Understanding Irs Form 2553: How To File As An S Corporation


IRS Form 2553 Download Fillable PDF or Fill Online Election by a Small
IRS Form 2553 Download Fillable PDF or Fill Online Election by a Small from www.templateroller.com

What is IRS Form 2553?

IRS Form 2553 is a document that must be filed with the Internal Revenue Service (IRS) in order to elect to become an S Corporation. It is an important form for small business owners who want to take advantage of the tax benefits associated with S Corporations. By filing this form, small business owners are able to have their business treated as a separate entity from their personal income for tax purposes.

What are the Benefits of Filing IRS Form 2553?

The main benefit of filing IRS Form 2553 is that it allows small business owners to take advantage of the pass-through taxation structure of an S Corporation. This means that business profits and losses are “passed through” to the shareholders and taxed at their individual tax rates. This eliminates the need to file a separate corporate tax return and pay taxes at the corporate tax rate.

In addition to the tax savings, there are other benefits associated with filing IRS Form 2553. For example, S Corporations are not subject to the double taxation that applies to C Corporations, and they are not subject to the self-employment taxes that sole proprietors must pay.

What do I Need to Know Before Filing IRS Form 2553?

Before filing IRS Form 2553, there are some important points to consider. First, the business must meet the requirements for an S Corporation. This includes requirements related to the number of shareholders, the type of shareholders, and the type of business structure.

In addition, the business must have a valid Employer Identification Number (EIN) and must submit the form within 75 days of the beginning of the tax year. The business must also have a valid mailing address and must have no more than 100 shareholders.

How do I File IRS Form 2553?

In order to file IRS Form 2553, the business must first obtain a valid EIN. This can be done through the IRS website or by filing Form SS-4.

Once the EIN has been obtained, the business should complete and sign Form 2553 and mail it to the IRS. The form must be signed by all shareholders and must be postmarked within 75 days of the beginning of the tax year.

What Happens After I File IRS Form 2553?

Once the IRS receives the completed Form 2553, they will review it and determine whether the business meets the requirements for S Corporation status. If the business qualifies, the IRS will send a confirmation letter. It is important to keep this letter in a safe place, as it will need to be provided to the state and local tax authorities.

If the business does not qualify for S Corporation status, the IRS will send a letter explaining why the business is not eligible, and the business will need to file taxes as a C Corporation or a sole proprietorship.

Conclusion

Filing IRS Form 2553 is an important step for small business owners who want to take advantage of the tax benefits associated with S Corporations. Before filing the form, it is important to make sure that the business meets all of the requirements for S Corporation status. Once the form has been filed, the business must wait for the IRS to review the form and determine whether the business qualifies for S Corporation status.


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