2553 Form 2022 Printable, Fillable PDF – In the United States, 2553 Form (Election by a Small Firm Corporation) is a form that may be submitted by a business to opt to be registered as an S Corporation rather than a C Corporation with the Internal Revenue Service.
When a company registers as a corporation with the Internal Revenue Service, it is automatically created as a C Corporation. Many company owners choose to form an S corporation instead of a C corporation for a variety of reasons, one of which being tax advantages.
C. In many cases, corporations are subjected to double taxes, which may result in a significant financial burden for a small firm. Rather than the business, income is taxable to the shareholders under an S-Corp structure.
Follow this link to the Internal Revenue Service website to get the most recent PDF version of 2553 Form.
The Purpose Of Form 2553 Is To Collect Information
In order for a small firm to register as an S Corporation rather than the default C Corporation, IRS 2553 Form must be completed and submitted to the IRS. The majority of company owners use this form to submit their taxes. S Corporations save money on taxes since the corporation’s taxable income is only taxed once, and that taxation is passed on to the corporation’s shareholders.
Income and losses from a S Corp are claimed by the owners on their personal income tax returns, and they are taxed at their personal income tax rates. If dividends are given out, C-corporations are subject to taxes both at the corporate level and at the level of the individual shareholders.
Please read this article to understand more about S Corporations and the benefits that incorporating as an S Corporation may have for your company.
In What Situations Does Form 2553 Need To Be Filed?
A small firm must fulfill specific requirements in order to be qualified to submit 2553 Form, which allows them to choose to register as an S Corporation. These prerequisites are as follows:
- The company or organization must be based in the United States of America.
- All stockholders in the company must be citizens or permanent residents of the United States.
- No more than 100 shareholders are permitted in a company.
- Individuals, estates, exempt organizations, and certain trusts are the only types of shareholders permitted.
- There can only be one class of share in the company.
Another criterion is that the company has adopted or will adopt one of the following tax years, or that it will shift to one of them:
- The fiscal year ends on December 31st.
- Natural business year
- The tax year in which the property is owned
- Section 444 allows you to choose the tax year you want to use.
- It is a tax year that lasts 52–53 weeks and finishes with a reference to one of the other years already named.
- Any other tax year (including a 52–53-week tax year) in which the company (entity) creates a business purpose is considered to be a separate tax year for tax purposes.
Some companies are ineligible to submit a 2553 Form, and they are listed below. Among these companies are the following:
- A bank or thrift institution that accounts for bad loans using the reserve technique is known as a reserve bank or thrift institution.
- A company that has chosen to be classified as a holding corporation
- Subchapter L of the Internal Revenue Code applies to an insurance firm that is subject to taxation.
- A company that sells both domestically and internationally
What Is The Frequency With Which I Must File Form 2553?
Once a small company files 2553 Form and is accepted by the Internal Revenue Service to be regarded as an S Corp, the election is valid for life, and the business owner is not required to submit 2553 Form every year after that point.
This form, on the other hand, has a due date, and it must be submitted by that date in order to be effective for the current tax year for which you are filing. When it comes to submitting 2553 Form, a firm has two options:
Option 1: The S Corp election must be implemented no later than two months and fifteen days after the start of the tax year in which it is to be implemented.
Option 2: At any moment during the tax year previous to the tax year in which the S Corp election is to be implemented, the S Corp election may be implemented.
If you are late in completing 2553 Form but still wish to elect to be an S Corp for the current tax year, you still have several alternatives for obtaining a late filing penalty. If you fulfill the qualifications listed below, you may be eligible to submit 2553 Form late without penalty.
- The company intended to register as an S Corporation before the deadline.
- The company was not prohibited from becoming an S Corp for any other reason; it was only because of the late filing that the firm was banned from becoming an S Corp.
- In this case, there is a legitimate excuse for missing the filing deadline.
- All shareholders’ income was reported in a manner consistent with the business’s plan to file as an S Corp, and the corporation filed documents attesting to this fact.
Form 2553 Submission Fees
There is no charge for submitting 2553 Form with the Internal Revenue Service. Certain specific situations, on the other hand, may necessitate the payment of a charge. Example: If your firm uses “business purpose” to explain its fiscal year, you will be compelled to pay a $5,800 charge after submitting 2553 Form to the Internal Revenue Service.
This form cannot be submitted online; instead, it must be sent to the Internal Revenue Service in the United States.
State taxes may be applicable depending on the state in which you run your company, and you may be required to submit extra documentation to the appropriate state department. If you are uncertain about the regulations governing your state taxes, you may want to consult with a corporate lawyer who can help you complete the necessary paperwork.