What is IRS Form 2553? IRS form 2553 elects for internal revenue service and makes the business entity attain S corporation status for tax purposes. If a business does not perform this step, it will be assumed that it is a C corporation and help responsible for paying corporate income tax. The internal revenue system will review the receipt and send a letter to the corporation confirming the election, or if it is not legitimate, they will deny the request. Hence the company has to produce the required legal documents to fill the form.
What Is The Eligibility Criteria For Filing IRS Form 2553?
The eligibility criteria to apply for the election and fill the IRS form 2553 are:
- The company has no more than 100 shareholders.
- The business has only one class of stock.
- The firm is not eligible to be a corporation.
- The concern is only a domestic corporation.
How To File ?IRS 2553?
The stepwise details on how to file for an IRS 2553 tax are as follows:
- Download form 2553 from the IRS website.
- Take a printout.
- The form contains four parts.
- The first part asks for general information like the employer identification number, date of the election, shareholder details. This part requires a signature.
- Part two requests information about the fiscal year.
- The next part is for trusts and skipped if the concern is not qualified for the subchapter S trust election.
- The final part is necessary to fill only for late filings.
- After filling, this can be mailed or faxed to the appropriate IRS center. The only drawback is that it cannot be e-filed.
Filing Requirements For Form 2553
There are some guidelines while filing IRS form 2553. They are:
- Form 2553 must be filed either on the 16th day of the third month of the corporation’s tax year or the 15th day of the second month if the tax year is less by 2.5 months.
- Form 2553 can be filed any time during the tax year when the organization wants to take the election into effect.
- One can file the form even after deadlines if there are particular rules by the corporation to render a late S corporation election.
Late Filing Possibilities
A company can file for Form 253 even after the due date and receive IRS approval to make the election with the proper steps. Any filing after the 15th day of the third month in its tax year can meet the S corporation status eligibility with reasonable mentioned causes. If the concern provides reasonable causes, then the filing date will be considered valid. An individual must explain the following points, and they are:
- What happened?
- When did it happen?
- What are the situations that prevented the filing?
- How did these circumstances affect the form from not being filed on time?
- How did the business handle the other financial and tax affairs at this time?
- What are the attempts taken by the businesses to correct the situation when the factors changed?
The taxation as an S corp is similar to that of a partnership or limited liability company. It makes one question what is sales tax, and to understand it better. Small businesses file for form2553 for tax purposes as they will be taxed only once. In contrast, the C corporations have double taxation depending on the circumstances.
