The Deadline for Businesses to File for “S” Tax Status is March 15
If you have an LLC or corporation, this deadline applies to you. Eligible business entities have until March 15, 2023 to file Form 2553 with the Internal Revenue Service to elect “S” tax designation for the 2023 tax year. There are tax benefits associated with the “S” tax designation that may be beneficial for business owners.
What is the “S” Tax Designation?
The “S” stands for Small Business Corporation and is a type of tax designation. An eligible business entity can elect to be treated as a S-Corporation by the Internal Revenue Service (IRS) by filing Form 2553 Under Section 1362 of the Internal Revenue Code within two months and fifteen days of the beginning of the tax year. The S-Corporation designation allows a business to pass income, losses, and deductions from the business directly to the owners for federal tax purposes.
It is important that business owners are aware that there are default tax designations with the IRS. A single member LLC has a default tax designation as a sole proprietorship and a multi-member LLC has a default tax designation as a partnership. With the S-Corporation tax designation, profits paid as distributions to LLC members are not subject to certain self-employment taxes.
A corporation’s default tax status with the IRS results in one tax on the corporate income and then another tax when profits are paid as dividends. For a corporation, the S-Corporation tax designation avoids this double taxation, and corporate profits are taxed at the individual’s rate.
Who is Eligible?
Single Member Domestic LLCs;
Multi-Member Domestic LLCs; and
Domestic Corporations with no more than 100 domestic shareholders and one class of stock (no preferred stock).
How can a Business Elect S-Corporation Status?
Eligible business owners should complete and file Form 2553 with the IRS. All shareholders or members are required to consent to the S-Corporation election and sign and date Form 2553.
Fiffik Law Group, PC provides a full range of services to business owners, including filing the S-Corporation election form. Contact our experienced business attorneys today.