What the Form Is For
Purpose of Form 2553
Form 2553 is the official IRS document that corporations and certain eligible entities use to elect S corporation status under Section 1362(a) of the Internal Revenue Code. When you file this form successfully, your corporation stops being taxed as a regular C corporation and becomes an S corporation instead.
How S Corporation Taxation Works
The key difference is fundamental: S corporations don't pay corporate income tax themselves. Instead, the income, losses, deductions, and credits flow through to shareholders, who report them on their personal tax returns and pay tax at their individual rates. This arrangement eliminates the double taxation that C corporations face—where the corporation pays tax on its profits and then shareholders pay tax again on dividends they receive.
Entity-Level Taxes That May Still Apply
The form serves as your formal request to the IRS to change how your corporation is treated for federal tax purposes. While S corporations avoid double taxation, they may still owe tax on certain built-in gains and passive income at the entity level.
Using Form 2553 for LLCs and Other Entities
For an entity that's structured as something other than a corporation (like a limited liability company), filing Form 2553 can simultaneously elect both corporate classification and S corporation status if the timing requirements are met. This dual-purpose nature makes Form 2553 particularly valuable for LLCs seeking S corporation treatment without first needing to file Form 8832 for corporate classification.
When You'd Use Form 2553 (Including Late and Amended Elections)
Standard Filing Window
The standard filing window for Form 2553 is strict but straightforward. You must submit the form either no more than 2 months and 15 days after the beginning of the tax year when you want S corporation status to take effect, or at any time during the preceding tax year.
For a calendar-year corporation wanting S corporation status starting January 1, this means filing anytime during the previous year or by March 15 of the new year (2 months and 15 days from January 1).
Filing Deadlines for New Corporations
For new corporations, the clock starts on the earliest of three dates:
- When the corporation first had shareholders
- When it first had assets
- When it began doing business
A corporation starting business on January 7 would need to file by March 21 to be treated as an S corporation from inception. Because a newly formed corporation has no prior tax year, it cannot file Form 2553 before it legally exists.
Late Election Relief Under Rev. Proc. 2013-30
Standard Late Election Relief
Late Election Relief: The IRS recognizes that businesses sometimes miss the filing deadline through honest mistakes. Revenue Procedure 2013-30 provides streamlined relief for late elections without requiring expensive private letter rulings.
To qualify for this administrative relief, you must:
- Demonstrate reasonable cause for the delay
- Show that you acted diligently to correct the mistake after discovering it
- Prove that both the corporation and all shareholders have been reporting income consistently with S corporation status
The form must be filed within 3 years and 75 days of your intended effective date.
Extended Relief Beyond 3 Years and 75 Days
An important exception exists for corporations that have been filing as S corporations for at least 6 months without IRS objection. These corporations can qualify for late election relief even beyond the 3 years and 75 days deadline, provided the IRS never questioned their S corporation status and all parties reported income consistently.
When filing a late election, write "FILED PURSUANT TO REV. PROC. 2013-30" at the top of Form 2553 and attach a detailed explanation of why the election was late and what steps you took to correct the error.
Amended Elections and Ongoing Validity
There is no amended Form 2553 in the traditional sense. Once an S corporation election is accepted, it remains in effect until the corporation revokes it or the election terminates. If your corporation's circumstances change (such as new shareholders), you don't amend Form 2553—instead, you must ensure ongoing compliance with S corporation requirements or file to revoke the election.
Key Rules and Eligibility Requirements
Ownership and Structure Requirements
Not every corporation can become an S corporation. The IRS imposes eight strict eligibility requirements, and failing any one of them disqualifies the election.
The corporation must:
- Be domestic (organized under U.S. law)
- Have no more than 100 shareholders
For counting purposes:
- A married couple and their estates count as one shareholder
- All members of a single family (as defined by the tax code) plus their estates also count as one shareholder
Every shareholder must be an allowable type:
- Individuals
- Estates
- Certain tax-exempt organizations (401(a) and 501(c)(3))
- Specific trusts (QSSTs and ESBTs)
Partnerships, corporations, and non-resident aliens cannot be shareholders.
Stock Requirements
The corporation must have only one class of stock, meaning all outstanding shares must provide identical rights to distribution and liquidation proceeds.
Differences in voting rights are permitted—you can have voting and non-voting common stock—but differences in economic rights create a second class of stock and destroy S corporation eligibility.
Entity-Level Restrictions
Certain types of corporations are categorically ineligible:
- Banks using the reserve method of accounting for bad debts
- Insurance companies taxed under Subchapter L
- Domestic international sales corporations (DISCs)
- Former DISCs
Tax Year Rules
The corporation must adopt one of the following acceptable tax years:
- Calendar year ending December 31
- Natural business year
- Ownership tax year
- Tax year elected under Section 444
- 52–53-week tax year corresponding to one of the above
- Any other tax year with an established business purpose
Universal Shareholder Consent
Every shareholder who owns stock on the election date must consent to the election.
For elections filed on or after the intended effective date, even former shareholders who owned stock at any point between the effective date and the filing date must consent. This consent requirement is absolute—a single missing signature can invalidate the entire election.
