So you’ve reviewed all your options and you decided you want to be an S corporation. As such, you decide to file form 2553. But one question remains, can you file form 2553 electronically?
The IRS has made great strides in recent years to get a lot of returns filed electronically. It saves time for the IRS, but is also very efficient for taxpayers.
In this article, will discuss electronic filing capabilities for form 2553. Will give you some options to break down.
Background
Unfortunately, the IRS does not allow form 2553 to be filed electronically. The IRS is spending a lot of time and resources in efficiently improving electronic filing for millions of Americans.
But their initial tasks have revolved around 1099‘s 1040s W-2s and other business filing forms. But when it comes to specialize forms and elections like form 2553 which art manual and one time in nature the IRS just hasn’t come up with an effective approach to the problem.
However, they do realize that this is a challenging issue for many people. The IRS request that form 2553 be mailed or faxed. But how many people actually have a fax machine? Not many. It seems the IRS is the only entity that still deals with fax machines.
The IRS does believe that is initiative that they should make progress on. In fact, when you look at their IRS instructions they list a section which says recent developments. This encompasses any changes to the forms as well as any capabilities for electronic or other filing initiatives. You can find out any upcoming changes relating to form 2553 by looking at the following IRS link: https://www.irs.gov/forms-pubs/about-form-2553
You will see a section in the middle of the page that says “Recent Developments.” This is where the IRS would list any new e-filing options.
Can you file form 2553 electronically?
I think that the IRS has spent a lot of time with most of the business filing applications that they just haven’t got around to the miscellaneous ad hoc forms like 2553. In addition, many of the election forms have different deadlines and so it’s very tough for the IRS systems to be able to determine when or if they were proffer properly and timely filed.
So the net result is that you were stuck having to mail or fax it. But hopefully that’ll change here in the near future. I feel that the IRS has done a relatively good job of processing mail and fax submissions. But it has been taking them longer and longer to process them.
The normal processing time is 6 to 8 weeks but it seems that escort election acceptance letters have been taking from six months to to one year to review. In fact you might see that it is time to file your next S Corp. return and you still haven’t received S Corp. acceptance yet.
Why consider an S-Corp?
When it comes to taxes, there are many advantages to being an S-Corp. While an LLC enjoys pass-through taxation, S corps do not. As a result, you save money and avoid the double taxation associated with corporate profits. You can pay your employees a reasonable salary and draw your profits as distributions, which do not have to be paid as self-employment taxes. These tax breaks can really add up over time.
Another advantage to being an S-Corp is that your company must distribute profits among its shareholders in an equitable manner. This advantage is particularly beneficial for new businesses with a straightforward ownership structure. Unlike a thriving company with a long history and a track record, a startup will not have a track record to rely on for projections regarding salaries or distributions. Additionally, if you’re working with a shoestring budget or have an extensive, complex business model, then an S-corp may not be the best option.
Another advantage is the flexibility and ease of transition from one business form to another. While an LLC, partnership, or S-Corp has many benefits, these entities are required to follow corporate formalities and the laws of the state in which they’re registered. A corporation must pay its officers and owners a salary even if they don’t earn any profits. These rules can create an obstacle for many new businesses, especially those with little or no track record.
Bottom line
Even though the IRS does not allow form 2553 to be file electronically, your mailing and faxing options are relatively easy. You just will not get immediate notification of acceptance like you would with efiling.
The IRS should open form 2553 to efiling in the next few years. But that won’t do you much good if you need to file now to meet the deadline.