Form 2553 is not overly complicated, but it needs to be completed accurately. The IRS provides detailed instructions for completing Form 2553, which may help. This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.

Find out why some businesses make the switch, what’s involved, and whether your LLC qualifies. • You, as an owner of an LLC, are separate from your business and can be considered an employee of that business. As such, payroll taxes will be withheld from your income, which benefits owners of profitable LLCs that have high self-employment taxes. S corporation status isn’t a default — but something you must intentionally elect with the IRS.

Potential Tax Benefits of Filing Form 2553

The What Is The Form 2553 For Your Business had reasonable cause for missing the deadline. A corporation that has elected to be treated as a possessions corporation under section 936.

The form can be completed online and then downloaded or printed before it is mailed or faxed to the IRS. The primary reason eligible C Corporations and Limited Liability Companies file Form 2553 is to improve their tax outcomes. Start by downloading a copy of form 2553 from IRS.gov.

How Long Does It Take to Process Form 2553?

You can’t use a Solo 401K with a single-member LLC. Apologies I couldn’t provide more black and white answers. Overall, you have a great grasp of the situation, but taxes vary widely from person to persona and from business to business. I recently realized I been treating my company like an S-Corp and this status is better for me. I’m submitting a 2553 form for 2019, I want to also elect the S-Corp status for 2018. Some examples of items with excise tax are gasoline, indoor tanning, coal products, airline tickets, cigarettes, and alcohol. Matt, I have been reading online for days and your article is by far the best article.

Experience a backlog of mail and has extended the 2021 tax season. If you submitted Form 2553 at the start of the year but still haven’t heard back, the issue likely isn’t on your end. You can call the IRS to check on your S-corp status and see if they’ve processed your application yet. We do our best to calculate your filing fees upfront and collect those fees today so we can get started.

What Is Form 2553 Used For?

If you https://intuit-payroll.org/ a corporation, the IRS will automatically place you in the corporation tax classification. C Corporations are often subjected to double taxation which can be a financial burden for a small business. With an S Corp, income is taxed to the shareholders rather than to the corporation. For more detailed information about the requirements to make an S corp election, you can check out the IRS Form 2553 instructions.

The most common reason small businesses file Form 2553 is for tax purposes. An S-Corporation is a “pass through” tax entity in that it doesn’t pay federal taxes at the corporate level. The profits, losses, credits, and deductions from the S-Corporation “flow through” to the individual shareholders’ personal tax return and they are responsible for paying the tax.

You don’t actually form an S corporation. You just form a corporation.

It could elect to be treated as a corporation instead, then subsequently elect to be treated as an S corporation. Part II asks for information regarding the fiscal year you’re selecting. Part III is dedicated to trusts, so you can skip this if you’re not making a qualified Subchapter S Trust election. Likewise, it’s only necessary to complete Part IV if you’re filing late. If you have organized your business as a corporation, you have a choice as to how your business will be taxed by the Internal Revenue Service .

• The S corporation doesn’t pay its own income taxes.
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• Said another way, I recommend being fairly certain S-Corp election is the route to go before making the election.