Form 2553 - Dec 2017

Everything you need to know about Form 2553

IRS Form 2553, Election by a Small Business Corporation, is the document a corporation or eligible LLC files to elect S corporation tax status. Once accepted, the business shifts from standard C corporation double taxation to a pass-through structure, where income, losses, deductions and credits flow directly to shareholders' personal tax returns.

Who needs to file Form 2553?

Not every business qualifies for the S corporation election. Before filing, confirm that your business meets all IRS eligibility requirements, as entities that do not satisfy these rules cannot elect S corporation status. Here are the following requirements:

• Organised as a domestic corporation or eligible LLC
• No more than 100 shareholders
• All shareholders are US citizens, residents or eligible trusts or estates
• Only one class of stock issued
• Every shareholder must sign the consent statement on the form

When to file Form 2553?

The deadline depends on when you want S corp status to take effect. For most calendar-year businesses, you must file within two months and 15 days of the start of the tax year, generally by March 15. Filing after the deadline means your election won't take effect until the following tax year.

If you missed the deadline, the IRS may still grant relief under Rev. Proc. 2013-30 if you had reasonable cause for the delay and all shareholders reported income consistent with S corp status. Late elections filed under this provision must be filed within three years and 75 days of the intended effective date.

Where to mail or fax Form 2553?

Where you send the form depends on your state. The IRS does not accept Form 2553 online. It must be mailed or faxed to the appropriate IRS service center. Use the addresses and fax numbers below:

• Eastern states (including CT, DE, DC, GA, IL, IN, KY, MD, MA, MI, NJ, NY, NC, OH, PA, VA, WI and others): mail to IRS, Kansas City, MO 64999 or fax to 855-887-7734.
• Western states (including AK, AZ, CA, CO, FL, HI, ID, LA, MN, MO, MT, NE, NV, NM, TX, UT, WA, WY and others): mail to IRS, Ogden, UT 84201 or fax to 855-214-7520.

Always check the IRS Where to File page at IRS.gov before submitting, as addresses and fax numbers are subject to change. If mailing, certified mail with return receipt is recommended as proof of timely filing.

Can Form 2553 be signed electronically?

The IRS does not currently accept Form 2553 filed online or through an electronic filing system. The form must be mailed or faxed. On the question of signatures, the IRS generally requires a handwritten (wet ink) signature from an officer of the corporation and from all consenting shareholders. Submitting with only an electronic signature carries a risk of rejection, so most tax professionals recommend wet signatures to avoid any processing issues.

What to expect after filing

After the IRS receives your Form 2553, you should receive a determination within 60 days. If you checked box Q1 in Part II for a fiscal tax year, allow up to an additional 90 days. If you haven't received a response within the expected window, follow up by calling the IRS Business and Specialty Tax line at 1-800-829-4933.

How to fill out Form 2553

The form has four parts, though most filers only need to complete Parts I and, if applicable, II. Remember, double-check every entry before submitting. Errors or missing shareholder signatures are a common reason the IRS delays or rejects elections. Here is what each section requires:

• Part I: Basic business information including name, EIN, mailing address, date of incorporation, state of incorporation, election effective date and shareholder consent signatures
• Part II: Fiscal tax year information, only required if your business is requesting a tax year other than the calendar year
• Part III: Qualified Subchapter S Trust (QSST) elections, if applicable
• Part IV: Late election relief information, completed only when filing after the standard deadline

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