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2553 late election Form: What You Should Know

File an election with the appropriate tax authority within two months of becoming a corporation.

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FAQ - 2553 late election

Should Late Election Relief under IRS Form 8832 still be sought if the entity is only making an initial classification, and not a change in the current classification?
An 8832 Form is only needed if the entity does not wish to accept the default classification as follows:Single Owner LLC-Disregarded EntityMulti-Owner LLC-PartnershipCorporation-C Corporation (although as a general rule S corporation is the only other option for a new Corporation and you make that election on Form 2553 and do NOT file an 8832)If the entity wishes to be something other than the above default tax classification, then you have 2 1/2 months from the date of formation to make the election.If you did not make your election within that 2.5 month window, then you will have to seek relief for the late election.
How does an LLC go about getting taxed as a S-Corporation?
To be taxed as an S-corporation, an LLC must file IRS Form 8832, Entity Classification, and IRS Form 2553, Election by a Small Business Corporation. Form 8832 can be signed by either all of the member-owners or the managing member of the LLC, if so authorized under local law; Form 2553 must be signed by all of the shareholders of the LLC.To qualify as an S-corporation, the LLC must meet the following requirements:Domestic corporationAll shareholders must be individuals, estates, nonprofits, or certain types of trusts; no partnerships or for-profit corporations can be shareholdersNo nonresident aliens can be shareholdersNo more than 100 shareholdersOnly one class of stock (disregarding differences in voting rights)The LLC must file Form 2553 no later than the 15th day of the 3rd month of the tax year in which the S-corporation election is to take effect (e.g. March 15, 2023 for a calendar year corporation that decides to become an S-corporation beginning in 2011), or at any time during the year before the tax year in which the election is to take effect. Note that you cannot normally go backwards in time - e.g. you cannot elect now to become an S-corporation in 2023. unless you can meet the IRS's requirements for late election.
If you are an LLC, what is the last day you can choose to file taxes as an S-corp?
It probably not too late to file 2023 as an S-Corporation (with certain caveats of course, and even if you don't qualify for this, you can get a Private Letter Ruling):General Relief Rules for S Corporation ElectionsThe following requirements must be met in order to qualify for late S corporation election relief:The entity intended to be classified as an S corporation, is an eligible entity, and failed to qualify as an S corporation solely because the election was not timely;The entity has reasonable cause for its failure to make the election timely;The entity and all shareholders reported their income consistent with an S corporation election in effect for the year the election should have been made and all subsequent years; andLess than 3 years and 75 days have passed since the effective date of the election (See the Exception to the 3 Years and 75 Day Rule section below).Exception to the 3 Years and 75 Days RuleCertain entities can qualify for the exception to the 3 years and 75 day rule when:The entity is a corporation (i.e., not an LLC seeking an entity classification election);The entity failed to qualify as an S corporation solely because the election was not timely field;The corporation and all its shareholders reported their income consistent with S corporation status for the year the S election should have been made and for every subsequent taxable year (if any);At least 6 months has elapsed since the date on which the corporation filed its tax return for the first year the corporation intended to be an S corporation;Neither the corporation nor any of its shareholders was notified by the IRS of any problems regarding the S corporation status within 6 months of the date on which the Form 1120S for the first year was timely filed; andThe completed Election form includes the statements as described in the revenue procedure.Late Election Relief
How can I change my longtime disregarded-entity LLC's taxation treatment to s-corp if I do not want it to be retroactive to the beginning of the year?
Complete a Form 2553, Election by a Small Business Corporation.u00a0 On line E write in the future date you want the S election to be effective.u00a0 Unless you are filing between Jan 1 and Mar 15, the election cannot be retroactive to the beginning of the year anyway, unless you are granted late election relief.
If you are a multi-member LLC that chooses to elect to file taxes as an S Corp (wages - dividends), are you informing the IRS of how you intend to file through a form(s) or is it an application request that needs to be approved by the IRS?
