If you’re looking to reduce your self-employment tax liability and simplify your business’s tax structure, Form 2553 might be your golden ticket. Many small business owners aren’t aware of how powerful this form can be when it comes to tax savings. While filing requirements can be technical, understanding how this decision fits into your overall financial picture is where experienced tax services can make a real difference.
In this guide, we’ll break down what Form 2553 is, who needs it, how to file it, and what to do if you miss the deadline—so you can make informed decisions for your business.
What is Form 2553?
Form 2553, officially called the Election by a Small Business Corporation, is how a corporation or LLC elects to be taxed as an S corporation. With this election, business income passes through to shareholders and is taxed at individual rates—avoiding the double taxation applied to traditional C corporations.
If you’re asking, “what is a 2553 form?”—this is the document that kicks off your S-corp status with the IRS.
What is an S-Corp?
An S corporation (S-corp) is a tax classification that allows business income, deductions, and credits to pass through directly to shareholders’ personal tax returns, avoiding the double taxation typically applied to C corporations. This means the business itself isn’t taxed on its income; instead, shareholders are taxed individually.
One of the key benefits of an S-corp is the potential to save on self-employment taxes. Shareholders can receive a reasonable salary, with additional earnings distributed as dividends that may not be subject to self-employment tax.
Who Should File IRS Form 2553?
Not every business can file Form 2553, but those that meet the criteria may benefit from this special tax status. Your business may qualify if:
- Domestic Corporation: Must be a domestic corporation or eligible entity that files Form 2553 on time.
- 100 or Fewer Shareholders: Shareholders can include individuals, estates, exempt organizations, or certain trusts. Family members can be treated as one shareholder.
- One Class of Stock: The corporation must issue only one class of stock, though voting rights can differ.
- No Nonresident Alien Shareholders: The business cannot have nonresident alien shareholders, except for certain trusts.
- Eligible Business Type: Certain businesses, such as banks and insurance companies, are ineligible.
- Shareholder Consent: Unanimous shareholder consent is required for the S-Corp election.
How to File Form 2553: Step-by-Step Instructions
Understanding how to file Form 2553 can save you from headaches later on. Here’s a breakdown of the filing process:
1. Provide Basic Business Details (Part I)
Start by entering the corporation’s name, EIN, incorporation date, and state. Indicate whether the entity has changed its name or address since obtaining the EIN. Also include the effective date you want the S election to begin.
If you’re choosing a tax year other than the calendar year, select the relevant box (fiscal year or 52–53-week year). If applicable, complete Part II.
2. Obtain Shareholder Consent (Part I continued)
All shareholders (or former shareholders) must provide their names, addresses, tax identification numbers, stock ownership details, and tax year-end dates. Each must sign the Shareholder’s Consent Statement affirming their agreement to the S corporation election and confirming that they have reported their income accordingly.
3. Select a Tax Year (Part II, if required)
If you’re using a fiscal year or a 52–53-week year, you must justify this in Part II. The corporation must indicate whether it’s:
- A new corporation adopting a tax year,
- An existing one retaining it, or
- An existing one changing it.
Depending on the situation, you may need to show that your fiscal year is based on either a natural business year, ownership tax year, or a valid business purpose. You may also need to file Form 8716 for a section 444 election if required.
4. Make QSST Election (Part III, if applicable)
If stock has been transferred to a Qualified Subchapter S Trust (QSST) before the S election date, complete Part III. The income beneficiary (or legal representative) must sign to confirm the trust meets all QSST requirements.
5. Request Late Election Relief (Part IV, if applicable)
If you’re filing late, Part IV must include representations confirming:
- The entity is eligible to be classified as a corporation,
- The delay was due to a missed Form 8832 or Form 2553 filing,
- All prior returns have been consistent with S status, or the first year’s return is not yet due.
These declarations are required for late S corporation elections and late classification elections.
Where to Send Form 2553?
Form 2553 must be sent to the appropriate IRS office based on where your principal business is located. The original election (no photocopies) should be mailed or faxed to the designated IRS Service Center. If filing by fax, retain the original Form 2553 with your business’s permanent records.
Additionally, certain late elections can be filed along with Form 1120-S. You may also file the election using an IRS-approved private delivery service (PDS). For the current list of approved services, visit IRS.gov/PDS.
Form 2553 Deadline
The IRS requires that Form 2553 be filed:
- Within 2 months and 15 days after the start of the tax year the election will take effect, or
- Anytime in the tax year before the one when the election is intended to take effect
Can Form 2553 Be Signed Electronically?
No, at this time, Form 2553 cannot be signed and submitted electronically to the IRS. Each shareholder’s physical signature is required, and the form must be submitted via mail or fax. That said, some third-party platforms may assist in preparing the form digitally before printing and submitting it the traditional way.
Form 2553 Late Filing: What If You Miss the Deadline?
Late filings happen more often than you’d think. Fortunately, the IRS allows certain businesses to request relief if they can show reasonable cause for missing the deadline. This is done through Line I of the form and often includes a written explanation.
To qualify for late election relief, your business must:
- Be eligible to elect S-corp status
- Have intended to file on time
- Not have filed a return inconsistent with S-corp status
- Act reasonably and in good faith
If the IRS grants your request, your S-corp election can still be treated as effective from your desired start date.
How The MadTax Can Help With Business Tax Strategy
Form 2553 is just one of many decisions business owners face when structuring their company for long-term financial health. Choosing the right tax classification, managing compliance, and understanding how these elements impact your bottom line can be overwhelming without the right guidance.At The MadTax, we help you focus on the bigger picture—giving you the clarity you need to make confident, informed choices for your business. If you’re navigating tax questions or planning for growth, we’re here to support your success every step of the way.