Step-by-Step Filing Process (High Level)
Step 1: Verify Eligibility
Before completing any forms, confirm your corporation meets all eight eligibility requirements. Count your shareholders properly, verify shareholder eligibility, confirm you have only one class of stock, and ensure no disqualifying corporate characteristics exist.
Step 2: Obtain an Employer Identification Number (EIN)
If your corporation doesn't already have an EIN, apply immediately at IRS.gov/EIN (instant approval) or by filing Form SS-4. You need this number to complete Form 2553.
Step 3: Determine Effective Date and Tax Year
Decide when you want S corporation status to begin and calculate your filing deadline. Choose your tax year carefully, keeping in mind that calendar years are automatic but fiscal years require justification or a Section 444 election.
Step 4: Complete Form 2553
Fill out:
- Part I with identifying information, effective date, and tax year
- Part II if requesting a fiscal year based on business purpose
- Part III if making a qualified subchapter S trust election
Attach any required supporting documentation.
Step 5: Obtain All Required Shareholder Consents
Every eligible shareholder must sign and date the consent statement in Column K or provide a separate consent document. Include share counts, acquisition dates, SSNs or EINs, and tax year-ends. Missing consents are the most common reason for rejection.
Step 6: Officer Signature
An authorized corporate officer (such as the president, treasurer, or tax officer) must sign and date the form.
Step 7: File at the Correct IRS Location
Mail or fax Form 2553 to the appropriate IRS service center:
- Eastern states: Kansas City, Missouri (fax: 855-887-7734)
- Western states: Ogden, Utah (fax: 855-214-7520)
Keep proof of filing.
Step 8: Track Your Election Status
The IRS typically responds within:
- 60 days for standard elections
- 90 days if requesting a business purpose fiscal year
If no response arrives, call 1-800-829-4933 and retain proof of filing.
Common Mistakes and How to Avoid Them
Incomplete Shareholder Consents
Missing or incomplete consents are the most frequent error. All shareholders must sign personally, including spouses in community property states, trustees, and legal representatives. Verify all signatures before filing.
Missing or Miscalculating the Filing Deadline
Many corporations miscalculate the “2 months and 15 days” deadline. Always count carefully and file early to avoid mail delays.
Ineligible Shareholders Discovered After Filing
If any ineligible shareholder existed between the intended effective date and filing date, the election will be denied. Verify shareholder eligibility before filing.
Filing With the Wrong IRS Service Center
Using outdated addresses can delay processing and jeopardize timeliness. Always verify current filing locations on IRS.gov.
Insufficient Documentation for Fiscal Year Requests
Business purpose fiscal years require detailed gross receipts data. Generic explanations are insufficient—provide precise numbers and supporting schedules.
Inconsistent Filing After Election
Filing Form 1120 instead of Form 1120-S after submitting Form 2553 signals noncompliance. Always file returns consistent with S corporation status.
What Happens After You File
IRS Review and Notification
The IRS reviews your form for completeness, eligibility, and timeliness. A determination letter is typically issued within 60–90 days.
If Your Election Is Accepted
Your S corporation status remains in effect indefinitely unless revoked or terminated. You must file Form 1120-S annually and retain the acceptance letter in your records.
If Your Election Is Rejected
The rejection letter will explain the reason. You may correct errors and refile, though the effective date may change unless late election relief applies.
If You Receive No Response
If no response arrives within the expected timeframe, call the IRS Business & Specialty Tax Line at 1-800-829-4933. Proof of filing is critical.
Ongoing Compliance Obligations
You must:
- File Form 1120-S annually
- Issue Schedule K-1s to shareholders
- Maintain eligibility and corporate formalities
Violations can result in automatic termination of S corporation status.
State-Level Considerations
Form 2553 affects only federal tax status. Some states require separate S corporation elections—check state requirements carefully.
Frequently Asked Questions
Can I file Form 2553 electronically?
No. Form 2553 must be filed by mail or fax. Keep copies and proof of filing.
Do all shareholders need to be present to sign?
No, but all required shareholders must provide valid, complete consents before filing.
What happens if we add a new shareholder later?
New shareholders do not need to consent to the original election, but must receive Schedule K-1s and be eligible shareholders.
Can I revoke S corporation status after approval?
Yes. Revocation requires consent from shareholders holding more than 50% of outstanding shares and may trigger a five-year waiting period for re-election.
What is a business purpose tax year?
It is a fiscal year aligned with your natural business cycle. Calendar years require no justification; fiscal years do.
Does IRS acceptance guarantee ongoing validity?
No. Later discovery of ineligibility can retroactively terminate S corporation status with significant tax consequences.
We missed the deadline—can we still elect S corporation status this year?
Only if you qualify for late election relief under Rev. Proc. 2013-30. Otherwise, the election applies starting next tax year.
Sources: This guide is based exclusively on official IRS publications including Instructions for Form 2553 (December 2020), About Form 2553, S Corporations, and Late Election Relief guidance on IRS.gov. For current filing addresses and updates, always consult IRS.gov/Form2553.
