Election by a Small Business Corporation

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Instructions for Form 2553

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Instructions for Form 2553

Department of the Treasury
Internal Revenue Service

(Rev. December 2007)
Election by a Small Business Corporation
Section references are to the Internal Revenue Code unless
otherwise noted.

What’s New
For tax years ending on or after December 31, 2007, certain
corporations (entities) with reasonable cause for not timely
filing Form 2553 can request to have the form treated as
timely filed by filing Form 2553 as an attachment to Form
1120S, U.S. Income Tax Return for an S Corporation. An
entry space for an explanation of reasonable cause was
added to page 1 of the form. See Relief for Late Elections.

General Instructions
Purpose of Form
A corporation or other entity eligible to elect to be treated as
a corporation must use Form 2553 to make an election
under section 1362(a) to be an S corporation. An entity
eligible to elect to be treated as a corporation that meets
certain tests discussed below will be treated as a
corporation as of the effective date of the S corporation
election and does not need to file Form 8832, Entity
Classification Election.
The income of an S corporation generally is taxed to the
shareholders of the corporation rather than to the
corporation itself. However, an S corporation may still owe
tax on certain income. For details, see Tax and Payments in
the Instructions for Form 1120S.

Who May Elect
A corporation or other entity eligible to elect to be treated as
a corporation may elect to be an S corporation only if it
meets all the following tests.
1. It is (a) a domestic corporation, or (b) a domestic
entity eligible to elect to be treated as a corporation, that
timely files Form 2553 and meets all the other tests listed
below. If Form 2553 is not timely filed, see Relief for Late
Elections on page 2.
2. It has no more than 100 shareholders. You can treat a
husband and wife (and their estates) as one shareholder for
this test. You can also treat all members of a family (as
defined in section 1361(c)(1)(B)) and their estates as one
shareholder for this test. For additional situations in which
certain entities will be treated as members of a family, see
Notice 2005-91, 2005-51 I.R.B. 1164. All others are treated
as separate shareholders. For details, see section
1361(c)(1).
3. Its only shareholders are individuals, estates, exempt
organizations described in section 401(a) or 501(c)(3), or
certain trusts described in section 1361(c)(2)(A).
For information about the section 1361(d)(2) election to
be a qualified subchapter S trust (QSST), see the
instructions for Part III. For information about the section
1361(e)(3) election to be an electing small business trust
(ESBT), see Regulations section 1.1361-1(m). For guidance
on how to convert a QSST to an ESBT, see Regulations
section 1.1361-1(j)(12). If these elections were not timely
made, see Rev. Proc. 2003-43, 2003-23 I.R.B. 998.

4. It has no nonresident alien shareholders.
5. It has only one class of stock (disregarding differences
in voting rights). Generally, a corporation is treated as
having only one class of stock if all outstanding shares of
the corporation’s stock confer identical rights to distribution
and liquidation proceeds. See Regulations section
1.1361-1(l) for details.
6. It is not one of the following ineligible corporations.
a. A bank or thrift institution that uses the reserve method
of accounting for bad debts under section 585.
b. An insurance company subject to tax under subchapter
L of the Code.
c. A corporation that has elected to be treated as a
possessions corporation under section 936.
d. A domestic international sales corporation (DISC) or
former DISC.
7. It has or will adopt or change to one of the following
tax years.
a. A tax year ending December 31.
b. A natural business year.
c. An ownership tax year.
d. A tax year elected under section 444.
e. A 52-53-week tax year ending with reference to a year
listed above.
f. Any other tax year (including a 52-53-week tax year)
for which the corporation establishes a business purpose.
For details on making a section 444 election or
requesting a natural business, ownership, or other business
purpose tax year, see the instructions for Part II.
8. Each shareholder consents as explained in the
instructions for column K.
See sections 1361, 1362, and 1378, and their related
regulations for additional information on the above tests.
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.

