Form 2553 is an IRS form that lets small businesses elect S corporation status for tax purposes. Filing this form allows a business to pass income, losses, deductions, and credits directly to shareholders, which can lead to major tax savings. But there are strict deadlines and eligibility rules, so it’s important to file on time and meet IRS requirements.
Where to file Form 2553
You need to file Form 2553 within 75 days of starting your business or the beginning of the tax year when you want S corp status to take effect. You can submit it online, by mail, or by fax.
Online filing
To file online, your business needs an Employer Identification Number (EIN) and must meet IRS eligibility rules. The online process is quick, and you’ll get a confirmation receipt once it’s successfully submitted.
Mail or fax filing
If your business doesn’t qualify for online filing, you can send Form 2553 by mail or fax. Keep in mind that mailed forms take longer to process and could get lost. You can find the correct mailing address and fax number on the IRS website.
Benefits of filing Form 2553
Filing Form 2553 and becoming an S corp has several advantages, especially for small businesses. Some of the biggest benefits include:
- Pass-Through Taxation: Avoids double taxation by passing income directly to shareholders. This is often the biggest reason businesses choose S corp status.
- Limited Liability Protection: Protects personal assets from business debts and lawsuits.
- Tax Savings & Retirement Planning: Can lower self-employment taxes and offer better retirement planning options.
- Access to Capital: Makes it easier to attract investors by offering stock ownership.
- Credibility & Trust: Boosts your business’s reputation with customers, vendors, and potential partners.
If S corp status makes sense for your business, filing Form 2553 can be a smart move. Just be sure to file it on time to avoid delays or tax issues.