Who is Required to Consent to the S Election on Form 2553?

A small company organization can choose to be taxed as a S corporation using Form 2553, which is a crucial form. The corporation and its stockholders may receive substantial tax benefits as a result of this choice. But in order to make this choice, certain conditions must be satisfied, such as getting all shareholders’ approval. We will talk about who must agree to the S election on Form 2553 in this article and respond to some pertinent queries.

All of the corporation’s shareholders must agree to the S election for it to be made. Both present and potential stockholders are included in this. Along with Form 2553, the IRS must also receive each shareholder’s permission. The form 2553 or a statement containing the same data as Form 2553 must be used to provide the permission. The shareholder’s signature and the date on the statement are required.

It is significant to remember that, once the S election has been made, the shareholder’s consent is final. As a result, the shareholder cannot later withdraw their approval and switch back to paying taxes as a C corporation. Therefore, before consenting, shareholders should give significant thought to the choice to make a S election.

A corporation may choose its entity classification for tax purposes by submitting Form 8832, Entity Classification Election. Although it is not necessary to submit this form in order to make a S election, it might be if the corporation decides to change its classification in the future. For instance, the corporation would have to file Form 8832 to change its classification if it later desired to be taxed as a partnership rather than a S corporation.

A taxpayer may waive their right to take an IRS deficiency assessment to court using Form 870, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax. This form is not necessary to make the S election on Form 2553 and is unrelated to it.

The IRS must be asked for authorization to change the corporation’s tax year using Form 1128, Application to Adopt, Change or Retain a Tax Year. If the firm wants to adopt a fiscal tax year or modify its present tax year, this form can be necessary. It is not necessary to make a S election, though.

An accounting term for a tax year that has 52 or 53 weeks and always finishes on the same day of the week is a 52-53 week tax year. Businesses with a fiscal year that doesn’t coincide with the calendar year frequently utilize this kind of tax year. However, the procedures for making a S election on Form 2553 are unaffected by adopting a 52–53 week tax year.

Finally, all of the corporation’s shareholders must approve the S election for it to be made on Form 2553. Forms 8832, 870, and 1128 may be required for other tax reasons even though they are not required to make the election. The conditions for making a S election are unaffected by tax years with 52 or 53 weeks. Before granting their consent, shareholders should carefully assess the choice to make a S election because, once given, the assent is final.