When To Make the Election
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, or
• At 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.
Example 1. No prior tax year. A calendar year small
business corporation begins its first tax year on January 7.
The two month period ends March 6 and 15 days after that
is March 21. To be an S corporation beginning with its first
tax year, the corporation must file Form 2553 during the
period that begins January 7 and ends March 21. Because

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Instructions for Form 2553

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• If Form 1120S was filed without an S corporation election
and neither the corporation nor any shareholder was notified
by the IRS of any problem with the S corporation status
within 6 months after the return was timely filed, see Rev.
Proc. 97-48, 1997-43 I.R.B. 19.

the corporation had no prior tax year, an election made
before January 7 will not be valid.
Example 2. Prior tax year. A calendar year small business
corporation has been filing Form 1120 as a C corporation
but wishes to make an S election for its next tax year
beginning January 1. The two month period ends February
28 (29 in leap years) and 15 days after that is March 15. To
be an S corporation beginning with its next tax year, the
corporation must file Form 2553 during the period that
begins the first day (January 1) of its last year as a C
corporation and ends March 15th of the year it wishes to be
an S corporation. Because the corporation had a prior tax
year, it can make the election at any time during that prior
tax year.

Where To File
Generally, send the original election (no photocopies) or fax
it to the Internal Revenue Service Center listed below. If the
corporation files this election by fax, keep the original Form
2553 with the corporation’s permanent records. However,
certain late elections can be filed attached to Form 1120S.
See Relief for Late Elections above.

Example 3. Tax year less than 2 1/2 months. A calendar
year small business corporation begins its first tax year on
November 8. The two month period ends January 7 and 15
days after that is January 22. To be an S corporation
beginning with its short tax year, the corporation must file
Form 2553 during the period that begins November 8 and
ends January 22. Because the corporation had no prior tax
year, an election made before November 8 will not be valid.

If the corporation’s principal
business, office, or agency is
located in:

Relief for Late Elections
A late election to be an S corporation generally is effective
for the tax year following the tax year beginning on the date
entered on line E of Form 2553. However, relief for a late
election may be available if the corporation can show that
the failure to file on time was due to reasonable cause.
To request relief for a late election when the tax year
beginning on the date entered on line E ends on or after
December 31, 2007, a corporation that meets the following
requirements can explain the reasonable cause in the
designated space on page 1 of Form 2553.
• The corporation fails to qualify to elect to be an S
corporation (see Who May Elect on page 1) solely because
of the failure to timely file Form 2553.
• The corporation has reasonable cause for its failure to
timely file Form 2553.
• The corporation has not filed a tax return for the tax year
beginning on the date entered on line E of Form 2553.
• The corporation files Form 2553 as an attachment to
Form 1120S no later than 6 months after the due date of
Form 1120S (excluding extensions) for the tax year
beginning on the date entered on line E of Form 2553.
• No taxpayer whose tax liability or tax return would be
affected by the S corporation election (including all
shareholders of the S corporation) has reported
inconsistently with the S corporation election on any affected
return for the tax year beginning on the date entered on line
E of Form 2553.
Similar relief is available for an entity eligible to elect to be
treated as a corporation (see the instructions for Form 8832)
electing to be treated as a corporation as of the date entered
on line E of Form 2553. For more details, see Rev. Proc.
2007-62, 2007-41 I.R.B. 786.

Use the following
address or fax number:

Connecticut, Delaware, District of
Columbia, Illinois, Indiana,
Kentucky, Maine, Maryland,
Massachusetts, Michigan, New
Hampshire, New Jersey, New
York, North Carolina, Ohio,
Pennsylvania, Rhode Island,
South Carolina, Vermont,
Virginia, West Virginia,
Wisconsin

Department of the
Treasury
Internal Revenue Service
Center
Cincinnati, OH 45999
Fax: (859) 669-5748

Alabama, Alaska, Arizona,
Arkansas, California, Colorado,
Florida, Georgia, Hawaii, Idaho,
Iowa, Kansas, Louisiana,
Minnesota, Mississippi, Missouri,
Montana, Nebraska, Nevada,
New Mexico, North Dakota,
Oklahoma, Oregon, South
Dakota, Tennessee, Texas,
Utah, Washington, Wyoming

Department of the
Treasury
Internal Revenue Service
Center
Ogden, UT 84201
Fax: (801) 620-7116

