What the Form Is For
Form 2553 is the official IRS document that corporations use to elect S corporation status under section 1362 of the Internal Revenue Code. When a corporation files this form and the IRS accepts it, the business transforms from being taxed as a regular C corporation into an S corporation, fundamentally changing how its income is taxed. Instead of the corporation paying taxes on its profits and shareholders paying taxes again when they receive dividends (double taxation), an S corporation's income flows directly to shareholders who report it on their personal tax returns—similar to how a partnership operates.
This election is available to small business corporations and certain entities eligible to be treated as corporations, such as limited liability companies (LLCs) that meet specific requirements. The form must be signed by an authorized corporate officer and requires the written consent of all shareholders. The 2017 revision of Form 2553 also includes provisions for late elections filed under Revenue Procedure 2013-30, offering corporations a streamlined path to correct missed deadlines under certain circumstances.
When You’d Use Form 2553
Timely Elections
Most corporations file Form 2553 within the narrow window required for timely elections: no more than 2 months and 15 days after the beginning of the tax year when they want S corporation status to begin, or at any time during the preceding tax year. For example, if a calendar-year corporation wants to be an S corporation starting January 1, it must file the election between January 1 and March 15 of that year (or anytime during the previous year).
Late Elections
However, circumstances don't always unfold perfectly. If you miss the deadline, Form 2553 can still be filed as a late election. Revenue Procedure 2013-30 provides relief for late S corporation elections when the corporation can demonstrate reasonable cause for the delay. To qualify for this simplified relief, the corporation must meet several requirements: it must have intended to be an S corporation from the specified effective date, failed to qualify solely because Form 2553 wasn't filed on time, and have reasonable cause for the late filing. Critically, both the corporation and all shareholders must have consistently reported their income as if the S election were already in effect for all relevant tax years.
Late election relief is available if you file within 3 years and 75 days of the intended effective date. There's even an exception to this rule: corporations that have consistently filed as S corporations and weren't notified of any problems by the IRS within six months of filing their first Form 1120-S can request relief beyond the 3-year-and-75-day window.
Late Entity Classification Elections
If a late election also requires a late entity classification election (for example, an LLC that needs to be classified as a corporation before it can elect S status), Form 2553 can address both elections simultaneously by completing Part IV of the form, which includes specific representations about the entity's eligibility and consistent tax reporting.
Key Rules
Eligibility Requirements
Several eligibility requirements determine whether a corporation can become an S corporation. The business must be a domestic corporation (or an eligible domestic entity), and it cannot have more than 100 shareholders. The IRS allows families to be counted as a single shareholder for this purpose, which can help businesses stay under the limit.
Shareholders must be individuals, estates, certain exempt organizations, or specific types of trusts—corporations, partnerships, and nonresident aliens cannot be shareholders.
Stock Structure Rules
The corporation must have only one class of stock, though differences in voting rights are permitted. This means all shares must provide identical rights to profits and liquidation proceeds.
Ineligible Businesses
Certain types of businesses are automatically disqualified from S corporation status, including banks using the reserve method for bad debts, insurance companies taxed under specific Code provisions, and domestic international sales corporations.
Tax Year Rules
Tax year selection comes with its own set of rules. Most S corporations must use a calendar year (ending December 31) unless they can establish a natural business year, meet the ownership tax year test, or obtain approval for a fiscal year based on business purpose. The form includes provisions in Part II for corporations requesting non-calendar tax years, with different pathways for automatic approval versus those requiring IRS review.
Shareholder Consent Rules
The shareholder consent requirement is absolute: every person who owns stock on the day the election is made must consent to becoming an S corporation. For late elections, anyone who was a shareholder at any time between the intended effective date and the actual filing date must also consent and confirm they've reported their income consistently with S corporation status.
Special rules apply for stock held by minors, estates, trusts, and in community property situations—each scenario has specific requirements about who must sign the consent.
Step-by-Step Filing Process
Step One: Verify Eligibility and Timing
Before filling out Form 2553, confirm your corporation meets all S corporation requirements. Check that you have 100 or fewer eligible shareholders, only one class of stock, and no ineligible shareholders or business types. Determine when you want the election to take effect and calculate your filing deadline. Remember the 2-month-and-15-day window starts on the first day of your tax year.
Step Two: Complete Part I
Enter your corporation's legal name exactly as it appears in your organizing documents, along with your Employer Identification Number (EIN). If you don't have an EIN yet, you'll need to apply for one immediately—you can do this online at IRS.gov and receive it the same day.
Fill in your business address, state of incorporation, and incorporation date. Enter the effective date for your election in Item E, being careful to select the correct date based on whether this is your first tax year or you're converting from C corporation status. Choose your tax year in Item F, checking the appropriate box and completing Part II if you're requesting anything other than a calendar year.
If this is a late election, check box I and provide a detailed explanation of your reasonable cause for the delay and the actions you took to correct the mistake.
Step Three: Obtain All Shareholder Consents
List every shareholder (or former shareholder, if filing late) in column J of Part I, providing their complete names and addresses. In column K, each shareholder must sign and date their consent to the election.
Complete columns L, M, and N with stock ownership details, social security numbers or EINs, and each shareholder's tax year end. If you have more than the space provided, use additional copies of page 2. Don't skip anyone—missing even one required signature will invalidate the election.
Step Four: Sign and File
Have an authorized corporate officer (president, vice president, treasurer, or other authorized officer) sign and date the form at the bottom of page 1. Keep a copy for your records along with proof of filing.
Mail the original form (or fax it) to the appropriate IRS Service Center based on your business location—you can find current addresses at IRS.gov/Form2553. If you're attaching the late election to your Form 1120-S instead of filing separately, write “FILED PURSUANT TO REV. PROC. 2013-30” at the top of the first page.
