What is Form 2553? Your Guide to Filing as an S Corporation

September 19, 2022

Form 2553 is an important document that needs to be filed with the IRS in order to declare your business status as an S corporation (as opposed to a C corporation). The instructions for form 2553 can be confusing, so it’s important to know who should file form 2553 and when you need to file it. In this guide, we will go over the basics of form 2553 so that you understand how to stay compliant.

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What is an S Corp?

Before we get too far into the paperwork, let’s define what an S corp is. In short, an S corporation is a regular corporation that has filed Form 2553 with the IRS in order to be taxed as a small business corporation. S corporations are not subject to double taxation, meaning that the corporate income is not subject to corporate income tax. Instead, the shareholders of the S corporation report their share of the corporate income on their individual tax returns. 

Who Should File Form 2553?

Anyone whose business qualifies as an S corp and wants to take advantage of the tax benefits offered by this entity type can fill out form 2553. To qualify as an S corp, a corporation must meet certain IRS requirements, including:

  • Be a domestic corporation of the United States
  • Have only allowable shareholders, which include individuals, certain trusts, and estates; and may not include partnerships, corporations, or non-resident alien shareholders
  • Have no more than 100 shareholders
  • Have only one class of stock

When Do You Need to File Form 2553?

If your business meets these four requirements, you may file Form 2553 at any time during the year. However, if you want your S corporation status to be effective for the current tax year, you must file Form 2553 no later than the 15th day of the 3rd month of the tax year (March 15th for calendar year taxpayers).

For example, if you want your S corporation status to be effective January 1st, 2020, you would need to file Form 2553 no later than March 15th, 2020. 

How to Fill Out Form 2553

Form 2553 can be found on the IRS website. At first, it may look a bit intimidating. The truth is, it’s pretty straightforward. Still, there are a few key points to keep in mind when filling it out. Here are the major sections of the form that you need to be aware of.

Part I – Business and Shareholder Information 

In this section, you’ll need to provide your business name, address, and EIN (Employer Identification Number). You’ll also need to indicate the date that your business began operating as an S corporation, also known as the effective date of election.

Finally, you’ll have to provide information about each shareholder, such as name, address, social security number, and the number of shares owned. Each shareholder is required to sign a consent statement before you file.

Part II – Fiscal Tax Year Information 

Many businesses aren’t required to fill this section out. That’s because it only applies to organizations whose fiscal year doesn’t end on December 31. Alternate fiscal calendars are used by a smaller number of organizations, like seasonal businesses or companies whose shareholders have selected a different fiscal year.

Part III –  Qualified Subchapter S Trust (QSST) Information  

If you thought the fiscal tax year section of the 2553 was exciting, wait until you read about the Qualified Subchapter S Trust section!

In reality, this section doesn’t apply to most businesses. A QSST is an election made on behalf of a trust that retains ownership as the shareholder of an S corporation. In short, it’s a trust with just one beneficiary. If this situation applies to your S corp, you’ll be required to provide some basic information about the beneficiary.

Part IV – Late Corporate Classification Election Representations 

Again, this section is relevant to a smaller percentage of businesses. You only need to fill this section out if you’re filing late, after the March 15 deadline. If this applies to you, you have an opportunity to explain your late filing. Otherwise, you can skip this section.

Filling out form 2553 may seem like a daunting task, but it’s actually pretty simple once you know what you’re doing. Just be sure to double-check that all the information is correct before you submit it—incorrect or missing information could cause delays in processing your request for S corporation status.

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