Form 2553: How to Use It & Save on Corp Taxes!

If you are ready to save money on your corporate taxes as a real estate agent, investor or small business, we are here to help.  Registering with the IRS to form your corporation is easy, and form 2553 is simple when you know what to fill out and how.  The TL:DR version is by marking yourself from a C Corporation (which is the IRS default) to a S Corporation you can lower what you owe in taxes.  It is important to note there are differences in C and S corps, and we’ll cover those in a follow up post.

Below you’ll find FAQs about Form 2553 including what it is, who is eligible for it, and how to fill out and file this form. 

What is a Form 2553?

The 2553 form is the tax form that tells the IRS that a business wants to be registered as an S Corporation rather than a C corporation.

To be eligible and qualify you must:

• Be a domestic corporation
• Ensure shareholders are US citizens or residents
• Have 100 shareholders or less
• Not have shareholders that are corporate entities 
• Not have more than one class of stock

How to fill out Form 2553

Start by clicking here to download a copy of Form 2553.  Now follow these instructions to fill form 2553 out:

Part I: Election Information

1. Name and Address
   1. List your corporation’s name exactly as it appears on other legal documents.
   2. If the mailing address is the same as someone else’s, write “C/O” and this person’s name following the name of the corporation.
2. Item A. Employer Identification Number (EIN)
   1. List your corporation’s EIN. 
      1. If you do not have an EIN, you will need to apply for one.
      2. If you have not received your EIN yet, write “Applied For” and the date the EIN was applied for in that space. 
3. Item E. Effective Date of Election
   1. List the tax year (fiscal year) in which your company intends to hold S corporation status
4. Item F
   1. Check the box that corresponds with the S corporation’s selected tax year. If box (2) or (4) is checked, provide the additional information about the tax year, and complete Part II
5. Signature
   1. Form 2553 must be signed and dated by the president, vice president, treasurer, assistant treasurer, chief accounting officer, or any other corporate officer (such as tax officer) authorized to sign..
6. Column J
   1. Enter the name and address of each shareholder or former shareholder. 
7. Column K. Shareholder’s Consent Statement
   1. Each shareholder signs and dates either in column K or on a separate consent statement. 
8. Column L
   1. Enter the number of shares of stock each shareholder owns and the date it was acquired.
9. Column M
   1. Enter the social security number of each individual listed in column J.
10. Column N
    1. Enter the month and day that each shareholder’s tax year ends.

Part II: Selection of Fiscal Tax Year

1. In this section, you’ll answer questions about whether you are changing or retaining your tax year.  Most businesses use the calendar year (January to December) as their fiscal year.  You’ll only complete Part II if you checked box (2) or (4) in Part I, item F.  It is important to note some of this only applies to non-profits.  
   1. Box Q1
      1. If your business purpose is based on one of the natural business year tests in section 5.03 of Rev. Proc. 2002-39, you need to write which test you are using (the 25% gross receipts, annual business cycle, or seasonal business test). For the 25% gross receipts test, you’ll need to show the amount of gross receipts for each month for the most recent 47 months. For either the annual business cycle or seasonal business test, you’ll need to provide the gross receipts from sales and services (and inventory costs, if applicable) for each month of that period and the three immediately preceding tax years. If your corporation is less than three tax years old, submit the figures you have.
   2. Box Q2
      1. If your business purpose request isn’t approved, then your back-up section 444 election will occur.

Part III: Qualified Subchapter S Trust (QSST) Election Under Section 1361(d)(2)

1. This section is only relevant for trusts applying for S corporation status. Use Part III only if you make the election in Part I. Form 2553 can’t be filed with only Part III completed.
2. List the income beneficiary’s name, address, and social security number, and the trust’s name, address, and employer identification number.

Part IV: Late Corporate Classification Election Representations

1. This section is for businesses filing their application past the IRS deadline. 

How to submit a completed Form 2553

The original completed Form 2553 must be mailed or faxed to an Internal Revenue Service Center. 

If you are incorporating in Connecticut, Delaware, District of Columbia, Georgia, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia, or Wisconsin, submit to:  Department of the Treasury, Internal Revenue Service, Kansas City, MO 64999 or fax to (855) 887-7734.  

If you are incorporating in Alabama, Alaska, Arizona, Arkansas, California, Colorado, Florida, Hawaii, Idaho, Iowa, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Utah, Washington, or Wyoming, submit your form to Department of the Treasury, Internal Revenue Service, Ogden, UT 84201 or fax to (855) 214-7520.

Now that you know how to complete and submit tax form 2553, here are some common questions.

Form 2553 FAQs

What is the deadline to submit Form 2553?

The deadline to submit Form 2553 depends on whether or not your corporation is newly incorporated. 

The deadline for form 2553 is:

• The 16th day of the third month of the corporation’s tax year. 
• If the tax year is 2.5 months or less, you must file before the 15th day of the second month. 

If your incorporation is filed on or after January 1 of the current tax year, then you can submit Form 2553 any time during the tax year with these exemptions:

• The filing must be accepted no more than 75 days after your corporation has issued stock to shareholders, acquired assets, or conducted business as a corporation. 
• If you miss this deadline, your S-Corporation status will not take effect until the following calendar year.

Is there a filing cost for the IRS 2553 form?

There is no fee to file Form 2553.  However, there can be other costs associated with being a S Corp.  If you check box Q1 of Part II, you will be charged a user fee of $5,800 (subject to change by Rev. Proc. 2018-1 or its successor).  

Note:  You don’t pay the fee when filing Form 2553. Instead, the service center will send Form 2553 to the IRS in Washington, DC, who will then bill you.

How do I know if my Form 2553 was approved?

The IRS will contact you within 60 days of submitting your application to let you know if you are approved.  

How often should I file Form 2553?

Once a small business files Form 2553 and is approved, you do not need to file a Form 2553 again.

Now you’re ready to fill out Form 2553 if you want to change your small business from a C Corporation to a S corporation!