Form 2553 (2018): Small Business Election Checklist
IRS Form 2553 allows an eligible domestic corporation or limited liability company to elect S corporation tax treatment for federal taxes beginning in the 2018 tax year. Under the Tax Cuts and Jobs Act, qualifying pass-through tax treatment may reduce overall tax liability by allowing eligible income to be taxed at personal rates rather than corporate rates. Proper completion of
Form 2553 instructions is critical to ensure the Internal Revenue Service accepts the election.
Verify Eligibility Requirements
Your business structure must qualify as a domestic corporation or an eligible limited liability company to make an S-Corp Election. Disregarded entities must first elect corporate tax classification before filing IRS Form 2553. Benefit corporations and other specialized business structures should confirm eligibility before proceeding.
The corporation must have no more than 100 shareholders, only one class of stock, and eligible shareholders limited to individuals, estates, and qualifying trusts. Nonresident aliens, partnerships, and other corporations cannot hold S corporation stock. Failure to meet these requirements may result in unintended C corporation status and exposure to double taxation.
Evaluate Federal and State Tax Considerations
S corporations are treated as pass-through entities for federal income tax purposes, meaning income, deductions, and tax credits flow through to shareholders via Schedule K-1. This structure may reduce exposure to self-employment tax on distributions, though reasonable salary rules still apply and are subject to payroll tax, Social Security, and Medicare taxes.
State and local taxes must also be considered before making the election. States such as New
York and Arizona may impose additional filing requirements, franchise tax obligations, or separate recognition rules for S corporations. Taxpayers should review Arizona Revised
Statutes, Arizona Taxes guidance, and Arizona Proposition 208, including the Prop 208
Surcharge, when evaluating Arizona small business income tax exposure.
Understand Filing Deadlines and Timing Rules
Form 2553 must be filed no later than two months and 15 days after the beginning of the tax year for which the election is intended to take effect. For calendar-year corporations beginning
January 1, 2018, the deadline is March 15, 2018. Filing deadlines apply regardless of when the first tax return is due.
Newly formed corporations may file in advance of the effective tax year, which can simplify tax planning during tax season. Late filings may still qualify for relief if reasonable cause exists and all shareholders reported income consistently with S corporation treatment.
Prepare Required Documentation
Step 1: Complete Corporate Information
Enter the legal business name exactly as shown in organizational documents, along with the
Employer Identification Number and principal business address. This information establishes the entity’s identity for federal tax and processing purposes.
Step 2: Obtain All Shareholder Consents
All shareholders must consent to the S-Corp Election by signing Form 2553. Consent requirements vary depending on whether the form is filed before or after the intended effective date, and missing signatures are a common cause of rejection.
Step 3: Gather Shareholder Details
Each shareholder’s name, address, Social Security number, ownership percentage, and tax year-end must be recorded accurately. Community property spouses must each provide consent, even if only one spouse is listed on ownership documents.
Step 4: Select the Appropriate Tax Year
Most S corporations operate on a calendar tax year, but fiscal year elections may be permitted if a valid business purpose exists. Selecting the correct tax year affects estimated payment obligations, extension payments, and ongoing tax return filing requirements.
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Step 5: Sign and Submit the Election
An authorized corporate officer must sign Form 2553 before submission. The form must be mailed to the correct filing address listed in the Form 2553 instructions, and corporations should retain proof of mailing and any confirmation number received.
Apply for Late Election Relief When Needed
Rev. Proc. 2013-30 allows eligible corporations to request late election relief if Form 2553 was not timely filed. The request must be submitted within 75 days of the intended effective date and must include a reasonable cause explanation.
All shareholders must confirm they reported income in a manner consistent with S corporation treatment on their tax returns. The Internal Revenue Service generally processes qualifying late election requests without requiring private letter rulings.
Ongoing Compliance and Reporting Obligations
After acceptance, the S corporation must file Form 1120S annually and issue Schedule K-1 to each shareholder reporting pass-through income, losses, and tax credits. Items such as charitable contributions, start-up losses, and gains reported on Schedule D or Form 4797 must be properly allocated.
Businesses should monitor net taxable income, personal tax rates, and state-specific obligations such as franchise tax or payment plans, when necessary. Maintaining organized records using return preparation software helps ensure accurate reporting and compliance in future business days.
Maintain Proper Records
Retain a copy of the accepted IRS Form 2553, proof of filing, and all related correspondence with permanent business records. These documents support future filings, audits, amendments such as Form 140X, and ongoing coordination with a tax professional or Department of
Revenue.
Your S corporation election remains in effect until revoked or terminated under federal tax law.
Careful monitoring of eligibility rules and filing obligations helps preserve pass-through tax treatment and avoid unintended reclassification.
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