It's both, though the requests are automatic when timely filed.You need to file an 8832 (to elect to be taxed as a corporation) and a 2553 (to elect that corp to be taxed as an S corp).For calendar year entities both forms are due March 15 of the year you want it to be effective. Otherwise within 75 days of the beginning of the effective year.If you miss the due date there are various revenue procedures to follow in order to submit a late election. I have found the IRS to be quite liberal with granting late elections.
How can I elect as an S Corporation without having my EIN?
You first need to:Incorporate your company. An S Corporation is a special type of corporation created through the IRS. By electing to be treated as an S Corporation, the corporation can avoid double taxation. What makes the S Corporation different from a traditional C Corporation is that profits and losses can pass through to your personal tax return. What this means is that the business itself is not taxed; only the shareholders are taxed.? First form a C-Corporation then file Form 2553 within 2.5 months to get S-election for your Corporation.Then you need to apply for an Employer Identification Number (EIN). Employer Identification Number (EIN) is a number assigned by the IRS and is used for a number of business needs including: filing taxes, compliance with IRS, opening a bank account, and applying for business licenses.If you have a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN), you may apply for an Employer Identification Number for free here: EIN Individual Request - Online Application.However, if you do not have a social security number, feel free to contact me at sam@mollaeilaw.com and I can help you.Read more here: How to Get Employer Identification Number (EIN) without SSN or ITINThen you need to fax Form 2553.
Can I elect to be taxed as an S-corp four years after incorporating?
As long as you havenu2019t rescinded a prior election to be taxed as an S Corporation vs. as a C Corporation, you may make the election at any time. However, you cannot go back more than one year.Technically, you must make the election by the fifteenth day of the third month of the calendar year unless you chose a fiscal year end (which is generally not an available option, although there are exception available under Section 444 of the IRS Code), which means not later than March 15 of the year in which you wish to begin reporting income as an S Corporation.There is, however, what is called u201clate election reliefu201d available, by invoking Revenue Procedure 2013u201330. You may therefore make the election and then file it along with the S Corporation Tax Return.However, there may be problems, if you extended your return. In that event, the IRS will not be aware that you made the election and, even if you filed a Form 7004 to extend the newly elected S Corporation, they will not recognize the extension and charge a late-filing penaltyu2026at first. However, when you do file the return that was previously on extension including the Form 2553 S Corp election and invoke the late election relief provision, simply attach a copy of the Form 7004. The Service may still send a notice of late filing, but you then simply have to explain that you extended the return on or before March 15, attach the proof of having filed the extension (either a proof of having e-filed the extension or a copy of the paper form, including proof of mailing in the form of a Certified Mail Receipt - if you ever mail anything to the IRS, always use a Certified Mail Receipt!), and the IRS will abate the penalty.
How long does it take to convert from an LLC to a C or S Corp? Also how much would it cost?
If you have an existing LLC you can convert to an S-Corp by completing IRS Form 2553. This form can be faxed or emailed to the IRS. It will usually take 6u20138 weeks to get a confirmation letter back from the IRS. You are not officially an S-Corp until you receive the confirmation letter. You should save your fax receipt or send the form by certified mail with return receipt requested so you have proof of filing with the IRS.There are strict timelines for filing Form 2553. Here are the due dates quoted from the IRS website:Complete and file Form 2553:No more than two months and 15 days after the beginning of the tax year the election is to take effect, orAt any time during the tax year preceding the tax year it is to take effect.For this purpose, the 2-month period begins on the day of the month the tax year begins and ends with the close of the day before the numerically corresponding day of the second calendar month following that month. If there is no corresponding day, use the close of the last day of the calendar month.Newly formed corporations and LLCu2019s can file the form anytime during the year if they have just been incorporated/organized.Late S-Corp elections are often permitted if an explanation is included on Form 2553 however this is at the discretion of the IRS.Converting an LLC to a C-Corp is slightly more complicated. To do this you would need to file and submit Form 8832 (Entity Classification Form). If the LLC has previously submitted this form there is a chance the IRS will deny your request. The timeline for this process can vary from one company to the next.I hope this helps you.
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