Form 2553 (2015): Small Business Election Checklist
Form 2553, officially titled Election by a Small Business Corporation, allows an eligible small business to elect S Corporation tax treatment for federal taxes. This checklist helps ensure your
S-Corp election is properly completed, filed on time, and accepted by the Internal Revenue
Service for the correct tax year or fiscal tax year.
Verify Your Corporation Meets Eligibility Requirements
To qualify for S Corporation status, your entity must be a domestic corporation under federal tax law. Eligible business structures include a C corporation that is making an S-Corp election or a limited liability company that has already elected corporate tax treatment. Disregarded entities must elect to be taxed as a corporation to be eligible to file IRS Form 2553.
Your small business must issue only one class of stock and have no more than 100 shareholders. The corporation must operate as a pass-through entity once the election is effective, meaning income, deductions, tax credits, and start-up losses flow through to shareholders rather than being subject to corporate taxes at the entity level.
Confirm Shareholder Composition and Stock Structure
All shareholders must be eligible individuals under federal tax rules, including individuals, estates, and certain qualifying trusts. Each shareholder must be a U.S. citizen or resident alien with a valid social security number, and no shareholder may be a nonresident alien during the tax year.
The corporation must maintain one class of stock throughout the entire tax year or fiscal year.
Differences in voting rights are permitted, but economic rights must be identical. Violations of these ownership rules can invalidate the S Corporation election and subject the business to C corporation tax rates and increased tax liability.
Understand the Filing Deadline for Timely Elections
The timing of your S-Corp election is critical. IRS Form 2553 must be filed no later than two months and fifteen days after the beginning of the tax year in which S Corporation status is intended to take effect. For calendar-year corporations, this deadline generally falls on March 15 or the next business day if the due date falls on a weekend or holiday.
Form 2553 may also be filed during the preceding tax year to secure S Corporation status starting January 1 of the following year. Missing the deadline without approved relief will result in default C corporation treatment for federal income tax purposes.
Complete Form 2553 With Required Information
Form 2553 instructions require accurate completion of all applicable sections. Part I requires the corporation’s legal name, Employer Identification Number, principal business address, and the effective date of the S-Corp election. You must indicate whether the corporation uses a calendar tax year or a fiscal year, and justify your selection if a fiscal year is selected.
Each shareholder’s name, address, social security number, ownership percentage, and consent must be listed. An authorized officer must sign the form on behalf of the corporation. Errors in identifying information can delay processing and interfere with the later use of return preparation software for Form 1120-S filing.
Obtain All Required Shareholder Consents
Shareholder consent is mandatory for a valid S corporation election. Consent requirements vary
depending on when the election is filed relative to its effective date
- Elections filed before the effective date: Only shareholders who own stock on the
date Form 2553 is filed must consent. Each consent confirms agreement to pass-through tax treatment and personal tax rates applicable to S Corporation income.
- Elections filed on or after the effective date: All shareholders who held stock at any
time during the affected tax year must consent, including former shareholders. Each consent must be signed and dated to reflect acknowledgment of S Corporation status.
Shareholder consents are recorded in Column K of Form 2553 or attached separately. If shares are held in community property states, both spouses must consent due to shared tax liability.
File Form 2553 at the Correct IRS Service Center
Form 2553 must be mailed or faxed to the correct filing address based on the corporation’s principal business location. It should not be filed with the corporation’s income tax return unless requesting late election relief. Retain proof of filing, such as a certified mail receipt or fax confirmation number, as evidence of timely submission. This documentation is important during tax season or if the Internal Revenue Service questions the validity of your S-Corp election.
Request Late Election Relief if You Missed the Deadline
If you missed the filing deadline, late S-Corp election relief may be available under Revenue
Procedure 2013-30. Relief generally applies if the corporation intended to be treated as an S corporation, acted reasonably, and failed to file due to an inadvertent error.
To request relief, file Form 2553 within three years and seventy-five days of the intended effective date and write the required revenue procedure statement at the top of the form. You may submit the election with a delinquent or current Form 1120-S, provided all shareholders reported income consistent with S Corporation status on their tax returns.
Monitor Your Election Status With the IRS
After filing, the Internal Revenue Service will review your Form 2553 and issue a determination letter confirming acceptance or rejection. Most corporations receive confirmation within sixty days. If you do not receive a response, contact the IRS Business and Specialty Tax line to verify processing status.
Once approved, your S Corporation election remains in effect until revoked or terminated.
Maintaining compliance with payroll tax obligations, estimated payment requirements, and ongoing shareholder eligibility helps preserve the tax benefits of S Corporation pass-through tax treatment.
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