Processing Time for Form 2553: What You Need to Know

Small firms that seek to be taxed as S corporations must submit Form 2553, commonly known as the Election by a Small Business Corporation. This form gives the company the opportunity to avoid double taxation, which is a huge benefit for many small business owners. The length of time it takes to process Form 2553, however, is one of the biggest worries for business owners.

The amount of time it takes to process Form 2553 depends on a number of variables. Form 2553 is typically processed by the IRS within 60 days after receipt. It might take longer in some circumstances, though. The length of the processing period may increase, for instance, if the IRS requires more data or supporting documentation. It is significant to remember that the IRS cannot promise when Form 2553 will be processed, therefore it is better to submit as soon as possible.

A corporation is permitted to establish a fiscal year that is distinct from the calendar year under the terms of a Section 444 Election. Small enterprises who desire to match their fiscal year with their business cycle may find this option useful. The company must submit Form 8716, Election to Have a Tax Year Other Than a Required Tax Year, in order to make a Section 444 election. Before the tax return deadline for the year in which the election is to take effect, this form must be submitted.

For taxation purposes, an LLC is classified as a disregarded entity when it converts to a single-member LLC. This indicates that the owner’s personal tax return is where the LLC’s earnings and costs are disclosed. No longer does the LLC submit a separate tax return.

To modify an LLC’s tax categorization, utilize Form 8832, Entity categorization Election. When an LLC wishes to be taxed as a corporation or partnership, this form is employed. When a company or an LLC wants to be taxed as a S corporation, on the other hand, Form 2553 is used. The tax classification that is selected on the two forms is the primary distinction between them.

When the LLC wishes to modify its tax categorization, Form 8832 must be submitted. No later than two months and fifteen days following the start of the tax year for which the election is to take effect, this form must be submitted. It can be submitted at any time during the year. It is significant to remember that, unless the IRS granted authorization for a change, the election cannot be modified for five years after it is made.

In conclusion, the time it takes the IRS to process Form 2553 can vary, but on average it takes 60 days. A corporation is permitted to establish a fiscal year that is distinct from the calendar year under the terms of a Section 444 Election. For taxation purposes, an LLC is classified as a disregarded entity when it converts to a single-member LLC. An LLC’s tax classification can be changed using Form 8832, while a corporation or LLC can elect S corporation status using Form 2553. Form 8832 must be submitted no later than two months and fifteen days following the start of the tax year for which the election is to take effect if an LLC wishes to change its tax classification.