Step Five: Follow Up
The IRS should notify you within 60 days whether your election was accepted (90 days if you requested a ruling on a fiscal year). If you don't hear back within this timeframe, call 1-800-829-4933 to verify receipt and check on your election's status.
Keep the acceptance letter with your permanent corporate records. If the election is accepted, begin filing Form 1120-S instead of Form 1120 starting with the effective tax year.
Common Mistakes and How to Avoid Them
Missing the Deadline
The most frequent error is miscalculating when Form 2553 is due. Many business owners assume they can file anytime during the tax year when they want S status, but the deadline is actually 2 months and 15 days after the tax year begins—March 15 for calendar-year corporations wanting S status effective January 1.
Mark your calendar when incorporating or when deciding to convert to S status, and file early to avoid issues. If you do miss the deadline, don't simply wait until next year—explore late election relief under Revenue Procedure 2013-30 immediately.
Incomplete or Missing Shareholder Consents
An election with even one missing signature is invalid. This becomes particularly complex in community property states, where both spouses must consent if they have a community property interest in the stock.
For stock held by trusts, estates, or minors, special rules determine who must sign. Create a comprehensive shareholder list before starting the form, including former shareholders if filing late, and systematically obtain each required signature.
Using the Wrong Effective Date
Line E asks for the date when you want the election to take effect, and entering the wrong date can create serious problems. For new corporations making the election in their first tax year, this should be the earliest of: the date you first had shareholders, the date you first had assets, or the date you began doing business.
For existing corporations, it's typically the first day of the tax year for which you want S status. Don't confuse this with the date you're filing the form—they're almost always different dates.
Overlooking Eligibility Issues
Some corporations discover after filing that they don't qualify for S status—perhaps they have a corporate shareholder they forgot about, or a second class of stock created by a side agreement.
Before filing, carefully review every shareholder to ensure they're eligible, examine all stock arrangements and agreements to confirm only one class of stock exists, and verify your corporation isn't an ineligible type.
Incorrectly Requesting a Fiscal Year
If you want a tax year other than the calendar year, you must complete Part II and meet specific requirements. Many corporations check a box in Part II without understanding what documentation or user fees might be required.
Box Q1 (business purpose) requires a detailed statement and triggers a $6,200 user fee. Boxes P1 and P2 offer automatic approval but only if you meet narrow tests and provide specific supporting information.
What Happens After You File
After mailing or faxing Form 2553 to the IRS Service Center, the waiting period begins. The IRS typically processes the election within 60 days, though requests involving a business purpose fiscal year (box Q1) can take up to 90 additional days for the IRS National Office to issue a ruling letter.
During this time, the Service Center reviews your form to verify all requirements are met: that all shareholders consented, the corporation qualifies for S status, the effective date makes sense, and all required information is complete.
If Your Election Is Accepted
If your election is accepted, you'll receive a formal acceptance letter from the IRS. This letter is an important document—file it with your permanent corporate records.
The acceptance confirms your S corporation status begins on the effective date you specified, which means you'll file Form 1120-S (U.S. Income Tax Return for an S Corporation) instead of Form 1120 starting with that tax year.
If Your Election Is Rejected
If there's a problem with your election, the IRS will send a notice explaining what's wrong. Common issues include missing shareholder signatures, an ineligible shareholder, multiple classes of stock, or a fiscal year request that doesn't meet requirements.
In some cases, you can correct the problem and resubmit. The notice will provide instructions on how to respond.
Ongoing Compliance
Once S corporation status begins, it continues indefinitely until terminated or revoked. Termination can happen voluntarily (shareholders holding more than 50 percent of the stock vote to revoke the election) or involuntarily (the corporation ceases to meet S corporation requirements).
If your election terminates or is revoked, the corporation generally cannot make another S election for five years without IRS consent.
Becoming an S corporation also changes your filing obligations. You'll need to issue Schedule K-1 forms to shareholders showing their share of income, deductions, and credits. The corporation may still owe certain taxes even though most income passes through to shareholders.
State-level S corporation elections may also be required—Form 2553 only addresses federal tax status.
FAQs
Can I file Form 2553 before I receive my EIN?
No, you need an Employer Identification Number before filing Form 2553. However, you can obtain an EIN quickly by applying online at IRS.gov—the number is issued immediately after your application information is validated.
If you've applied but haven't received your EIN when it's time to file Form 2553, enter “Applied For” in the EIN space along with the date you applied.
Do all shareholders have to sign at the same time?
You can collect shareholder signatures over a period of time before submitting the form to the IRS. The key requirement is that everyone who must consent has signed before you mail or fax the election.
What if my spouse owns shares and we live in a community property state?
In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), special consent rules apply. If stock is community property, both spouses must consent to the election even if the stock is titled in only one spouse's name.
Can I make the election effective for the current year if we're already several months into it?
It depends on when you file relative to the deadline. The election must be filed no later than 2 months and 15 days after the tax year begins. For a calendar-year corporation, this means March 15.
If you're past this deadline, you may still request late election relief if you meet the IRS requirements.
What’s considered reasonable cause for a late election?
The IRS evaluates reasonable cause based on facts and circumstances. It generally involves situations beyond your control that prevented timely filing despite good-faith efforts to comply.
Simply forgetting or not knowing about the deadline usually isn’t enough.
If I never received a response, is my corporation an S corporation?
No. You cannot assume S corporation status without IRS acceptance. If you haven’t received a response within the expected timeframe, contact the IRS to confirm your election’s status.
Does filing Form 2553 make my corporation an S corporation in my state?
Not automatically. Form 2553 only elects federal S corporation status. Many states require a separate election or have different rules, so you should check your state’s requirements separately.
