Question 1

What does Form 2553 actually do?

Accepted Answer

It elects S corporation tax treatment under Subchapter S. Instead of the entity paying corporate income tax, income, losses, deductions, and credits generally pass through to shareholders, who report them on their personal returns.

Question 2

Who is eligible to file Form 2553?

Accepted Answer

A domestic corporation, or an LLC treated as a corporation, with no more than 100 shareholders, only allowable shareholders (generally individuals, certain estates and trusts, and certain exempt organizations), one class of stock, and no nonresident alien shareholders.

Question 3

When is Form 2553 due?

Accepted Answer

No more than two months and 15 days after the beginning of the tax year the election is to take effect, or at any time during the preceding tax year. For a calendar-year business, that is March 15.

Question 4

Can I file Form 2553 electronically?

Accepted Answer

No. The IRS instructions direct filers to mail or fax Form 2553 to the service center for their state. In certain late-election cases it may instead be attached to a timely filed Form 1120-S.

Question 5

Where do I send Form 2553?

Accepted Answer

To one of two IRS service centers — Kansas City or Ogden — depending on the state where your principal business is located. Verify the current address and fax number in the IRS instructions before you send it, because they change.

Question 6

What happens if I miss the deadline?

Accepted Answer

The election normally takes effect for the following tax year. Rev. Proc. 2013-30 provides simplified late election relief when you have reasonable cause and act generally within three years and 75 days of the intended effective date. You state the reasonable cause on the form itself.

Question 7

What counts as reasonable cause for a late election?

Accepted Answer

Common explanations include reliance on a tax professional who failed to file, an entity that did not know an election was required, or a filing that was prepared but never submitted. The explanation must be truthful and specific to your facts.

Question 8

How will I know the IRS accepted my election?

Accepted Answer

The IRS sends a CP261 notice confirming acceptance, generally within about 60 days of receiving a properly completed form. Keep it permanently; lenders and accountants ask for it.

Question 9

Do all shareholders have to sign?

Accepted Answer

Yes. Every shareholder who holds stock on the day the election is made must consent in writing, and shareholders during any prior part of the tax year covered by a retroactive election must consent as well.

Question 10

Does an LLC need to file Form 8832 first?

Accepted Answer

Usually not. An LLC that files Form 2553 within the required period is generally treated as having elected to be classified as a corporation as of the S election effective date, so a separate Form 8832 is not needed.

Question 11

Can I choose a fiscal year instead of a calendar year?

Accepted Answer

An S corporation generally must use a permitted tax year. Requesting anything other than a calendar year means completing Part II of Form 2553 and meeting the requirements for a business purpose or a Section 444 election.

Question 12

Can I revoke the election later?

Accepted Answer

Yes, an S election can be revoked with the consent of shareholders holding more than half the shares, but a corporation that revokes or terminates its election generally must wait five tax years before electing again without IRS consent.

Form 2553 questions, answered.

Ready to file Form 2553?