ContractsCounsel Logo

IRS Form 2553

Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 9,865 reviews
No Upfront Payment Required, Pay Only If You Hire.

Jump to Section

What is the IRS Form 2553?

IRS Form 2553 is a form used by a business entity that would like to be treated as an S corporation by the Internal Revenue Service for the purpose of taxes. This form, also called election by a Small Business Corporation, must be filed by any corporation that wants to be an S Corp. When a corporation is formed, it is classified as a C Corp by default until Form 2553 is filed.

Owners of an LLC may also file Form 2553 to elect to be taxed as an S Corp . Even though the LLC will be treated as an S Corp for tax purposes, it will still remain a limited liability company.

To read more about IRS Form 2553, click here.

Purpose of the IRS Form 2553

S Corporation taxation provides businesses with many tax benefits. Most notably, S Corps are not subject to double taxation like C Corps. C Corps are taxed at the corporate level and then shareholders are taxed again on any dividends or benefits they received throughout the year. This could include:

  • Dividends
  • Bonuses
  • Fringe benefits

An S Corp is called a pass-through entity , so it is not taxed at the corporate level like a C Corp. The corporation’s profits and losses pass through to the shareholders, who then must report their share of the profits and losses on their individual tax returns.

An LLC has the option to be taxed as a corporation to save on certain taxes. When an LLC is taxed like a partnership, the owner or owners are not considered employees for the LLC by the IRS even if they perform employee tasks running the company. They are simply considered owners and therefore self-employed.

When a person is self-employed, they must pay full Social Security and Medicare taxes. Together these are called self-employment taxes. An employee only pays a portion of these taxes, and then the balance is covered by the employer.

If an owner performs services for the corporation in an S Corp, they can be considered an employee. This individual will be classified as both a shareholder and an employee. Employees must be compensated for their services, and this compensation will be reported on the employee’s tax return, and they will pay Social Security and Medicare taxes on any salary they earn.

If an LLC files IRS Form 2553 to be taxed as an S Corp, members can now be considered an employee and classify some of their income as salary and some as a distribution from the company. The owner will still have to pay self-employment taxes on the salary, but only regular income tax on the distribution.

When these two incomes are divided correctly, the business owner could end up saving a large amount of money on self-employment taxes.

Who Needs to File an IRS Form 2553?

There are two business entities that generally file IRS Form 2553:

  • Corporations that want to be classified as S Corps
  • LLCs that wish to retain LLC status but be taxed as an S Corp

To be eligible to file, the company needs to meet specific criteria dictated by the IRS. These criteria include:

  1. The company cannot have more than 100 shareholders or members
  2. All shareholders/members must be US citizens or legal residents
  3. The corporation cannot have more than one class of stock
  4. The shareholders/members cannot be other corporations or partnerships

In addition, the company must adopt or change to one of the following tax years:

  • Tax year ending on December 31
  • Natural business year
  • Ownership tax year
  • Tax year elected under section 444
  • A 52-53-week tax year that ends with reference to one of the other years previously listed
  • Any other tax year (including a 52-53-week tax year) for which the corporation (entity) establishes a business purpose.

In addition, for a company to file to elect to be taxed as a corporation, all shareholders and members must agree to the election.

Some corporations are ineligible to file IRS Form 2553. These types of corporations are:

  • A bank or thrift institution that uses the reserve method of accounting for bad debts
  • A corporation that elects to be classified as a possessions corporation
  • An insurance company subject to tax under subchapter L of the tax code
  • A domestic, international sales corporation
Meet some lawyers on our platform

Bryan B.

242 projects on CC
View Profile

Benjamin E.

98 projects on CC
View Profile

Sara S.

107 projects on CC
View Profile

Chris D.

9 projects on CC
View Profile

How To File the IRS Form 2553

IRS Form 2553 can be filed with the IRS by either mailing or faxing the form. Currently, an online filing option does not exist for this form. There is no filing fee associated with this document, so it simply needs to be filled out correctly and submitted. Businesses usually receive a determination from the IRS as to whether their business qualifies for S Corp status within 60 days.