Acceptance or Nonacceptance of
Election
The service center will notify the corporation if its election is
accepted and when it will take effect. The corporation will
also be notified if its election is not accepted. The
corporation should generally receive a determination on its
election within 60 days after it has filed Form 2553. If box
Q1 in Part II is checked, the corporation will receive a ruling
letter from the IRS that either approves or denies the
selected tax year. When box Q1 is checked, it will generally
take an additional 90 days for the Form 2553 to be
accepted.
Care should be exercised to ensure that the IRS receives
the election. If the corporation is not notified of acceptance
or nonacceptance of its election within 2 months of the date
of filing (date faxed or mailed), or within 5 months if box Q1
is checked, take follow-up action by calling 1-800-829-4933.

To request relief for a late election when the above
requirements are not met, the corporation generally must
request a private letter ruling and pay a user fee in
accordance with Rev. Proc. 2008-1, 2008-1 I.R.B. 1 (or its
successor). However, the ruling and user fee requirements
may not apply if relief is available under the following
revenue procedures.
• If an entity eligible to elect to be treated as a corporation
(a) failed to timely file Form 2553, and (b) has not elected to
be treated as a corporation, see Rev. Proc. 2004-48,
2004-32 I.R.B. 172.
• If a corporation failed to timely file Form 2553, see Rev.
Proc. 2003-43, 2003-23 I.R.B. 998.

If the IRS questions whether Form 2553 was filed, an
acceptable proof of filing is (a) a certified or registered mail
receipt (timely postmarked) from the U.S. Postal Service, or
its equivalent from a designated private delivery service (see
Notice 2004-83, 2004-52 I.R.B. 1030 (or its successor)); (b)
Form 2553 with an accepted stamp; (c) Form 2553 with a
stamped IRS received date; or (d) an IRS letter stating that
Form 2553 has been accepted.

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Instructions for Form 2553

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Do not file Form 1120S for any tax year before the
year the election takes effect. If the corporation is
CAUTION now required to file Form 1120, U.S. Corporation
Income Tax Return, or any other applicable tax return,
continue filing it until the election takes effect.

should enter the beginning date of the first tax year for which
it wants the election to be effective.

!

A corporation (entity) not making the election for its first
tax year in existence that is changing its tax year and wants
to be an S corporation for the short tax year needed to
switch tax years should enter the beginning date of the short
tax year. If the corporation (entity) does not want to be an S
corporation for this short tax year, it should enter the
beginning date of the tax year following this short tax year
and file Form 1128, Application To Adopt, Change, or Retain
a Tax Year. If this change qualifies as an automatic approval
request (Form 1128, Part II), file Form 1128 as an
attachment to Form 2553. If this change qualifies as a ruling
request (Form 1128, Part III), file Form 1128 separately. If
filing Form 1128, enter “Form 1128” on the dotted line to the
left of the entry space for item E.

End of Election
Once the election is made, it stays in effect until it is
terminated or revoked. IRS consent generally is required for
another election by the corporation (or a successor
corporation) on Form 2553 for any tax year before the 5th
tax year after the first tax year in which the termination or
revocation took effect. See Regulations section 1.1362-5 for
details.

Specific Instructions

Item F
Check the box that corresponds with the S corporation’s
selected tax year. If box (2) or (4) is checked, provide the
additional information about the tax year, and complete Part
II of the form.

Part I
Name and Address
Enter the corporation’s true name as stated in the corporate
charter or other legal document creating it. If the
corporation’s mailing address is the same as someone
else’s, such as a shareholder’s, enter “C/O” and this
person’s name following the name of the corporation.
Include the suite, room, or other unit number after the street
address. If the Post Office does not deliver to the street
address and the corporation has a P.O. box, show the box
number instead of the street address. If the corporation
changed its name or address after applying for its employer
identification number, be sure to check the box in item D of
Part I.

Signature
Form 2553 must be signed and dated by the president, vice
president, treasurer, assistant treasurer, chief accounting
officer, or any other corporate officer (such as tax officer)
authorized to sign.
If Form 2553 is not signed, it will not be considered timely
filed.

