Form 2553 is the IRS form a corporation files to elect to be taxed as an S corporation. Timing and shareholder consent are where most elections go wrong.
| Check | Why it matters |
|---|---|
| Eligible corporation | Domestic, up to 100 shareholders, one class of stock, eligible shareholders |
| Every shareholder signs the consent | Missing one shareholder makes the election invalid |
| Tax year and effective date | Decides which year the election covers |
| Filing date | By the 15th day of the 3rd month to cover the current year |
| Proof of filing | Keep the IRS acceptance letter with your corporate records |
The decision itself, S corporation or not, is a tax planning question for an accountant. See C corp vs. S corp.
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A landscaping company has been a calendar-year C corporation for three years with two shareholders. In late May 2026, its accountant recommends S corporation status.
The deadline to cover 2026 was the 15th day of the 3rd month, March 15, 2026, so an election filed now generally takes effect for 2027. Both shareholders sign the consent, and the form is filed in June with an effective date of January 1, 2027. The corporation keeps the IRS acceptance letter.
Payroll is planned for the change. The owners who work in the business stay on payroll as employees with wages, because pass-through status does not replace paying people who work. From 2027, the corporation files Form 1120-S instead of Form 1120.
Most problems with Form 2553 are administrative, not technical. Keep a short file with the signed form, every shareholder’s consent, the date and method of filing, and the IRS acceptance letter. If you do not receive an acceptance letter within the time the IRS instructions describe, follow up rather than assuming it went through.
Check eligibility again whenever ownership changes. A new shareholder who is not an eligible type, or a second class of stock created by a new agreement, can end the election. Ask your accountant before any change in owners or share terms, and keep the shareholder list current in the corporate records.
A family-owned S corporation plans to give shares to a key employee. Before signing, the owners ask their accountant whether it affects the election.
The accountant confirms the employee is an eligible shareholder and that the new shares have the same rights as existing ones, so there is still one class of stock. The transfer goes ahead, and the file is updated with the new shareholder list.
To elect S corporation tax status for an eligible corporation.
To cover a tax year, generally during the preceding year or by the 15th day of the 3rd month of that year, which is March 15 for a calendar-year corporation.
Every person who is a shareholder on the day the election is made must consent to it. Missing one consent makes the election invalid.
It generally applies from the next tax year. The IRS has relief procedures for late elections in some situations, so speak with a tax professional.
The IRS sends an acceptance letter. Keep it with your corporate records, and follow up if it does not arrive.
Yes, it can be revoked or can end if the corporation stops qualifying. Talk to a tax adviser before any change.
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