Form 2553 (2020): Small Business Election Checklist
IRS Form 2553 allows eligible domestic corporations to elect S corporation tax treatment for federal income tax purposes. Filing this tax form correctly helps a business owner avoid double taxation for C corporations and supports a more efficient business structure for a growing venture.
Understanding S Corporation Eligibility Requirements
Before filing IRS Form 2553, confirm that the entity qualifies as an eligible small business corporation. The business must be a domestic corporation formed under United States law, including a limited liability company that has elected to be treated as a corporation for tax purposes. The corporation cannot have more than 100 shareholders, and all shareholders must be U.S. citizens or residents. Only one class of stock is permitted, and certain entities, such as banks and insurance companies using special accounting methods, are excluded.
Confirming the Existing Business Structure
Review how the entity is currently classified for federal tax purposes. Businesses operating as a
C corporation or a limited liability company taxed as a corporation may file Form 2553 to change their tax status. This step ensures the election aligns with the company’s long-term business structure and ownership goals.
Gathering Shareholder Consent Documentation
All shareholders who own stock on the effective date of the election must consent in writing to the S corporation election. Each consent must include a signature and date from the shareholder or an authorized representative. If stock is held through a trust, nominee, or similar arrangement, additional consent rules apply, and retroactive elections require consent from shareholders who owned stock at the start of the tax year.
Step-by-Step Filing Process
Step 1: Verify Corporation Qualifications
Confirm that the corporation meets all eligibility requirements under Internal Revenue Service rules. The entity must have 100 or fewer qualifying shareholders and no nonresident alien owners.
Step 2: Determine the Effective Election Date
Identify the tax year in which the S corporation election should begin. IRS Form 2553 must generally be filed within 2 months and 15 days after the start of the tax year for the election to be timely.
Step 3: Complete Part I Election Information
Enter the legal name of the corporation (e.g., ABC Corporation), along with the business address and employer identification number. Provide the date the corporation began business operations or acquired shareholders, as required in Item E.
Step 4: List All Required Shareholders
Complete the shareholder information section by listing each shareholder’s name, address,
Social Security number, number of shares owned, and acquisition date. Include all individuals who owned stock on the effective date of the election.
Step 5: Obtain Shareholder Signatures
Secure dated signatures from each shareholder listed on the form or on attached consent statements. Special signature rules apply to estates, trusts, minors, and community property situations.
Step 6: Select the Appropriate Tax Year
Indicate whether the corporation uses a calendar year or requests a fiscal year in Part I of the form. Complete Part II only if requesting a budgetary year that requires justification or a Section
444 election.
Step 7: Submit Form to the IRS
Send the completed IRS Form 2553 to the appropriate Internal Revenue Service filing address listed in the current instructions. Filing methods and addresses vary based on the corporation’s principal business location.
- Maintaining Records: Retain copies of IRS Form 2553, shareholder consents, and
- Nominee and Trust Ownership: When shares are held indirectly, list the beneficial
- Processing Timelines: Elections involving fiscal-year requests or special tax-year
- Full IRS transcript retrieval (Wage & Income + Account)
- Professional tax form review
- Preparation & filing support
- Tax relief options if you owe the IRS
Step 8: Monitor IRS Processing
The Internal Revenue Service typically issues an acceptance or rejection notice within 60 days.
If no response is received, contact the IRS Business and Specialty Tax Line for a status update.
Late Election and Corporation Election Relief Options
Businesses that miss the filing deadline may qualify for corporation election relief under
Revenue Procedure 2013-30. To qualify, the corporation must show reasonable cause for late filing and demonstrate consistent shareholder reporting as an S corporation. Relief is generally available if the form is filed within 3 years and 75 days of the intended effective date.
Key Filing Considerations related tax forms with permanent corporate records to support future compliance. owner correctly and ensure the legal holder provides proper consent. approvals require longer IRS review periods than standard calendar-year elections.
Common Filing Mistakes to Avoid
Errors often occur when businesses omit shareholder signatures, enter incorrect identification numbers, or miss the filing deadline. Incomplete forms or inconsistent ownership details may result in rejection, delaying the intended tax treatment and complicating future compliance for the business owner.
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