Once a company files Form 2553, and the IRS approves it, the election remains valid indefinitely. The company is not required to file IRS Form 2553 every year.

IRS Form 2553 is subject to deadlines, so a company that would like to file this form needs to be aware of these dates. This form must be filed:

  • No later than two months and 15 days after the beginning of the tax year that the S Corp election is to take effect.
  • Any time during the tax year prior to the tax year, the S Corp election is to take effect.

If a company fails to meet the filing deadline and still wants to elect to be taxed as an S Corp, there are some relief options. A business may be able to file IRS Form 2553 late if it meets the following requirements:

  1. The corporation prepared to file IRS Form 2553 by the deadline
  2. The corporation was not disqualified from becoming an S Corp for any reason other than missing the deadline
  3. The causefor missing the deadline is reasonable
  4. The corporation submits statements ensuring that all shareholders reported their income in a manner consistent with the corporation’s intention to file as an S Corp

Click here to read more about how to file IRS Form 2553.

ContractsCounsel IRS Form 2553 Image

Image via Pexels by Karolina

Costs Related to IRS Form 2553

IRS Form 2553 does not have a filing fee, however, a business owner should be aware that there can be some other costs associated with electing to be taxed as an S Corp. For example, if the company is using “business purpose” to justify its fiscal year, it will incur a $5,800 fee following filing Form 2553.

Taxes and S Corp treatment will vary by state, and you may need to file additional documents with your state department of revenue which could result in additional fees. If you have questions about your state’s laws regarding taxes and additional expenses you may incur, you can contact a corporate lawyer to assist you with filing the correct forms.

Get Help with IRS Form 2553

Do you have questions about Form 2553 and want to speak to an expert? Post a project today on ContractsCounsel and receive bids from corporate lawyers who specialize in IRS tax forms like Form 2553.

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our IRS Form 2553 Lawyers

Mark D. on ContractsCounsel
View Mark
5.0 (4)
Member Since:
March 15, 2022

Mark D.

Attorney
Free Consultation
Dallas/Houston Texas
29 Yrs Experience
Licensed in CO, TX
Thomas M Cooley Law School

Partnering with business clients to keep their greatest asset - their employees - from becoming their biggest liability. Mark accomplishes this by working with in-house counsel and human resource professionals of several Fortune 50 companies, as well as many smaller public and privately held profit and not for profit organizations, to provide advice and counsel on the day to day employment and workforce practice issues encountered by those organizations. For over fifteen years Mark has been Board Certified in Labor and Employment Law by the Texas Board of Legal Specialization. He is licensed and practices in both Texas and Colorado and has focused his practice for the last 20 plus years on defending companies in employment and labor related matters. During this time Mark has had extensive experience in handling and responding to a wide range of local, state and federal employment issues that impact the management and operations of businesses in a wide range of industries. Mark's experience includes appearances before state and federal agencies and regulatory boards, litigation in both state and federal courts, defense of class actions and appearances before courts of appeal. While Mark regularly handles matters in litigation, he has a high regard for handling every issue with the best interest of the client’s business. Mark is a published author and regular speaks on labor, employment and workplace practice topics. Whether it be an investigation by the Occupational Safety and Health Administration (OSHA), the Wage & Hour division of the U.S. Department of Labor, or other state agency; an Equal Employment Opportunity Commission (EEOC) or state agency charge claiming a violation of local, state or federal employment or labor laws; or the need for direction on a hiring, termination or business operational issue involving employees, Mark has extensive experience in handling these and many other employment and labor issues.

Rebecca R. on ContractsCounsel
View Rebecca
5.0 (2)
Member Since:
March 16, 2022

Rebecca R.

Attorney
Free Consultation
St. Petersburg, FL/Nashville, TN
23 Yrs Experience
Licensed in FL, TN
University of Tennessee College of Law

An experienced commercial contracts attorney with sales, leasing, NDA, SEC compliance, corporate governance, commercial real estate, and employment experience. Also well versed in internal and external policy document and manual creation.

