What Form 2553 Is For
Form 2553 is the official IRS document that a corporation or eligible entity uses to elect S corporation status for federal tax purposes. This election fundamentally changes how your business is taxed. Instead of the corporation paying taxes on its income (and shareholders paying taxes again on dividends—the dreaded "double taxation"), an S corporation's income, losses, deductions, and credits flow through directly to shareholders' personal tax returns. Shareholders then pay tax at their individual rates, avoiding the double-taxation problem that regular C corporations face. The form must be signed by all shareholders and filed with the appropriate IRS Service Center to make this critical tax status change official.
When You’d Use Form 2553
Standard Filing Deadline
You'll file Form 2553 when your corporation wants to be treated as an S corporation starting in a particular tax year. The standard filing window is tight: you must submit the form no more than two months and 15 days after the beginning of the tax year when you want the election to take effect, or at any time during the preceding tax year. For example, if you want S corporation status effective January 1, you have until March 15 of that year (March 14 in certain circumstances). You can also file anytime during the previous calendar year.
Late and Amended Elections
If you miss the deadline, don't panic—the IRS offers late election relief under Revenue Procedure 2013-30. To qualify for this simplified relief, your corporation must demonstrate reasonable cause for the late filing and show that you acted diligently to correct the mistake once discovered. Crucially, you and all shareholders must have reported income consistently with S corporation status for all affected years. The late election must generally be filed within three years and 75 days of the intended effective date. Mark "FILED PURSUANT TO REV. PROC. 2013-30" at the top of your form when requesting late relief.
There's even an exception to the time limit if at least six months have passed since filing your first Form 1120-S and the IRS hasn't contacted you about problems with your S corporation status.
Key Rules to Know
Eligibility Requirements
Before filing Form 2553, ensure your corporation meets all eligibility requirements. Your business must be a domestic corporation (or an entity eligible to be treated as one) with no more than 100 shareholders. Family members and their estates can be counted as a single shareholder for this test. Only specific types of shareholders are allowed: individuals, certain trusts, estates, and certain tax-exempt organizations. Importantly, you cannot have any nonresident alien shareholders.
Stock and Business Restrictions
Your corporation can have only one class of stock, meaning all shares must have identical rights to distributions and liquidation proceeds (though voting rights can differ). Certain types of businesses are automatically disqualified, including banks that use the reserve method for bad debts, insurance companies taxed under Subchapter L, and domestic international sales corporations.
Tax Year and Consent Rules
Your corporation must also use an acceptable tax year—typically a calendar year ending December 31, though other options exist with proper justification. Every single shareholder must consent to the election in writing, which is perhaps the most commonly overlooked requirement.
Step-by-Step: How to Complete and File Form 2553
Step 1: Gather Required Information
Start by gathering critical information: your corporation's name, Employer Identification Number (EIN), date of incorporation, and state of incorporation.
Step 2: Complete Part I of the Form
In Part I of Form 2553, you'll enter this basic information along with the effective date of your election. Select your tax year—most S corporations use a calendar year, but if you're requesting a fiscal year, you'll need to complete Part II with appropriate justifications.
Step 3: Obtain Shareholder Consents
The most detailed section is the shareholder consent area in Part I. List every shareholder who owned stock during the relevant period, including names, addresses, Social Security numbers or EINs, number of shares owned, acquisition dates, and tax year-ends. Each shareholder must sign and date the consent statement under penalties of perjury. This signature requirement is non-negotiable—without all signatures, your election is invalid.
If you're making a Qualified Subchapter S Trust (QSST) election, complete Part III.
Step 4: Sign and Submit the Form
An officer of the corporation must sign the form at the bottom of page one. Once complete, mail or fax the original form (not a photocopy) to the IRS Service Center designated for your state—addresses are listed in the instructions. If you fax it, keep the original with your corporate records. You can also use certain private delivery services if you prefer. Make sure to keep proof of filing, such as a certified mail receipt or fax confirmation.
