What the Form Is For
Form 2553 is the official IRS document a corporation uses to elect S corporation status for federal tax purposes. Think of it as the paperwork that transforms how your business is taxed—instead of the corporation itself paying income taxes, the profits and losses “pass through” to the shareholders, who report them on their personal tax returns. This election helps many small businesses avoid double taxation, where the corporation pays tax on its income and shareholders pay tax again on dividends. IRS.gov
To qualify, your corporation must meet specific requirements: it must be a domestic corporation with no more than 100 shareholders, have only one class of stock, and have shareholders who are individuals, certain trusts, or estates—not partnerships or corporations. Certain types of businesses like banks using reserve accounting methods or insurance companies cannot elect S corporation status. IRS.gov
The form itself requires the corporation to provide basic identifying information, specify when the election should take effect, and—critically—obtain the signed consent of every shareholder. Without all required signatures, the IRS won't accept the election.
When You’d Use It (Including Late and Amended Elections)
Regular Filing Timeline
You must file Form 2553 no more than two months and 15 days after the beginning of the tax year you want the S corporation election to take effect, or at any time during the preceding tax year. For a calendar-year corporation wanting S status starting January 1, this means filing between January 1 of the preceding year and March 15 of the election year. IRS.gov
Late Elections and Relief
Missing the deadline doesn't necessarily mean you've lost your opportunity. The IRS provides relief for late elections under Revenue Procedure 2013-30, which consolidates several relief provisions into one streamlined process. If you file late, you'll need to demonstrate reasonable cause for missing the deadline and show you acted diligently to correct the mistake once discovered. IRS.gov
The standard relief window is three years and 75 days from your intended effective date. However, there's an important exception: if your corporation filed all returns as an S corporation from the beginning, reported income consistently as an S corporation for at least six months, and the IRS didn't question your status within that timeframe, you may qualify for relief beyond the three-year window.
When filing for late election relief, you must write “FILED PURSUANT TO REV. PROC. 2013-30” at the top of Form 2553 and include a detailed statement explaining why you missed the deadline and what steps you took to fix it. You can attach the form to your current or delinquent Form 1120-S, or file it separately to the appropriate IRS Service Center.
Key Rules You Need to Know
The 100-Shareholder Limit and Family Aggregation
While the law caps S corporations at 100 shareholders, the counting rules are more flexible than they first appear. A husband and wife count as one shareholder, regardless of how they hold the stock. All members of a family—defined as a common ancestor and all lineal descendants (plus spouses and former spouses)—can also be treated as a single shareholder. This family aggregation provision makes S corporation status accessible to many family-owned businesses that might otherwise exceed the numerical limit. IRS.gov
Shareholder Consent Requirements
Every person who owns stock between the first day of the intended tax year and the date you file Form 2553 must consent to the election. This requirement is absolute—one missing signature can invalidate the entire election.
Special rules apply for:
- Community property spouses (both must sign)
- Tenants in common, joint tenants, and tenants by the entirety
- Trusts, depending on QSST or ESBT status
One Class of Stock Rule
All outstanding shares must confer identical rights to distribution and liquidation proceeds. Differences in voting rights are permitted—you can have voting and non-voting common stock—but economic rights must be identical. This requirement prevents corporations from creating complicated capital structures that would undermine the pass-through taxation concept.
Tax Year Limitations
Most S corporations must adopt a calendar year (ending December 31) unless they can establish a business purpose for a different fiscal year, meet the natural business year test, or make a Section 444 election. The natural business year test requires showing that 25% or more of gross receipts occur in the last two months of the chosen tax year for three consecutive 12-month periods.
Step-by-Step Filing Process (High Level)
Step 1: Verify Eligibility
Before completing any paperwork, confirm your corporation meets all requirements: domestic corporation status, eligible shareholder types, no more than 100 shareholders (applying aggregation rules), one class of stock, and not an ineligible entity type. Review the complete shareholder list to ensure everyone can legally hold S corporation stock.
