IRS Form 2553

Fill out
Export or Print
Download your fillable IRS Form 2553 in  PDF
IRS Form 2553

Any business requires an understanding of various financial transactions, registration, and the ability to maintain tax records. Many small businesses use all sorts of ways to gain benefits. They may bear less responsibility for something and pay fewer taxes.

Therefore, in the United States, there is a form for business owners classified as category “S” to pay through taxation. Companies belonging to this category do not pay income taxes. Instead, all the expenses and income of the business are shared among the shareholders. Thus, they must fill out tax returns by the rules, including this form.

Purpose and Main Requirements

This application is an official tax document that belongs to the Internal Revenue Service of the United States. The business entity submits this form for payments through taxation. At the same time, the shareholders must fill out this form since they are taxed on business income and losses. Keep in mind that business enterprises of this category are not exempt from taxes and liability at all. By the way, there is no specific date for submitting this form. It all depends on the unique tax year of the company itself.

In general, the presence of such a classification allows business companies to gain advantages. Firstly, you may save on taxes, and secondly, get additional benefits when filling out documentation. The owner of such a company is not self-employed, so it is not subject to federal income tax. Due to the property transactions, the owner may sell the business or transfer the right to ownership without closing the legal entity.

However, there are some nuances of such a corporation. If you plan to make your company public, you cannot use the S-category. When filling out all the documents and registering a business, it is better to consult a lawyer or a tax specialist.

Who Can Apply?

To obtain this status, the company must meet the following requirements:

  • Domestic business entity;
  • Timely submission of documents;
  • No more than 100 shareholders;
  • The shareholders as individuals, exempt organizations, and trusts;
  • Absence of non-resident foreign shareholders;
  • One class of shares;
  • Availability of the written consent of each shareholder.

Thus, your business must be patronymic and be carried out in the United States. At the same time, your company must have no more than 100 shareholders who are US citizens. Unfortunately, according to US rules, non-resident foreigners are not allowed to own shares of an S-category corporation. Besides, shareholders must submit voluntary consent to receive such a status. Coercion is not permitted since consent is a voluntary act. Also, observe the eligibility limits. Some types of corporations may not qualify for the S-category tax treatment.

When to Complete this Form

As a rule, companies submit this form on any day of the tax year. However, for a more efficient decision, the recommended deadline is two months and 15 days after the start of the tax year. Consider all these features to avoid mistakes and possible penalties. After submitting this application, expect a response from the Tax Authorities within 90 days. As a rule, the authorities give you a letter about the decision.

By the way, there is no fee for this form. But under certain conditions and circumstances, government agencies may issue an additional invoice. Send all the documents either by fax or by mail. Be sure to check the correctness of the specified data to avoid misunderstandings. This status takes effect within 12 months of submitting the form.

Late Application Submission

This form provides for a late submission. In this case, you need to attach an explanatory note so that the Tax Service understands the reason for the delay. The tax authorities consider these applications only if you have submitted the documents within three years after the expected effective date. For more information, use the help of a tax specialist and review the relevant legal papers.

When deciding to move from one category of business to another, business owners need to know the difference between them. Thus, C-category companies pay a fixed corporate tax rate, and shareholders pay taxes on dividends. As for the S-category, such a company is exempt from such payments. Also, C-category corporations have an unlimited number of shareholders, both foreign and domestic. As a rule, the other category does not allow it.

Other IRS Forms for Corporations

IRS forms for businesses are devised to let companies report various financial information to the Internal Revenue Service. Check if you have collected all the info you are required to report as an owner of a S-type business.

How to Fill out Form 2553

Carefully read the step-by-step instructions for filling out and submitting this form. Check the entered data several times. If necessary, use our form-building software to download and complete the up-to-date form template. Remember that you will be denied the status for providing false information.

1. Provide General Information

The first section contains information about your organization. Specify the company name, ADES, and employer identification number. The identification number is a digital code that identifies your organization among others for tax purposes. This code also confirms your identity and your data.

step 1.1 provide general information filling out irs form 2553

Next, you determine the date of application submission. Keep in mind the deadlines for filling out the documents. In the USA, there is a two-month period for the tax year. Select the appropriate item in the column for the tax year.

In case of late submission of the form, you may specify the reason in the same section. After filling out the form, be sure to sign the application. A signature is an official sign of your consent to the processing of the data provided.

step 1.2 provide general information filling out irs form 2553

2. Insert the Required Election Data

By the way, you also fill in the data about the shareholders, including their names, surnames, residential address, and number. In the form, specify the number of shares owned by each shareholder. In States with relevant laws, shares are public property. Therefore, the husband and wife are individual shareholders, even if their assets are owned in the name or managed by only one spouse.

step 2 insert the required election data filling out irs form 2553

3. Define the Tax Year

The second section of the form requires that the owners provide all the information and relevant documents regarding the tax year. Select the type of your corporation, as well as the appropriate option for tax payments. Each item contains a detailed description, but if necessary, you can use our form-building software.

step 3 define the tax year filling out irs form 2553

In this section, you may also specify information about your business goal for the financial year. At the same time, attach a statement indicating the relevant facts and circumstances for the purpose.

4. Enter the Relevant Trust Information

As for this part of the application, specify the data about the qualified S-category division here. This part is intended for the so-called QSST elections. You may do it if you have transferred the corporate shares to the trust on or before the date of the S-status election.

QSST is a universal real estate planning tool put into effect in the event of an S-corporation shareholder’s death. In this case, the property passes into a trust with one beneficiary. If this does not apply to you, then leave the item blank.

step 4.1 enter the relevant trust information filling out irs form 2553

The final section of this form is optional. You fill it out if you apply the deadline. At the same time, attach explanatory notes to the document. Keep in mind that each application form has lines at the top for the name and the identification number. Do not forget to specify this data.

step 4.2 enter the relevant trust information filling out irs form 2553