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After you submit Form 2553, you’ll typically hear back from the IRS within 60 days. The IRS will let you know whether they accept or reject your S Corp tax status request. You must then indicate the type of tax year test you’re using on line P. You can select either the natural business year or the ownership tax year. If you need to fill out Part II, mark off which statement applies to your business on line O (e.g., a new corporation adopting the tax year). When you start your business venture, you choose what type of business structure you want your company to be.
Visit our online business registration tool and select “LLC+S Corp” to get started. The deemed owner of the QSST must also consent to the S corporation election in column K of Form 2553. The election can be filed with the current Form 1120-S if all earlier Forms 1120-S have been filed. The election can be attached to the first Form 1120-S for the year including the effective date if filed simultaneously with any other delinquent Forms 1120-S. 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.
Form 2553 Late Filing and S Corporation Late Election Relief
A parent S corporation can elect to treat an eligible wholly owned subsidiary as a qualified subchapter S subsidiary. If the election is made, the subsidiary’s assets, liabilities, and items of income, deduction, and credit generally are treated as those of the parent. For details, see Form 8869, Qualified Subchapter S Subsidiary Election. Every corporation shareholder must consent to the New Jersey election as part of the qualifications.
When you first form your corporation, you have a short window of opportunity to make an S corporation election that is effective for the first year of operation. The election must be filed with the IRS no more than two months and 15 days after the beginning of your corporation’s tax year. An LLC is a pass-through tax entity, with its profits flowing through to its members’ personal tax returns. LLC members must pay income tax and self-employment taxes (Social Security and Medicare) on all the company’s profits.
Where to File Form 2553
A late election to be an S corporation and a late entity classification election for the same entity may be available if the entity can show that the failure to file Form 2553 on time was due to reasonable cause. Relief must be requested within 3 years and 75 days of the effective date entered on line E of Form 2553. When you form your corporation, it is essential that you do not make choices that will prevent you from electing S corporation status.
The Revocation of Election filing deadline is on or before the last day of the first tax year of the election. For the election to be in effect for the current tax year, the New Jersey S Corporation Bookkeeping for Owner-Operator Truck Drivers Election must be filed within 3 ½ months from the beginning of the fiscal year. For example, filing of the election for a fiscal period beginning July 1 must be done by October 15.
Need help with an IRS Form 2553?
Businesses that miss the regular election deadline can still apply for S corporation classification through late filing of Form 2553. Form 2553 allows a small business to register as an S corp instead of the default C-corp. https://simple-accounting.org/small-business-bookkeeping-services-bookkeepers/ S-corps can save on taxes because their taxable income is taxed only once. The owners of an S corp report income or losses on their personal tax returns, which are taxed at individual tax rates, not corporate rates.
Can I switch from C Corp to S Corp?
If you want to change your business's tax status from C-corp to S-corp status, you will need to submit Form 2553 to the IRS, which must be signed by all shareholders. You must either file this form: No later than two months and fifteen days from the beginning of the tax year.
Some businesses can save money on taxes by taking advantage of the S corporation election. Businesses taxed as S Corps don’t have to worry about double taxation. An S corporation is not a separate entity for federal (and most states) income taxes.