Column K. Shareholders’ Consent
Statement
For an election filed before the effective date entered for
item E, only shareholders who own stock on the day the
election is made need to consent to the election.

Item A. Employer Identification Number
(EIN)
Enter the corporation’s EIN. If the corporation does not have
an EIN, it must apply for one. An EIN can be applied for:
• Online – Click on the EIN link at
www.irs.gov/businesses/small. The EIN is issued
immediately once the application information is validated.
• By telephone at 1-800-829-4933.
• By mailing or faxing Form SS-4, Application for Employer
Identification Number.
If the corporation has not received its EIN by the time the
return is due, enter “Applied For” and the date you applied in
the space for the EIN. For more details, see the Instructions
for Form SS-4.

For an election filed on or after the effective date entered
for item E, all shareholders or former shareholders who
owned stock at any time during the period beginning on the
effective date entered for item E and ending on the day the
election is made must consent to the election.
If the corporation timely filed an election, but one or more
shareholders did not timely file a consent, see Regulations
section 1.1362-6(b)(3)(iii). If the shareholder was a
community property spouse who was a shareholder solely
because of a state community property law, see Rev. Proc.
2004-35, 2004-23 I.R.B. 1029.
Each shareholder consents by signing and dating either
in column K or on a separate consent statement. The
following special rules apply in determining who must sign.
• If a husband and wife have a community interest in the
stock or in the income from it, both must consent.
• Each tenant in common, joint tenant, and tenant by the
entirety must consent.
• A minor’s consent is made by the minor, legal
representative of the minor, or a natural or adoptive parent
of the minor if no legal representative has been appointed.
• The consent of an estate is made by the executor or
administrator.
• The consent of an electing small business trust (ESBT) is
made by the trustee and, if a grantor trust, the deemed
owner. See Regulations section 1.1362-6(b)(2)(iv) for
details.
• If the stock is owned by a qualified subchapter S trust
(QSST), the deemed owner of the trust must consent.
• If the stock is owned by a trust (other than an ESBT or
QSST), the person treated as the shareholder by section
1361(c)(2)(B) must consent.

Item E. Effective Date of Election
Form 2553 generally must be filed no later than 2

TIP months and 15 days after the date entered for item
E. For details and exceptions, see When To Make
the Election on page 1.
A corporation (or entity eligible to elect to be treated as a
corporation) making the election effective for its first tax year
in existence should enter the earliest of the following dates:
(a) the date the corporation (entity) first had shareholders
(owners), (b) the date the corporation (entity) first had
assets, or (c) the date the corporation (entity) began doing
business.
When the corporation (entity) is making the election
for its first tax year in existence, it will usually enter
CAUTION the beginning date of a tax year that begins on a
date other than January 1.
A corporation (entity) not making the election for its first
tax year in existence that is keeping its current tax year

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Instructions for Form 2553

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Continuation sheet or separate consent statement. If
you need a continuation sheet or use a separate consent
statement, attach it to Form 2553. It must contain the name,
address, and EIN of the corporation and the information
requested in columns J through N of Part I.

service center will send Form 2553 to the IRS in
Washington, DC, who, in turn, will notify the corporation that
the fee is due.

Box Q2
If the corporation makes a back-up section 444 election for
which it is qualified, then the section 444 election will take
effect in the event the business purpose request is not
approved. In some cases, the tax year requested under the
back-up section 444 election may be different than the tax
year requested under business purpose. See Form 8716,
Election To Have a Tax Year Other Than a Required Tax
Year, for details on making a back-up section 444 election.

Column L
Enter the number of shares of stock each shareholder owns
on the date the election is filed and the date(s) the stock
was acquired. Enter -0- for any former shareholders listed in
column J. An entity without stock, such as a limited liability
company (LLC), should enter the percentage of ownership
and date(s) acquired.

Column M

Boxes Q3 and R2

Enter the social security number of each individual listed in
column J. Enter the EIN of each estate, qualified trust, or
exempt organization.

If the corporation is not qualified to make the section 444
election after making the item Q2 back-up section 444
election or indicating its intention to make the election in
item R1, and therefore it later files a calendar year return, it
should write “Section 444 Election Not Made” in the top left
corner of the first calendar year Form 1120S it files.

