Form 2553 (2017) S Corporation Election Guide

corporation tax treatment for federal income tax purposes. Under Internal Revenue Code

Section 1362(a), a timely and properly completed IRS Form 2553 establishes pass-through taxation for the specified tax year. The 2017 Form 2553 instructions outline filing deadlines, shareholder consent requirements, and late-election relief procedures under Revenue

Procedure 2013-30.

Step-by-Step S Corporation Election Process

1. Step 1: Confirm Entity Type and Tax Classification

   The entity must be a domestic corporation or an eligible limited liability company that has elected corporate tax classification. Disregarded entities must complete Form 8832 before submitting Form 2553 to ensure proper tax treatment.

2. Step 2: Verify Shareholder Count and Eligibility

   The corporation must confirm it has no more than 100 shareholders during the tax year. Eligible shareholders include individuals, estates, certain trusts, and exempt organizations, while partnerships, corporations, and nonresident aliens are prohibited.

3. Step 3: Review Trust Shareholder Eligibility

   Trust shareholders must qualify as grantor trusts, qualified subchapter S trusts, or electing small business trusts. A QSST election or an electing small business trust election must be timely made to preserve S corporation status.

4. Step 4: Obtain Written Shareholder Consent

   All shareholders must provide written consent to the S corporation election in Part II of Form

   2553. Shareholder information must include names, addresses, Social Security numbers or

   Employer Identification Numbers, ownership percentages, and signature dates.

5. Step 5: Determine the Election Effective Date

   For startup companies, the effective date is generally the earliest date the corporation had shareholders, acquired assets, or began business operations. Existing C corporations converting to S corporation status must consider related tax implications.

6. Step 6: Calculate Filing Deadlines

   IRS Form 2553 must be filed no later than two months and fifteen days after the beginning of the tax year. For calendar-year corporations, the deadline is March 15 unless late election relief applies.

7. Step 7: Evaluate Fiscal Year or Section 444 Election Options

   Corporations seeking a fiscal year other than the calendar year must assess eligibility for a natural business year or make a Section 444 election. Form 1128 is required to request approval for a change of tax year.

8. Step 8: Prepare a Reasonable Cause Statement for Late Filing

   Corporations requesting late election relief must include a written statement explaining why the filing deadline was missed. The statement must describe when the corporation discovered the issue and the corrective actions taken.

9. Step 9: Address IRS Reasonable Cause Evaluation Factors

   The explanation should address reliance on a tax professional, the complexity of IRS regulations, prior filing history, and prompt corrective action. Supporting documentation strengthens late election relief requests.

10. Step 10: Complete Part I of Form 2553

    Part I requires the corporation’s legal name, mailing address, Employer Identification Number, tax year information, and election effective date. Errors in identification numbers frequently result in rejected filings.

11. Step 11: Complete Part II Shareholder Information

    Each shareholder listed in Part II must provide accurate identification numbers, ownership details, and signatures. This section documents shareholder consent and compliance with the requirements of Section 1362.

12. Step 12: Complete Part III for Late Elections

    Corporations requesting late election relief under Revenue Procedure 2013-30 must complete

    Part III in full. All questions regarding discovery dates and corrective actions must be answered accurately.

13. Step 13: Assemble Required Supporting Documents

    Attach all required statements and elections, including Form 8832 if applicable, QSST elections, and reasonable cause explanations. Incomplete submissions may delay processing at the

    Internal Revenue Service Center.

14. Step 14: Submit Form 2553 to the Correct IRS Service Center

    Form 2553 must be filed by mail with the appropriate Internal Revenue Service Center based on the corporation’s state, such as New York or New Jersey. Filing addresses are listed in the Form

    2553 instructions.

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15. Step 15: Retain Proof of Filing and Ongoing Records

    Corporations should retain copies of the filed Form 2553, shareholder consent pages, and IRS acceptance letters. These records support future compliance, including Form 1120-S and

    Schedule K-1 filings.

    Key 2017 Compliance Considerations

    The 2017 guidance emphasizes accurate shareholder classification, trust eligibility, and timely filing to preserve tax benefits and avoid unintended double taxation. Proper S corporation elections support tax savings, reasonable salary planning, and long-term tax planning for closely held and family businesses.

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