What the Form Is For
Purpose of Form 2553
Form 2553 is the official IRS document that transforms how your corporation pays taxes. When you file this form, you're asking the Internal Revenue Service to treat your regular corporation (C corporation) as an S corporation under Section 1362(a) of the tax code.
How S Corporation Taxation Works
This election fundamentally changes your tax treatment because S corporations don't pay corporate income tax. Instead, the business income, losses, deductions, and credits "pass through" directly to shareholders, who report everything on their personal tax returns and pay tax at their individual rates. This structure helps avoid the double taxation problem that plagues C corporations, where profits are taxed once at the corporate level and again when distributed to shareholders as dividends.
Eligible Entity Types
The form works for both existing corporations that want to switch from C corporation status and for newly formed entities eligible to be treated as corporations. If you're forming a limited liability company (LLC) that meets certain requirements, you can also use Form 2553 to elect S corporation status, effectively making both the entity classification election and the S corporation election simultaneously.
When You'd Use Form 2553 (Including Late and Amended Elections)
Standard Filing Deadlines
Timing is crucial with Form 2553. The IRS requires you to file no more than two months and fifteen days after the beginning of the tax year when you want S corporation status to take effect. Alternatively, you can file anytime during the preceding tax year.
For example, if you're a calendar-year corporation wanting to be an S corporation starting January 1, you must file Form 2553 between January 1 of the prior year and March 15 of the election year.
Deadlines for New Corporations
For brand-new corporations in their first tax year, the two-month-and-fifteen-day window starts from the earliest of these dates:
- When you first had shareholders
- When you first had assets
- When you began doing business
If your corporation started on January 7, you'd have until March 21 to file.
Late Elections
Missing the deadline doesn't necessarily mean disaster. The IRS offers relief for late elections under Revenue Procedure 2013-30 if you meet specific conditions.
Late Election Relief Requirements
For corporations, you must show that:
- You intended to be an S corporation from your stated effective date
- You failed to qualify solely because you missed the filing deadline
- You have reasonable cause for the delay
- You acted diligently to correct the mistake upon discovery
If you're filing within three years and seventy-five days of your intended effective date, you can request relief by writing "FILED PURSUANT TO REV. PROC. 2013-30" at the top of Form 2553 and explaining your reasonable cause on the form or an attached statement.
Shareholder Consent for Late Elections
All shareholders who owned stock between your intended effective date and when you actually file must sign consent statements confirming they've reported their income consistently with S corporation status on all affected tax returns.
If you don't meet these streamlined relief requirements, you'll need to request a private letter ruling and pay a user fee.
Key Rules and Eligibility Requirements
Shareholder Limitations
Not every corporation qualifies for S corporation status. You cannot have more than 100 shareholders, and only specific types are allowed:
- Individuals
- Certain trusts
- Estates
- Tax-exempt organizations under Section 401(a) or 501(c)(3)
Partnerships, corporations, and non-resident aliens cannot be shareholders.
For counting purposes, you and your spouse (and your estates) count as one shareholder, and family members as defined in the tax code can also be treated as a single shareholder.
Corporate Structure Rules
You must be a domestic corporation or an eligible domestic entity. You can have only one class of stock, meaning all outstanding shares must provide identical rights to distribution and liquidation proceeds, though voting rights can differ.
Certain corporations are categorically ineligible, including:
- Financial institutions using the reserve method for bad debts
- Insurance companies subject to Subchapter L taxation
- Domestic international sales corporations (DISCs)
Tax Year Requirements
Your corporation must adopt or change to one of several approved tax year types:
- A calendar year ending December 31
- A natural business year
- An ownership tax year
- A tax year elected under Section 444
If requesting a fiscal year for business purposes, you'll need to provide substantial justification and may be charged a $6,200 user fee for the ruling request.
Universal Shareholder Consent
Every shareholder must consent to the election. This requirement is absolute and must be documented in Column K of the form or through separate consent statements.
Step-by-Step Filing Process (High Level)
Step 1: Verify Eligibility
Before touching the form, confirm your corporation meets all eligibility requirements. Count your shareholders carefully, verify their eligibility, confirm you have only one class of stock, and ensure no ineligible entity types own shares.
Step 2: Obtain an Employer Identification Number (EIN)
If your corporation doesn't already have an EIN, apply immediately through the IRS website (instant approval), or by faxing or mailing Form SS-4. You cannot complete Form 2553 without an EIN.