Column N
Enter the month and day that each shareholder’s tax year
ends. If a shareholder is changing his or her tax year, enter
the tax year the shareholder is changing to, and attach an
explanation indicating the present tax year and the basis for
the change (for example, an automatic revenue procedure
or a letter ruling request).

Part III
In Part III, the income beneficiary (or legal representative) of
certain qualified subchapter S trusts (QSSTs) may make the
QSST election required by section 1361(d)(2). Part III may
be used to make the QSST election only if corporate stock
has been transferred to the trust on or before the date on
which the corporation makes its election to be an S
corporation. However, a statement can be used instead of
Part III to make the election. If there was an inadvertent
failure to timely file a QSST election, see the relief
provisions under Rev. Proc. 2003-43.
Note. Use Part III only if you make the election in Part I.
Form 2553 cannot be filed with only Part III completed.
The deemed owner of the QSST must also consent to the
S corporation election in column K of Form 2553.

Part II
Complete Part II if you checked box (2) or (4) in Part I, Item
F.
Note. Corporations cannot obtain automatic approval of a
fiscal year under the natural business year (box P1) or
ownership tax year (box P2) provisions if they are under
examination, before an appeals (area) office, or before a
federal court without meeting certain conditions and
attaching a statement to the application. For details, see
section 7.03 of Rev. Proc. 2006-46, 2006-45 I.R.B. 859.

Box P1

Paperwork Reduction Act Notice. We ask for the
information on this form to carry out the Internal Revenue
laws of the United States. You are required to give us the
information. We need it to ensure that you are complying
with these laws and to allow us to figure and collect the right
amount of tax.
You are not required to provide the information requested
on a form that is subject to the Paperwork Reduction Act
unless the form displays a valid OMB control number. Books
or records relating to a form or its instructions must be
retained as long as their contents may become material in
the administration of any Internal Revenue law. Generally,
tax returns and return information are confidential, as
required by section 6103.
The time needed to complete and file this form will
depend on individual circumstances. The estimated average
time is:

A corporation that does not have a 47-month period of gross
receipts cannot automatically establish a natural business
year.

Box Q1
For examples of an acceptable business purpose for
requesting a fiscal tax year, see section 5.02 of Rev. Proc.
2002-39, 2002-22 I.R.B. 1046, and Rev. Rul. 87-57, 1987-2
C.B. 117.
Attach a statement showing the relevant facts and
circumstances to establish a business purpose for the
requested fiscal year. For details on what is sufficient to
establish a business purpose, see section 5.02 of Rev. Proc.
2002-39.
If your business purpose is based on one of the natural
business year tests provided in section 5.03 of Rev. Proc.
2002-39, identify which test you are using (the 25% gross
receipts, annual business cycle, or seasonal business test).
For the 25% gross receipts test, provide a schedule showing
the amount of gross receipts for each month for the most
recent 47 months. For either the annual business cycle or
seasonal business test, provide the gross receipts from
sales and services (and inventory costs, if applicable) for
each month of the short period, if any, and the three
immediately preceding tax years. If the corporation has been
in existence for less than three tax years, submit figures for
the period of existence.
If you check box Q1, you will be charged a user fee of
$3,200 ($1,500 if your request is received before February
2, 2008) (subject to change by Rev. Proc. 2009-1 or its
successor). Do not pay the fee when filing Form 2553. The

Recordkeeping . . . . . . . . . . . . . . . . . . . . . . .

9 hr., 48 min.

Learning about the law or the form . . . . . . . .

2 hr., 33 min.

Preparing, copying, assembling, and sending
the form to the IRS . . . . . . . . . . . . . . . . . . . .

4 hr., 1 min.

If you have comments concerning the accuracy of these
time estimates or suggestions for making this form simpler,
we would be happy to hear from you. You can write to
Internal Revenue Service, Tax Products Coordinating
Committee, SE:W:CAR:MP:T:T:SP, 1111 Constitution Ave.
NW, IR-6526, Washington, DC 20224. Do not send the form
to this address. Instead, see Where To File on page 2.

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