Woman working on taxes at computer

How to Fill Out IRS Form 2553

7 min read • Jun 30, 2021 • Derek Miller

If you operate a small business or are self-employed, you may want to establish your business as a corporation. In the United States, you have the option of becoming an S corporation (S-corp) which allows for pass-through taxation and shareholder dividends.

If you’re considering turning your business into an S-corp, you’ll need to become familiar with Form 2553. Use this guide to learn more about this form and how to submit it. 

What Is Form 2553?

Form 2553 is the Election by a Small Business Corporation form, which establishes a sole proprietorship or partnership as an S-corp. Becoming an S-corp will change how you file your taxes and potentially increase your tax return. 

Form 2553 is a 5-page document that asks filers about their organization, fiscal year, and shareholders. However, if you have several shareholders, you may need additional pages. 

Once you’ve completed Form 2553 and any supplemental documents to form a corporation, the IRS will confirm whether your organization is approved to operate as an S-corp. If your organization doesn’t qualify, then you may need to recheck your paperwork or apply as another operating entity. 

How Do I Fill Out Form 2553?

Some parts of this form are self-explanatory, while others might be confusing. If you are confused by Form 2553’s instructions, follow this guide to walk through each page. These instructions have been updated as of May 2021. Changes to Form 2553 might affect the form placement on each page. 

Page 1: Mailing Address

The title page of Form 2553 highlights the address to send your application to. Identify your state and use the address to submit your form. The IRS doesn’t have a street address for either its Kansas City, MO, or its Ogden, UT, locations: the organization receives so much mail that it has its own zip code.

Page 2: Basic Information

Like most IRS forms, the first fillable page of Form 2553 is meant to identify and learn more about your organization. To complete this form, you’ll need the following information:

  • Your name and Employer Identification Number (EIN)
  • Your business street address (city, state, zip code)
  • The date your business was incorporated and the state where it was incorporated
  • The planned start date for your S-corp election 
  • Your company’s tax year
  • The name and title of your legal representative, along with their telephone number (By providing this, you authorize the IRS to call them for more information.) 

Many companies follow the calendar year as their tax year (January 1–December 31). However, some organizations create fiscal years that align better with their organization. For example, if a business has a major season in the summer, the company might choose to end its fiscal year in the fall. 

This page of Form 2553 also asks whether you have more than 100 shareholders (which can limit your eligibility) and if you are filing late. Form 2553 must be filed before the 16th day of the third month of your corporation’s tax year.

If your tax year starts on January 1, you have until March 15 to complete the form. However, you can also file ahead for the upcoming tax year if you have already missed this deadline.  

If you are filing for your S-corp past the approved deadline, you’ll need to write an explanation as to why—and the steps you took to correct your actions. If you file Form 2553 too late, the IRS may deny the application, and you’ll need to reapply next year. 

Page 3: Shareholder Consent

The third page of Form 2553 covers shareholder consent to become an S-corp. It also reviews the number of shares (or percentage of the company) each shareholder owns, their Social Security number or EIN, and their tax year. 

For example, if 2 people form a partnership and decide to become an S-corp, 1 person would file Form 2553. However, they would both be listed on this page. Whoever owns more of the company—typically in the form of money invested—would have a higher percentage of shares. 

Deciding who owns your shares is important before you file to become an S-corp. This will determine how your dividends are paid each year. 

Form 2553 currently has spaces for 7 shareholders. However, if you have more, you’ll need to add all of them to ensure that your full company is represented. 

Page 4: Fiscal Tax Year

The fourth page of Form 2553 reviews the fiscal tax year of your corporation. Section O asks if you are adopting the same fiscal tax year that you specified in Section F (back on page 2) or if you are changing it. If your tax year is changing, this form will ensure that your shareholders are in agreement about this measure and that their tax years line up with the company’s. This part also asks about contingency plans in the event that your tax year is denied by the IRS. 

The IRS sets a standard tax year of January–December (with certain exceptions for various departments). In order to avoid penalties for missing different filing dates or creating confusion, you need to tell the IRS if your tax year differs from this one. 

If you already operate on a tax year that ends on December 31 and plan to continue with it, this page is pretty straightforward. It may look complicated, but it won’t be a problem if you have a standard tax year. 

Page 5: Trust and Late Classification

The final page of Form 2553 covers 2 aspects: if the S-corp is to be left in a trust and rules for late classification. You can fill out the trust information if you plan to leave the company and its assets to a beneficiary, like a child or partner, when you pass away. You will need to include the beneficiary’s name and address, along with their Social Security number. You will also need to include the trust’s name and EIN. 

The final part is only relevant if you are seeking late corporate classification election representation. You will need to complete additional forms to qualify for these special exceptions. 

Take your time filling out Form 2553. By making sure each form is correct, you can avoid refiling with corrections and prevent delays on your S-corp approval.  

Can You File Form 2553 Online?

Form 2553 cannot be filed online. If you want to become an S-corp, you will need to print the form and either mail it or fax it to the IRS. The IRS has 2 different locations where it can receive S-corp documents: Missouri and Utah. The state you send form 2553 to is listed on page 1 of the document and is based on your current location. 

Do not mail Form 2553 to your closest location. IRS locations are not based geographically: just because you live closer to Utah doesn’t mean your form goes to the Ogden location. Failing to send your form to the correct address could cause delays in approval—or it could cause the IRS to ignore your application completely.  

How Do I Know If My Form 2553 Was Approved?

If you have submitted Form 2553 to the IRS and are confident that it was completed correctly, you can call the department at any time to check on your current status. The phone number is (800) 829-4933. 

If your S-corp application is approved, the IRS will send you a letter confirming this status. Save this copy for your records. The IRS should also send you a letter if your status has been denied.  

How Long Does It Take to Process Form 2553?

The IRS will approve your Form 2553 within 60 days of filing. If your paperwork is correct and you file on time, then you shouldn’t experience any delays in the approval process. 

However, 2020 and 2021 have not been standard years. Due to the COVID-19 pandemic and partial government shutdowns, the IRS experienced a massive backlog of unopened mail last June.

IRS Deputy Commissioner Sunita Lough estimated that more than 11 million unopened pieces of IRS mail needed to be reviewed and processed. Even before the pandemic, the IRS estimated that it could take up to 16 weeks to process written tax returns and other forms.

The IRS continues to experience a backlog of mail and has extended the 2021 tax season. If you submitted Form 2553 at the start of the year (before the March 15 deadline for businesses on a calendar year) but still haven’t heard back, the issue likely isn’t on your end. You can call the IRS to check on your S-corp status and see if they’ve processed your application yet.   

Learn More About Becoming an S-Corp

At Lendio, we strive to offer resources to small business owners. Whether you want to incorporate your company or just need help with tax deadlines, our guides are here for you. Turn to the Lendio blog for everything you need to establish your brand and increase your profits. 

SHARE

Derek Miller

Derek Miller is the CMO of Smack Apparel, the content guru at Great.com, the co-founder of Lofty Llama, and a marketing consultant for small businesses. He specializes in entrepreneurship, small business, and digital marketing, and his work has been featured in sites like Entrepreneur, GoDaddy, Score.org, and StartupCamp.