Gregory F. on ContractsCounsel
View Gregory
5.0 (5)
Member Since:
March 23, 2022

Gregory F.

Attorney
Free Consultation
Atlanta, Georgia
26 Yrs Experience
Licensed in GA, NY
University of Pennsylvania

Greg Fidlon has been practicing exclusively in employment law since 1998. He represents and advises clients in all aspects of the employment relationship. In addition to his litigation work, Greg regularly negotiates and drafts corporate policy handbooks, employment contracts, separation agreements and restrictive covenants. He also develops and presents training programs and has spoken and written extensively on labor and employment law topics.

Joann H. on ContractsCounsel
View Joann
Member Since:
March 23, 2022

Joann H.

Attorney at Law
Free Consultation
Miami
24 Yrs Experience
Licensed in FL, NY
University of Buffalo School of Law; SUNY at Buffalo School of Law

I practiced law for the past 22 years in Immigration, Bankruptcy, Foreclosure, Civil Litigation, and Estate Planning. I am interested in downsizing to a more workable schedule to allow the pursuit of other interests.

Pankaj R. on ContractsCounsel
View Pankaj
Member Since:
March 26, 2022

Pankaj R.

Owner
Free Consultation
Los Angeles/Inland Empire
15 Yrs Experience
Licensed in AZ, CA
University of Arizona Rogers College of Law

I advise clients in the areas of business, trademarks, real estate, employment, and finance. My overarching goals are to unite creative people and companies to assist them in making sound legal and business decisions. I have been fortunate enough to build a fast-growing, 21st-century law firm with an amazing staff by my side. Our focus is not just on providing invaluable legal insight but creating a better all-around client experience. We provide unique subscription pricing and flat-fee options for our clients, providing billing transparency and enhanced value to all of our wonderful clients. Focus areas: contract drafting, negotiations, research, trademarks international law, entertainment, business development, entity choice; business: manager, team builder, leader, motivator. Speaking Engagements: National Business Institute (NBI) - "Business Contracts 101"

Neilson B. on ContractsCounsel
View Neilson
Member Since:
March 26, 2022

Neilson B.

Managing Attorney
Free Consultation
Charlotte, NC
5 Yrs Experience
Licensed in IL, MO, NC
Shepard Broad School of Law

Hi, I am the founding member of Son of Brown Law Firm, based in Charlotte North Carolina. Our firm practices in the areas of Business Transactions, Cannabis/Hemp, Personal Injury and Immigration Law.

Find the best lawyer for your project

Browse Lawyers Now

How It Works

Post Your Project

Get Free Bids to Compare

Hire Your Lawyer

Tax lawyers by top cities
See All Tax Lawyers
IRS Form 2553 lawyers by city
See All IRS Form 2553 Lawyers
related contracts
See More Contracts
other helpful articles

Quick, user friendly and one of the better ways I've come across to get ahold of lawyers willing to take new clients.

View Trustpilot Review

Contracts Counsel was incredibly helpful and easy to use. I submitted a project for a lawyer's help within a day I had received over 6 proposals from qualified lawyers. I submitted a bid that works best for my business and we went forward with the project.

View Trustpilot Review

I never knew how difficult it was to obtain representation or a lawyer, and ContractsCounsel was EXACTLY the type of service I was hoping for when I was in a pinch. Working with their service was efficient, effective and made me feel in control. Thank you so much and should I ever need attorney services down the road, I'll certainly be a repeat customer.

View Trustpilot Review

I got 5 bids within 24h of posting my project. I choose the person who provided the most detailed and relevant intro letter, highlighting their experience relevant to my project. I am very satisfied with the outcome and quality of the two agreements that were produced, they actually far exceed my expectations.

View Trustpilot Review

How It Works

Post Your Project

Get Free Bids to Compare

Hire Your Lawyer

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call

Find lawyers and attorneys by city