Additional Considerations

What is an S Corporation?

An S corporation is a standard corporation that has made a special election with the IRS for pass-through taxation. This means that an S corporation’s business income, losses, deductions, and credits flow through to its shareholders for federal tax purposes. S corporation shareholders report their share of the flow-through items on their personal tax returns, thereby avoiding double taxation (where income is taxed at both the corporate and personal levels)....

Eligibility Requirements for Filing Form 2553

To be eligible to file Form 2553, a corporation must meet the following requirements:...

Where to File IRS Form 2553

The IRS does not offer electronic filingof Form 2553. You must file a physical form by mail or fax. The address or fax number where you submit the form depends on your corporation’s principal business location. Here’s how to determine the correct filing location:...

Timelines for Filing IRS Form 2553

The deadline for filing Form 2553 is strict and you must adhere to it to secure S corporation tax status. The deadlines are as follows:...

Consequences of Failing to File Form 2553

If you do not file Form 2553 on time or file it incorrectly, your corporation will be taxed as a C corporation. This means double taxation on any business profits – first at the corporate level, then again at the shareholder level upon distribution as dividends....

Completing IRS Form 2553

Form 2553 is relatively straightforward, but careful attention to the instructions is critical. You can find the form and instructions on the IRS website (https://www.irs.gov/forms-pubs/about-form-2553). Here’s a breakdown of the information you’ll need to provide:...

Obtaining an EIN

If your corporation doesn’t have an EIN, you’ll need to obtain one before you file Form 2553. You can apply for an EIN online through the IRS website, by phone, or by completing and submitting Form SS-4. The IRS typically issues EINs quickly upon application....

Additional Considerations

State Taxes: Filing Form 2553 is for federal tax purposes. You must also determine whether your state recognizes S corporation status or if a separate election is needed. Tax Professionals: If you are unfamiliar with the requirements for S corporations or filing Form 2553, consider consulting with a tax attorney or accountant to ensure your business complies with all relevant regulations....

Conclusion

Electing S corporation status can provide significant tax advantages to eligible businesses. By understanding the eligibility requirements, how to properly complete Form 2553, and where to file accordingly, you can ensure that your small business benefits from this special tax treatment....