S-Corp Election Deadline: Everything You Need to Know
Small business ownership comes with countless decisions, and how you structure your company might be one of the most important. If you've been considering an S-Corporation election to potentially reduce your tax burden, you need to understand how the S-Corp election deadline works to file on time.
An S-Corporation is a tax election that allows businesses to pass corporate income, losses, deductions, and credits through to shareholders for federal tax purposes. This means business profits can flow directly to your personal tax return, potentially saving you thousands in self-employment taxes.
But you can't just decide to become an S-Corp whenever you want. The IRS has specific deadlines you must meet, and missing them could cost you an entire year of potential tax benefits.
Key Takeaways
New businesses have 75 days from formation to file for S-Corp status.
Existing businesses must file by March 15 for calendar year companies.
Missing the deadline doesn't disqualify you permanently, you can qualify for late election relief if you meet specific requirements.
S-Corp status can save you thousands in self-employment taxes.
When Is the S-Corp Election Deadline?
It depends on your situation. The S-Corp election deadline varies based on whether you're forming a new business or converting an existing one.
If you're launching a new business, you have 75 days from your formation date to file the necessary paperwork with the IRS. For existing businesses, your deadline typically falls on March 15th if you use a calendar year.
S-Corp Election Deadline for a New Business
For newly formed businesses, the S-Corp election deadline is straightforward: you have 75 days from your date of incorporation or formation to file Form 2553 with the IRS.
For example, if you launch your business on March 1, 2025, you must file your S-Corp election by May 15, 2025, to receive S-Corp tax treatment for the 2025 tax year.
Missing this 75-day window doesn't permanently disqualify you from S-Corp status, but it does mean you'll need to wait until the next tax year to enjoy the potential tax benefits.
S-Corp Election Deadline for an Existing Business
If you already operate as an LLC or a C-Corporation and want to convert to S-Corp status, different deadlines apply.
For existing businesses using a calendar year for tax purposes (January 1 - December 31), you must file Form 2553 by March 15 of the year you want S-Corp status to take effect.
If your business operates on a fiscal year rather than a calendar year, your deadline is the 15th day of the third month of your fiscal year. For example, if your fiscal year begins July 1, your S-Corp election deadline would be September 15.
How to File for S-Corporation Election
Filing for S-Corporation status requires you to complete the IRS Form 2553, "Election by a Small Business Corporation." This relatively straightforward form tells the Internal Revenue Service you want your business to be taxed as an S-Corp and not as its default tax classification.
1. Confirm Eligibility
Not every business qualifies for S-Corporation status.
The IRS maintains specific eligibility requirements your business must meet:
Your business must be a domestic corporation (formed within the US)
You can have no more than 100 corporation shareholders
Shareholders must be individuals, certain trusts, or estates (not partnerships, corporations, or non-resident alien shareholders)
Your business can only have one class of stock (though differences in voting rights are permitted)
Certain businesses are ineligible, including financial institutions, insurance companies, and domestic international sales corporations
Before filing your election form, make sure that your business structure and ownership meet all these requirements.
2. Complete Form 2553
Once you've confirmed eligibility, you'll need to complete Form 2553, which requires:
Basic business information (legal name, address, employer identification number)
Date of incorporation and tax year information
Information about your business activity and accounting methods
Shareholder information and consent (all shareholders must sign)
Details on your selected tax year
The form can look a little scary at first, but it's pretty straightforward.
Part I covers the business entity details, while Part II is only necessary if you're choosing a fiscal tax year different from the calendar year. Part III is for qualified subchapter S trusts, and Part IV applies to late elections.
3. Wait for Approval
After submitting Form 2553 to the IRS (either by mail or fax), you'll need to wait for their response.
If your election is approved, the IRS will send you an acceptance letter that you should keep with your permanent business records.
This letter is a confirmation that your business is now officially taxed as an S-Corporation. You'll need to learn how to pay yourself as a business owner and make sure you're complying with all of the necessary regulations that S-Corporation tax treatment requires.
