How Many Days to File Form 2553?
Understanding the timeline for filing Form 2553 is crucial for any business owner looking to establish an S corporation status. Form 2553, officially known as “Election by a Small Business Corporation,” is a tax form used to elect S corporation status for a corporation. This election can have significant tax implications, so it’s important to know how long it takes to file this form and what the process entails.
What is Form 2553?
Form 2553 is a tax form that allows a corporation to elect S corporation status. This status is beneficial because it allows profits and losses to be passed through to shareholders, who then report these on their individual tax returns. This can result in a lower tax burden compared to the corporate tax rate.
When Should You File Form 2553?
The ideal time to file Form 2553 is before the end of the first year of the corporation’s existence. This ensures that the S corporation status is effective for the first tax year. However, it’s important to note that the IRS allows late filings, but the benefits may not be as significant.
How Long Does It Take to File Form 2553?
The time it takes to file Form 2553 can vary depending on several factors. Here’s a breakdown of the process:
| Step | Timeframe |
|---|---|
| Completing the Form | Varies, but typically takes 30 minutes to an hour |
| Reviewing and Signing | 5-10 minutes |
| Preparing Supporting Documents | Varies, but typically takes 1-2 hours |
| Submitting the Form | Varies, but typically takes 5-10 minutes |
| Processing Time by the IRS | 4-6 weeks |
As you can see from the table, the actual time spent on completing the form and preparing supporting documents is relatively short. However, the processing time by the IRS can take up to 6 weeks. It’s important to file the form well before the end of the tax year to ensure that the S corporation status is effective for the desired tax year.
What Happens If You File Late?
While it’s best to file Form 2553 before the end of the first year, the IRS allows late filings. However, there are some important considerations:
-
Penalties may apply if the election is made more than 75 days after the end of the tax year. The penalty is $195 per month (up to a maximum of 12 months) for each month the election is late.
-
The S corporation status may not be effective for the entire tax year. This means that the corporation may have to pay taxes twice, once as a corporation and once as a pass-through entity.
-
It may be more difficult to obtain financing or other benefits associated with S corporation status.
Therefore, it’s important to file Form 2553 on time to avoid these potential issues.
How to File Form 2553
There are two ways to file Form 2553:
-
Online: You can file Form 2553 online through the IRS website. This is the fastest and most convenient method.
-
By Mail: You can also file Form 2553 by mail. This method is slower, but it may be more suitable for some businesses.
When filing online, you’ll need to create an account on the IRS website and follow the instructions provided. When filing by mail, you’ll need to print the form, complete it, and mail it to the appropriate IRS address.
Conclusion
Filing Form 2553 is an important step for any business looking to establish S corporation status. By understanding the process and timeline, you can ensure that your business benefits from this tax status as soon as possible. Remember to file the form before the end of
