Form 2553 (2014): Small Business Election Checklist
Form 2553 allows an eligible small business corporation to elect S corporation tax status with the Internal Revenue Service. This checklist helps United States taxpayers correctly file the election, meet federal requirements, and avoid penalties or delayed approval when filing current or past due tax returns.
Confirm S Corporation Eligibility Requirements
An entity must qualify as an eligible small business corporation under federal law before filing
Form 2553. The business must be domestic, have no more than 100 shareholders, and issue only one class of stock. All shareholders must be U.S. citizens, resident aliens, estates, or eligible trusts. Ineligible shareholders or ownership structures will cause the IRS to reject the S
Corp election and deny pass-through taxation.
Verify Entity Classification Before Filing
Some business entities must confirm their federal classification before submitting Form 2553.
Limited liability companies must already be classified as corporations for federal tax purposes before electing S corporation status. Entities that have not elected corporate treatment may need to file Form 8832 or Form 8869. Failure to resolve classification issues often results in rejection codes or processing delays.
Determine Filing Deadline and Effective Date
Form 2553 must be filed no later than two months and fifteen days after the beginning of the intended tax year. A timely filing makes the election effective on the first day of that tax year.
Late elections may qualify for relief under Rev. Proc. 2013–30 if reasonable cause exists. The
IRS allows relief if the form is filed within three years and seventy-five days of the intended effective date.
Complete IRS Form 2553 Accurately
IRS Form 2553 must be completed using the current IRS Instruction 2553 and applicable IRS publications. Part I requires the business name, EIN, address, effective date, and shareholder information. Part II applies only if requesting a fiscal tax year other than the calendar year. Part
III is completed only if a qualified subchapter S trust or electing small business trust is a shareholder.
Obtain All Required Shareholder Consents
Every shareholder who owned stock during the applicable tax year must sign Form 2553. This includes shareholders who transferred shares before the election was filed. Missing signatures or incomplete shareholder information will invalidate the election. The IRS does not approve partial consent, and corrections require resubmission with proper documentation.
Address Trust and Special Ownership Issues
Trust shareholders must qualify as a qualified subchapter S trust or an electing small business trust. Each trust election must comply with the governing provisions under applicable regulations. Improper trust classification can retroactively terminate S corporation status.
Supporting evidence may be required to demonstrate compliance if the IRS questions trust eligibility.
Prepare Late Election Relief Documentation
Late filers must attach a reasonable cause statement explaining why Form 2553 was not filed timely. The explanation must describe specific circumstances and corrective actions taken upon discovery. Forms filed under relief procedures must be clearly labeled pursuant to Rev. Proc.
2013–30. Relief may also apply under Sec—1362 (f) in limited correction circumstances.
Step-by-Step Filing Process
Step 1: Gather Required Business Information
Collect the business's legal name, EIN, incorporation date, state of formation, and shareholder identification numbers. Accurate identification prevents processing delays and IRS correspondence.
Step 2: Verify Shareholder and Trust Eligibility
Confirm shareholder citizenship status and trust classifications. Ineligible shareholders or improperly elected trusts will cause immediate rejection of the S Corp election.
Step 3: Complete Form 2553 Carefully
Enter all required information in Part I and obtain all shareholder signatures. Review entries for accuracy using IRS instructions before submission.
Step 4: Attach Late Election Statements if Required
Include a reasonable cause statement if filing late and annotate the form as required. Failure to include proper statements will invalidate relief eligibility.
Step 5: Submit Form 2553 to the IRS
Submit Form 2553 by mail or fax to the correct Internal Revenue Service address. Retain proof of submission and copies for permanent business records.
- State filing obligations: Arkansas requires Form AR11003, New Jersey requires Form
- State law compliance: State laws govern recognition of S corporation status for state
- Missed deadlines: Filing after the statutory deadline without relief documentation delays
- Incomplete shareholder data: Missing identification numbers or signatures cause
- Incorrect entity classification: Filing Form 2553 without proper corporate classification
- Full IRS transcript retrieval (Wage & Income + Account)
- Professional tax form review
- Preparation & filing support
- Tax relief options if you owe the IRS
Step 6: Monitor Status and Retain Confirmation
Monitor election status and retain the CP261 letter once received. This letter confirms approval and should be kept with annual tax filing records.
State-Level Election Requirements
Some states require separate S corporation elections even after federal approval. Failure to file required state forms may result in state-level double taxation.
CBT-2553, and New York requires Form CT-6 for state recognition. Each form must be filed separately. tax return purposes. Federal approval does not guarantee automatic state acceptance.
Ongoing Compliance After Election Approval
Approved S corporations must file Form 1120-S annually and issue Schedule K-1 to shareholders. Shareholders report business income through pass-through taxation on their tax returns. Owner-employee shareholders must receive a reasonable salary reported on Form
W-2. Improper wage treatment may trigger the issuance of an audit notice and employment tax penalties.
Common Filing Issues to Avoid
S corporation status and may require amended form submissions. rejection and require correction before approval. results in automatic denial by the IRS.
Frequently Asked Questions
Can an LLC File Form 2553?
Yes, a limited liability company may file Form 2553 after electing corporate treatment for federal tax purposes. Proper classification is required before submitting the election.
How Long Does IRS Processing Take?
The IRS typically processes Form 2553 within sixty days. Fiscal year elections or correction requests may take longer.
How Do I Confirm My Election Was Approved?
The IRS issues a CP261 letter confirming acceptance. Taxpayers should retain this letter as proof of S corporation status.
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