If your application is rejected or deemed incomplete, the IRS will contact you with specific reasons and instructions for re-applying. Common reasons for rejection include missing signatures, filing after the deadline, or not meeting the eligibility requirements.
S-Corp Election Deadline for LLC
LLCs follow the same S-Corp election deadlines as other businesses. If you have a new LLC, you must file for S-Corp status within 75 days of forming your company. For existing LLCs using a calendar tax year, the deadline is March 15 to receive S-Corp treatment for the current year.
Learn more about LLCs vs. S-Corps and which structure is right for you.
What Happens If I Miss the S-Corp Election Deadline?
Missing your S-Corp election deadline isn't the end of the world, but it does have consequences. The most immediate impact is that you'll need to wait until the next tax year to receive S-Corporation tax treatment, which can cost you in tax savings.
That said, the IRS offers a safety net through something called "late election relief." This relief provision allows businesses to receive S-Corp status retroactively, even if they missed the original filing deadline.
To qualify for the late S-Corporation election, you'll need to meet a few requirements:
Your business must meet all the eligibility criteria for S-Corporation status
You must have reasonable cause for filing late (for example, receiving incorrect professional advice)
All shareholders must have reported their income consistent with S-Corp status for the relevant period
Your late filing must occur within 3 years and 75 days of the intended effective date
In other words, if you miss the S-Corp election deadline for a legitimate reason, you may still be able to qualify.
Filing for a Late S-Corp Election
If you've missed your deadline but qualify for late election relief, you'll need to follow these steps to file a late S-Corp election:
Complete Form 2553 as you normally would
Write "FILED PURSUANT TO REV. PROC. 2013-30" at the top of the first page of the form
Include a statement explaining your reasonable cause for filing late in Part I, Line I of the form
Make sure all shareholders sign
Submit the form and all attachments to the IRS either by mail or fax
If approved, your business will receive S-Corp tax treatment retroactive to your requested effective date. If denied, you'll receive a notification explaining why, and you can either appeal the decision or file for the upcoming tax year instead.
What Are the Benefits of an S-Corp?
An S-Corporation can save you money on taxes.
Unlike a sole proprietorship, a partnership, or an LLC, an S-Corp lets you pay yourself a reasonable salary and take additional money as distributions. These distributions aren't subject to self-employment taxes (Medicare and Social Security), which can save you thousands of dollars each year.
FAQs
How Do I File Form 2553?
You need to file the Form 2553 by the S-Corp election deadline. You'll need basic business information, tax year details, and shareholder information. Every shareholder must sign the form consenting to the election. Once you complete the form, mail or fax it to the IRS.
Can I File for S-Corporation Status in Advance?
Yes, you can file for S-Corporation status before you want it to take effect. For new businesses, you can file anytime during the year before your intended S-Corp effective date. For existing businesses, you can file during the year before the tax year you want S-Corp status.
What Are the Tax Advantages of Electing S-Corporation Status?
The biggest tax advantage of an S-Corporation is saving on self-employment taxes. As an S-Corp owner, you can pay yourself a reasonable salary (which is subject to employment taxes) and take additional profits as distributions that aren't subject to the 15.3% self-employment tax.
S-Corps also avoid the double taxation of C-Corporations. Your business doesn't pay corporate taxes since all profits and losses pass directly to shareholders' personal tax returns.
Tax Preparation and Planning for S-Corps
Once your S-Corporation election is approved, you'll need to stay on top of taxes and take advantage of the benefits that S-Corp status offers. Unfortunately, many business owners overpay simply because of common mistakes that go unnoticed year after year.
Working with a tax professional can help you identify and avoid critical errors that many business owners miss, such as:
Miscategorized expenses that reduce your legitimate deductions
Misreported income that creates tax liability you don't actually owe
Misclassified employees that could lead to penalties
Inaccurate bookkeeping
Mixed business and personal expenses
And more! Without expert help, you might be consistently overpaying taxes when you could be reinvesting that money in your business growth.
Learn about our tax services and how we can help you start saving more of your hard-earned money!
