If you own a corporation and want to change how the IRS taxes your business, Form 2553 is your gateway to becoming what's called an "S corporation." While that might sound technical, think of it this way: instead of your corporation paying taxes and then you paying taxes again on dividends (double taxation), an S corporation lets the income, deductions, and credits flow directly through to you and your fellow shareholders.
You report it on your personal tax returns, similar to how a partnership works. Form 2553 is simply the official document you file to make this election.
IRS.gov
What Form 2553 Is For
Form 2553 allows your corporation or eligible entity to elect treatment as an S corporation under section 1362(a) of the tax code. This election fundamentally changes how your business profits are taxed—instead of the corporation itself paying income tax, the income passes through to shareholders who report it on their individual returns. The corporation still exists as a legal entity, but for tax purposes, it operates more like a partnership.
IRS.gov
Eligibility Requirements
Not every business can make this election. Your corporation must meet several requirements:
- It must be a domestic corporation
- It can have no more than 100 shareholders
- All shareholders must be individuals, certain trusts, or estates (not partnerships or corporations)
- It can have only one class of stock
- None of the shareholders can be nonresident aliens
Additionally, certain types of businesses—like some financial institutions, insurance companies, and domestic international sales corporations—are automatically ineligible.
IRS.gov
Information Required on the Form
The form itself requires basic information about your corporation, details about each shareholder, consent signatures from every shareholder, and information about your chosen tax year. If you're also requesting a special fiscal year (rather than the standard calendar year), you'll need to complete additional sections explaining your business purpose.
When You’d Use Form 2553 (Late or Amended Elections)
Timing is crucial with Form 2553. The standard rule is straightforward: you must file no more than 2 months and 15 days after the beginning of the tax year when you want the S corporation election to take effect, or at any time during the preceding tax year.
For a calendar-year corporation wanting to be an S corporation starting January 1, this means filing between January 1 of the previous year and March 15 of the election year.
IRS.gov
Late S Corporation Elections
If you miss the deadline, the IRS provides relief under Revenue Procedure 2013-30. If you can demonstrate reasonable cause for the delay—such as reliance on incorrect professional advice, serious illness, or misunderstanding the filing rules—you may still obtain S corporation status.
To qualify:
- File within 3 years and 75 days of your intended effective date
- Explain reasonable cause on line I or in an attached statement
- Write “FILED PURSUANT TO REV. PROC. 2013-30” at the top of the form
Exceptions to the Late Filing Deadline
There is an exception to the 3-year-and-75-day limit if:
- All shareholders consistently filed as if the corporation were an S corporation
- At least 6 months have passed since the first Form 1120-S was filed
- The IRS has not contacted you about any issues during that time
This exception applies when everyone acted in good faith believing the election was properly filed.
Private Letter Rulings
If you do not qualify for automatic relief, you may request a private letter ruling. This involves a more complex process and a significant IRS user fee (currently $6,200, subject to change).
Key Rules You Need to Know
Several critical rules govern Form 2553 elections.
Unanimous Shareholder Consent
Every shareholder must consent. Anyone who owned stock on the day you file (or between the intended effective date and filing date for late elections) must sign column K.
- Both spouses must sign in community property states
- Trusts, estates, and minors follow special signature rules
Missing even one required signature invalidates the election.
IRS.gov
Choosing the Correct Tax Year
Most S corporations use a calendar year ending December 31, which is automatically approved.
If you request a fiscal year, you must either:
- Demonstrate a valid business purpose (triggering a $6,200 user fee), or
- Make a section 444 election limiting the fiscal year
The IRS scrutinizes fiscal year requests closely.
Duration of the Election
Once effective, the S corporation election remains in place until:
- It is formally revoked, or
- The corporation no longer meets eligibility requirements
If revoked or terminated, you generally must wait 5 years before re-electing without IRS consent.
Corporations vs. LLCs
LLCs seeking S corporation status may need to file both:
- Form 8832 (to be treated as a corporation), and
- Form 2553 (to elect S corporation status)
The Form 2553 instructions provide a streamlined option if both elections are needed.
Step-by-Step Filing (High Level)
Step 1: Gather Required Information
Collect your corporation’s legal name, EIN, business address, date of incorporation, and desired effective date. If you don’t have an EIN, apply immediately at IRS.gov/EIN.
Step 2: Complete Part I
Enter items A through E carefully, especially item E (effective date).
In item F:
- Check box (1) for a calendar year (most common)
- Boxes (2) or (4) require Part II
Complete columns J through N for each shareholder.
Step 3: Obtain Shareholder Consents
Every shareholder must sign and date column K or a properly prepared consent statement.
Special rules apply for:
- Community property spouses
- Trust beneficiaries
- Minors and estates
Step 4: Complete Additional Parts if Required
- Part II: Fiscal year requests (boxes P1, Q1, or Q2)
- Part III: QSST elections
- Part IV: Late entity classification elections (if applicable)
Step 5: File the Form
Mail or fax Form 2553 to the correct IRS service center based on location. Keep the original with your permanent corporate records.
IRS.gov
Common Mistakes and How to Avoid Them
Missing Shareholder Signatures
Even one missing signature invalidates the election. Verify every shareholder has signed and dated the form.
Missing the Filing Deadline
The deadline is 2 months and 15 days after the tax year begins—not the tax return due date. File early to avoid late-election issues.
Unnecessary Fiscal Year Requests
Requesting a fiscal year without strong justification leads to delays and high fees. Most businesses should select a calendar year.
Entity Classification Errors
LLCs must be classified as corporations before electing S corporation status. Failing to do so is a common and costly mistake.
Failing to Verify Acceptance
If you don’t hear back within 60 days (or 5 months for fiscal year requests), call the IRS at 1-800-829-4933 to confirm status.
What Happens After You File
The IRS reviews your election and typically responds within 60 days. Fiscal year requests take longer—about 5 months.
IRS.gov
If the Election Is Accepted
You must:
- File Form 1120-S annually
- Issue Schedule K-1s to shareholders
- Maintain ongoing S corporation eligibility
If the Election Is Rejected
The IRS will explain why. Correct the issues promptly and refile if possible.
Ongoing Compliance
Maintain records proving eligibility, filed returns, and shareholder K-1s. These are essential if your status is ever questioned.
FAQs
Can I make an S corporation election before my corporation exists?
No. You must legally incorporate first, obtain an EIN, and then file Form 2553 within the allowed window.
What if we filed Form 1120-S but never filed Form 2553?
File Form 2553 immediately under late-election relief. You may still qualify if filings were consistent.
IRS.gov
Do spouses both need to sign?
In community property states, yes—both spouses must sign even if only one is listed on the stock certificate.
IRS.gov
Does a single-shareholder corporation still need to complete all sections?
Yes. Single-shareholder corporations must complete all shareholder information and sign the consent.
Can I change my tax year later?
Possibly, but it usually requires Form 1128 and IRS approval. Most S corporations keep the original calendar year.
IRS.gov
How do I prove I’m an S corporation?
Your IRS acceptance letter is the best proof. Filed Forms 1120-S can also serve as supporting evidence.
What if a shareholder refuses to sign?
Without unanimous consent, you cannot elect S corporation status. Your options are limited to restructuring ownership or remaining a C corporation.
