Form 2553 must be filed no later than two months and 15 days after the beginning of the tax year the election is to take effect. For new corporations, this is typically the date of incorporation. Are you a small business owner looking to elect your business as an S-corporation? This comprehensive guide on IRS Form 2553 is essential for you.
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- As an LLC owner, carefully weigh the tax and administrative implications of each path.
- But before you can elect to become an S corporation, also called S corp, you need to meet the eligibility requirements and file Form 2553 with the IRS.
- To change the corporation’s classification, shareholders must submit the statement of revocation to the IRS office, where they file their tax returns.
- Enter the number of shares or percentage ownership and dates acquired for each shareholder in box L.
- Explore a detailed guide, customizable template and real-world examples.
Businesses that want to make the S corporation election can’t file it electronically. Hence, you must fax this form to the IRS or send its paper version to the IRS Kansas City or Odgen office. Changing your business structure can increase revenue and lower the federal tax burden. The IRS treats all corporations as C corporations for tax purposes, often leading to double taxation. This section is for filing late and requesting ‘relief from a late election’. It includes representations you can add to the statement you made in Part I, line I, for late filing.
- Changing your business structure can increase revenue and lower the federal tax burden.
- To revoke an S-election, you should submit a statement of revocation to the service center where you file your annual return.
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- See Form 8716, Election To Have a Tax Year Other Than a Required Tax Year, for details on making a back-up section 444 election.
- While these are the main legal requirements, there are other guidelines S corps are required to follow that you can review in full on the IRS website.
- Part II of Form 2553 is for further information about the fiscal tax year.
Need to Fill Out Form 2553 to the IRS
In Part III, the income beneficiary (or legal representative) of certain qualified subchapter S trusts (QSSTs) may make the QSST election required by IRC Section 1361(d)(2). A filer may use Part III to make the QSST election only if corporate stock has been transferred to the trust on or before the date on which the corporation makes its election to be an S corporation. These points encapsulate the critical aspects of filing Form 2553 for the S-corp election and the consequent changes in taxation and legal standing for a small business corporation. Beyond tax benefits, electing S-corp status can offer legal advantages, including limited liability protection for shareholders. This means personal assets are generally protected from business debts and liabilities.
Item C: State of incorporation
Of course, filing forms such as Form 2553 can be complicated, both from a legal perspective and the information you need to provide. If you need assistance, it’s worth consulting a business adviser for personalized advice. If you file Form 2553 for S corporation status and it is rejected by the IRS, the first step is to understand why it was rejected.
IRS Form 8283 Instructions
The election can be attached to the first Form 1120-S for the year including the effective date if filed simultaneously with any other delinquent Forms 1120-S. A corporation or other entity eligible to elect to be treated as a corporation may elect to be an S corporation only if it meets all the following tests. In essence, the decision and process to file Form 2553 (and skip Form 8832) for an LLC involve coordination between you, the IRS, and possibly financial professionals. Accountants and lawyers serve as guides who can navigate the twists and ensure you stay on track (and out of trouble).
When LLC owners choose to reinvest profit, very little net income (profit minus expenses) from the business will pass-through to the LLC member(s) individual tax returns. Most small business owners will not complete any of the information in this part. To file Form 2553, form 2553 instructions the corporation must submit the form to the appropriate IRS service center by mail or fax. If the company is not eligible to make a Section 444 election, checkbox R2 to indicate that it will adopt or convert to a tax year ending December 31 if the IRS requires this to accept the S-election. You only need to complete Part II if you’re selecting a non-calendar year-end, as indicated by selecting box 2 or 4 in item F on the first page.
Form 8832 vs. Form 2553 is not a matter of doing both – it’s an either/or decision based on desired status. As an LLC owner, carefully weigh the tax and administrative implications of each path. Often, consulting with a CPA or tax advisor can help determine which election (if any) will benefit your situation. If it does, make sure you provide an explanation as to why you’re filing late, either in the first line of Part I or in a separate letter that you attach to the form. Another section that most businesses can skip, Part IV only applies to you if you’re an LLC and you’re filing Form 2553 after the form deadline.