Step 2: Complete Part I of Form 2553
Enter your corporation's legal name, address, and Employer Identification Number. If you're newly formed, enter the earliest of when you first had shareholders, first had assets, or began doing business. This becomes your effective date. If you're an existing C corporation making the election, enter the beginning date of the tax year when you want S status to begin.
Step 3: Obtain All Shareholder Consents
Have each shareholder complete their information in the table: name, address, Social Security Number or EIN, number of shares owned and acquisition dates, and tax year end. Each must sign and date in Column K or provide a separate consent statement with identical information.
Step 4: Address Tax Year Selection
Most corporations will check Box (1) for a calendar year ending December 31. If you need a different fiscal year, check Box (2) or (4) and complete Part II, explaining your business purpose or making a backup Section 444 election. Be prepared for additional review time—the IRS charges a $6,200 user fee for business purpose requests.
Step 5: Sign and File
An authorized corporate officer must sign Form 2553. File it with the appropriate IRS Service Center based on your principal business location. If filing electronically isn't an option, send the form via certified or registered mail to create proof of timely filing.
Common Mistakes and How to Avoid Them
Missing or Invalid Shareholder Consents
The single most common reason for Form 2553 rejection is incomplete shareholder consent. Create a comprehensive checklist of all shareholders and systematically verify each signature before filing.
Incorrect Effective Date
Many filers misunderstand what date to enter in Item E. Using the wrong effective date can delay your election by an entire year. Double-check this date against the timing rules before filing.
Late Filing Without Following Relief Procedures
Simply filing late without following Revenue Procedure 2013-30 results in automatic rejection. Late filers must include the required statement, reasonable cause explanation, and shareholder consistency confirmations.
Ineligible Shareholders
Common problems include nonresident aliens, corporations or partnerships, or trusts without proper QSST or ESBT elections. Verify eligibility before filing.
Inconsistent Tax Reporting
For late election relief, all shareholders must have reported income consistently using Schedule E, and the corporation must have filed Forms 1120-S—not Forms 1120.
Failure to Follow Up
If you haven't received a response within 60 days (or 90 days for fiscal years), call 1-800-829-4933 to confirm receipt and status.
What Happens After You File
IRS Processing and Notification
The IRS reviews Form 2553 for completeness and eligibility. Within approximately 60 days (or up to 90 days for fiscal year requests), you'll receive either a CP261 acceptance notice or a CP264 rejection notice. IRS.gov
Acceptance and Tax Filing Changes
Once accepted, the election remains in effect until revoked or terminated. Starting with the effective year, you must file Form 1120-S annually and issue Schedule K-1s to shareholders.
Maintaining S Corporation Status
You must continuously monitor shareholder eligibility and stock structure. Transfers to ineligible shareholders can trigger automatic termination.
Voluntary Revocation
Shareholders owning more than 50% of outstanding stock may revoke the election. Once revoked, you generally cannot re-elect S status for five years without IRS consent. IRS.gov
Frequently Asked Questions
Can I file Form 2553 if my corporation hasn't been officially formed yet?
No. Your corporation must legally exist before filing. However, you can file shortly after incorporation and make the election effective from day one.
What happens if a shareholder refuses to sign the consent?
You cannot complete the election without unanimous consent. Your options are negotiation, buyout, or abandoning the election.
Do I need to file a new Form 2553 every year?
No. Once accepted, the election remains in effect until revoked or terminated.
Can I make the election effective for a prior year if I'm filing late?
Yes, under late election relief rules, up to three years and 75 days retroactively if requirements are met.
What if we discover an ineligible shareholder after the election takes effect?
This causes an inadvertent termination, but IRS relief may be available under Section 1362(f) with corrective action.
How do I prove I filed Form 2553 if the IRS says they never received it?
Acceptable proof includes certified mail receipts, stamped copies, or IRS acceptance letters.
Can a Limited Liability Company file Form 2553?
Yes. A timely filed Form 2553 also serves as a corporate classification election, allowing an LLC to be taxed as an S corporation.