Common Mistakes and How to Avoid Them
Missing Shareholder Signatures
The number one mistake is failing to obtain all required shareholder signatures. The timing of when you file determines which shareholders must consent. If you file the election before the intended effective date, only shareholders who own stock on the day you make the election need to sign. However, if you file on or after the effective date, every person who owned stock at any time from the effective date through the filing date must consent—including former shareholders who sold their shares during that period. Missing even one signature renders the election invalid.
Filing the Wrong Return or Missing the Deadline
Another frequent error is filing Form 1120-S before the election is actually effective. Continue filing your regular Form 1120 or other applicable return until you receive IRS confirmation that your S election is accepted. Many corporations also miss the filing deadline by miscounting the two-month-and-15-day window.
Incomplete or Inaccurate Information
Incomplete or inaccurate information is another pitfall. Double-check that your EIN is correct, dates are accurate, and shareholder information is complete. If you're requesting a fiscal year rather than a calendar year, ensure you've properly completed Part II with the required justifications and attachments. For late elections, failing to provide a detailed reasonable cause explanation or not marking the form properly will result in denial.
Overlooking Disqualifying Factors
Finally, some businesses overlook disqualifying factors like having an ineligible shareholder or more than one class of stock before filing.
What Happens After You File
IRS Review and Determination
After you submit Form 2553, the IRS Service Center will review your election and send you a written notification. In straightforward cases, you should receive a determination within 60 days. The IRS will issue either a CP261 notice accepting your election or a CP264 notice explaining why it was denied. If you requested a fiscal tax year in Part II, processing takes longer—typically an additional 90 days—because it requires approval from the IRS National Office.
If You Don’t Receive a Response
If you don't hear anything within the expected timeframe, call the IRS Business & Specialty Tax Line at 1-800-829-4933. Acceptable proof of a valid election includes an IRS acceptance letter, Form 2553 with an IRS-received stamp, or a certified mail receipt showing timely filing.
After Acceptance
Once accepted, your S corporation election remains in effect indefinitely until it's terminated or revoked. You don't need to file Form 2553 again each year. However, if your S corporation status is later revoked or terminated, you generally cannot make another S election for five years without IRS consent.
FAQs
Can a limited liability company (LLC) file Form 2553 to become an S corporation?
Yes, an LLC that's eligible to be treated as a corporation can elect S corporation status by filing Form 2553. The LLC must first be classified as a corporation for federal tax purposes (either by default rules or by filing Form 8832), then file Form 2553 with all members consenting. The IRS may grant simultaneous relief for both elections if filed late under the proper procedures.
What if one shareholder refuses to sign the consent statement?
Without unanimous shareholder consent, your S corporation election cannot proceed. Every shareholder who owned stock during the relevant period must sign. If you cannot obtain a signature from a former shareholder who sold their interest, consider whether you filed late—the definition of required shareholders depends on your filing timing.
How do I know which IRS Service Center to send my Form 2553 to?
The correct mailing address depends on your corporation's state of incorporation or principal place of business. These addresses change periodically, so always check the most current instructions at IRS.gov rather than relying on older materials.
If we want S corporation status starting January 1, when is the deadline?
For a calendar-year corporation, the deadline is March 15 of that same year. You may also file anytime during the previous calendar year. For newly formed corporations, the clock starts on the date of incorporation.
What happens if our corporation stops meeting eligibility requirements?
If your S corporation fails to meet requirements, your S status may terminate. The IRS may grant relief for inadvertent terminations if the violation was unintentional and corrected promptly.
Can we withdraw or revoke the election?
Before acceptance, you may be able to withdraw the election. After acceptance, revocation requires a statement signed by shareholders holding more than 50 percent of shares, and timing affects the effective date.
Do we need to attach corporate bylaws or formation documents?
Generally, no. Form 2553 alone is sufficient unless you're requesting a fiscal year or late election relief, which requires additional statements.