Step 3: Complete Part I of Form 2553
Enter your corporation's legal name exactly as stated in your charter, complete address, EIN, and desired effective date. Select your tax year choice in Item F.
If choosing anything other than a calendar year or a 52–53 week year ending December 31, you'll need to complete Part II with additional justification.
Step 4: Shareholder Information and Consent
In Columns J through N, list every shareholder who must consent to the election. Include names, addresses, social security numbers or EINs, share ownership percentages or numbers, acquisition dates, and each shareholder's tax year end.
Each shareholder must sign and date in Column K. For community property states, both spouses must sign. For trusts, the appropriate trustee or deemed owner signs.
Step 5: Complete Additional Parts if Applicable
- Complete Part II if requesting a fiscal tax year
- Complete Part III if making a qualified subchapter S trust (QSST) election
- Include Part IV representations if filing a late entity classification election simultaneously with a late S corporation election
Step 6: Obtain Proper Officer Signature
An authorized corporate officer—president, vice president, treasurer, assistant treasurer, chief accounting officer, or other authorized officer—must sign and date the form.
Step 7: File With the Correct IRS Service Center
Mail the original form (not a photocopy) or fax it to the IRS service center corresponding to your principal business location:
- Kansas City for eastern states and the District of Columbia
- Ogden for western states
You can also use IRS-designated private delivery services.
Common Mistakes and How to Avoid Them
Missing Shareholder Consents
This is the number one reason elections get rejected. Every person who owned stock during the relevant period must sign. Don't forget spouses in community property states, joint tenants, and all required trust signatories.
Incorrect Effective Date
Many filers misunderstand when their election can begin. If you file late in the year, your election generally won't take effect until the following year unless you qualify for late election relief.
Missing or Delayed EIN Applications
Some businesses try to file Form 2553 before obtaining an EIN. While "Applied For" is allowed, obtaining the EIN first reduces processing issues.
Failing to Keep Proof of Filing
Always maintain evidence that you filed on time. Use certified or registered mail, retain fax confirmations, or keep private delivery receipts. Store the original signed Form 2553 in your permanent records.
Overlooking Continuous Eligibility
S corporation status must be maintained continuously. Adding an ineligible shareholder, issuing a second class of stock, or exceeding 100 shareholders automatically terminates the election.
Incomplete Part II for Fiscal Year Requests
If you selected a fiscal tax year, you must complete Part II. Missing business purpose explanations, calculations, or Section 444 information will result in rejection.
What Happens After You File
IRS Review Timeline
After submitting Form 2553, the IRS reviews your election for completeness and accuracy. You should receive a determination letter within:
- 60 days for standard elections
- Up to 150 days if requesting a business purpose fiscal year ruling
If Your Election Is Accepted
Once approved, your S corporation election remains in effect indefinitely unless revoked or terminated. You'll begin filing Form 1120-S instead of Form 1120 starting with the effective tax year.
If Your Election Is Rejected
A rejection letter will explain the deficiency. Common issues include missing consents, ineligible shareholders, or timing errors. Many rejections can be cured and resubmitted.
If You Receive No Response
If you haven't received a response within two months (or five months for fiscal year rulings), contact the IRS at 1-800-829-4933 to confirm status.
Termination and Re-Election Rules
If your S corporation status ends, you generally cannot re-elect S corporation status for five years without IRS consent.
FAQs
Can I file Form 2553 before incorporating my business?
No. Your corporation must legally exist and have a valid EIN before filing Form 2553.
What happens if one shareholder refuses to sign?
Your election cannot proceed without unanimous shareholder consent. You must resolve the ownership issue or abandon the election.
Do I need to file Form 2553 every year?
No. Form 2553 is a one-time election that remains in effect until revoked or terminated.
Can an LLC file Form 2553?
Yes. An eligible LLC can file Form 2553 to elect both corporate tax treatment and S corporation status without filing Form 8832 separately, if filed timely.
What should I do if I discover an error after filing?
Contact the IRS service center immediately. Minor errors may not affect the election, but substantive issues may require correction or refiling.
Will my state recognize my S corporation election?
Not always. Some states require separate S corporation elections or do not recognize S corporation status at all.
How do I revoke my S corporation election?
Shareholders owning more than 50 percent of the stock must consent to revocation and file a statement with the IRS. Revocation timing determines when the change takes effect.
