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- Send Form 2553 by certified mail to the IRS state address within 2 months and 15 days of the new corporation’s first tax year.
- The IRS approves S corp status within 60 days.
- To avoid corporate income tax, LLCs file Form 2553. No need to first elect C corporation status.
- Tax savings: pass income, losses, deductions, credits to shareholders, avoiding double taxation.
- Include reasonable cause explanation in Section I if the deadline for Form 2553 is missed.
- Shareholder consent must sign and date in Section K. If late, provide a reasonable cause explanation in Section I.
- Consult a tax professional to change the entity from C to S Corporation filing status.
- Fax Form 2553 to: (855) 215-1627 (within the U.S.).
- Form 2553 allows small businesses to register as an S corporation rather than default C corporation.
- S corporations save tax dollars as profits are only taxable once by shareholders.
- S corp owners pay personal taxes on all income and loss at personal rates, while C corps pay tax on corporate income and dividend income.
- First, form an LLC or Corporation with the state’s Secretary of State office.
- Then elect to have the entity taxed as an S-Corporation with the IRS using Form 2553.
- Part 1 of Form 2553 requests identifying information like the business’ name, address, and Employer Identification Number.
- S corps are pass-through entities, transferring the tax burden to owners on their personal tax returns.
- Form 2553 notifies the IRS of the election for S corp status, leading to a confirmation or denial request upon review.
- Business incorporation through legal documents is necessary before electing S corporation status.
