IRS Form 2553 Instructions: How to Fill Out Form 2553

What is IRS Form 2553?

IRS Form 2553 is designed for businesses that want to elect to become an S corp (typically from a C corporation, the standard corporation type). 

The main reason for this is to become a pass-through entity and reap the associated tax benefits.

Depending on your business, you may be able to save money on your annual tax bill by electing to be taxed as an S corp as opposed to a C corp.

As a pass-through entity, instead of the corporation itself paying taxes as in a typical C corp, with an S corp those tax liabilities “pass through” to those individuals who have an ownership stake in the company (just like a sole proprietorship or partnership, which are also both pass-through entities). 

This means, depending on the size and structure of your business, becoming an S corp could save you considerably on taxes. 

There’s no guarantee of that, so you should first check with your accountant if you’re considering changing your corporation type.

However, it’s worth considering for the tax savings alone. 

We’ll review step-by-step IRS Form 2553 instructions so you know everything you need to fill the form out right in a sec. 

But first, let’s clarify who can file Form 2553. 

Who can file IRS Form 2553?

These two business entities can file Form 2553 to elect to become a pass-through entity:

1. C corps, and
2. LLCs

We’ve touched on shifting from a C corp to an S corp already, but what about as an LLC?

If you’re an LLC and you file Form 2553, nothing will change from a liability or legal standpoint.

However, you will be taxed as an S corp (in other words, treated as a pass-through entity) for tax purposes.

You’ll also need to meet the below requirements to be able to file Form 2553:

• The company must be a domestic corporation
• The company can’t be a bank or insurance company
• And the company must adopt a valid fiscal (tax) year
• All shareholders must be United States citizens, permanent residents, or resident aliens
• You must have less than 100 shareholders
• You can only have one class of stock
• All shareholders must be either an individual, estate, trust (only certain types allowed), or exempt organizations such as a nonprofit
• And all shareholders must sign-off on the change to S corp status

Provided you meet the above requirements, you’re good to file Form 2553.

Now, let’s dive into some step-by-step instructions. 

IRS Form 2553 instructions: How to fill out Form 2553 

At first glance, IRS Form 2553 can look a bit daunting.

Fortunately, for most businesses, several of the sections straight up don’t apply. So, chances are you’ll be able to skip a good portion of the 4-page form. 

For the most part, the purpose of the form is simply to collect various pieces of information about the company and its shareholders. 

So, keep that in mind before you sit down to work on it and have any information you might need on-hand (if you don’t already).

Alright, let’s start with section 1 of our IRS Form 2553 instructions: election information. 

Part I: Election information

Part I is about filling in two main things:

• Your business’ basic information (including your EIN, so if you have it but don’t know what it is or where to find it, read this guide on finding your EIN number)
• And your election information (in other words, information on your election to be taxed as an S corp)

One important point to be careful with is item E.

Generally, you must file IRS Form 2553 no later than 2 months and 15 days beyond the date of S corp election. 

So, don’t put down the date your business “opened its doors” as that might not align with your tax obligations.

Instead, put down the earliest of these three dates:

1. The date you acquired your first shareholders
2. When you first acquired assets, or
3. The date that you began processing transactions for the business

Part 1 then continues through sections J through N:

In this section, you’ll need to input each of these pieces of information for all shareholders as their show of consent for the election to S corp tax status:

• Section J: Shareholder’s name and address
• K: Signature and date
• L: Their ownership stake
• M: SSN or EIN
• N: That shareholder’s tax year

Once that’s done, any officer of the company can sign the end of Part I to finish it off.

Now, let’s move on to Part II. 

Part II: Selection of fiscal tax year

Part II might seem kind of overwhelming, but it’s mostly a bunch of reading with a few checkboxes.

Having said that, if you’re like most businesses and you’re filing using a calendar tax year (meaning your tax year starts January 1st and ends December 31st), you can skip this section entirely (yay).

If not and you’re using a fiscal tax year, no worries. We’ll have this section completed quickly and painlessly. 

The IRS generally prefers you use a calendar tax year. So, in this section, you need to provide justification for why you rather use a fiscal (non-calendar) tax year.

There are all kinds of reasons why a business might want to use a non-traditional, non-calendar tax year, such as seasonality or because the majority of stakeholders have a preference (called an “ownership tax year”).

Whatever the reason, that’s exactly what you’ll be clarifying in Section P. 

Pick whichever best corresponds to your chosen tax method:

• Natural: In other words, seasonal. Your business follows a different “year” as it essentially begins/ends with your busy season.
• Organizational: Described above, the majority of stakeholders prefer a different fiscal tax year start and end date.

If neither of those applies to you, you’ll then want to move on to sections Q or R depending on if you’re using another business purpose for a unique fiscal year (Q) or Section 444 (R).

Part III: Qualified Subchapter S trust election

Part III applies to Qualified Subchapter S Trusts– a trust with a single beneficiary whose income is distributed annually– who want to hold stock in an S corp. 

If that doesn’t apply to you, you can skip this section in its entirety. 

Part IV: Late corporate classification election representations

Another section that most businesses can skip, Part IV only applies to you if you’re an LLC and you’re filing Form 2553 after the form deadline.

Again, if that doesn’t apply to you, skip this section.

If it does, make sure you provide an explanation as to why you’re filing late, either in the first line of Part I or in a separate letter that you attach to the form. 

Where to file Form 2553

Now that you’ve got IRS Form 2553 completed, it’s time to send it in. 

It can be a little confusing figuring out where you’re supposed to file Form 2553, especially because that information changes regularly. 

Here is the most current information as of June 2019 according to the IRS: 

To break this down simply, you have two options for filing your Form 2553:

• Mail, or
• Fax

If you choose to mail your Form 2553, you send it to this address:

Department of the Treasury, Internal Revenue Service, Cincinnati, OH 45999

… if your business’ principle location is in one of the states listed in the top box. 

Or, if your business’ principle location is in one of the states listed in the middle box, you send it to this address:

Department of the Treasury, Internal Revenue Service, Kansas City, MO 64999

Lastly, if you’re in one of the states listed in the bottom box, you send it to this address:

Department of the Treasury, Internal Revenue Service, Ogden, UT 84201

Alternatively, you can fax your Form 2553 to:

1. 855-270-4081 if you’re in the top box
2. 855-887-7734 if you’re in the middle box, or
3. 855-214-7520  if you’re in the bottom box

Once you’ve sent your form in, expect to hear a response back from the IRS within about 60 days. 

It’s as simple as that!

Now you not only know how to fill out but also where to send your completed Form 2553. 

What if I forget to file Form 2553?

For whatever reason, Form 2553 is known as the IRS form most likely to be turned in late.

If that’s you, you’ll want to make yourself aware of what the IRS considers to be reasonable cause for filing your Form 2553 late.

Those reasons include:

• The person responsible for filing Form 2553 failed to file 
• The business’ tax professional failed to file Form 2553
• The business entity itself did not know that it needed to file the form

If you’re requesting relief for late filing, you’ll need to answer each of the below questions:

• What caused the filing to be late?
• How did this cause the form to be filed late?
• How did the company handle its tax records during this period? In other words, did you operate as if you were an S corp or did you hold back individual tax filings in anticipation of becoming an S corp?
• What steps were taken to fix the situation once you had discovered that you were late filing the election (2553) form?

We hope these IRS Form 2553 instructions help you make the switch simple and painless. And don’t forget to check out the resources below for more help filling out form 2553: 

Click here to find out more about what you’ll need to submit (including written statements from each shareholder) to file Form 2553 late at the IRS website by clicking here. 

And click here to download a copy of the official IRS Form 2553.