Are you running a business that is a C corporation but you have decided to file your taxes as an S corporation? If yes then you have to notify the IRS about it in advance. In order to switch the status of your corporation, you will have to fill out the
IRS Form 2553. Now you must be thinking that what is the need of doing this. The answer is, it helps in reducing your annual income tax liability. Form 2553 is to inform the IRS about this switch from C corporation to S corporation. At the time of forming the business, if you do not specifically choose the S corporation status then the IRS assumes it as a C corporation. You will have to take an additional step of switching the status.
By making this switch, your company will be turned into a “pass through entity” for tax purposes. Now you will not have to pay a corporate tax rate of up to 35 percent,You will only be paying taxes on the income at your own individual income tax rates.
You have to file the tax form 2553 two months and 15 days after the beginning of the tax year in which this switch will take place. If you missed the deadline for filing Form 2553 then you will have to meet a few conditions so that you can file it even after the due date.
Still your mind is flooding with a lot of questions? It is a common thing to happen when you decide to take care of your finances all on your own then it is obvious to have issues like this. There is no need to worry. Probably, this is the time when you should consider taking some help from a tax professional. To get started, you can give us a call on +1-844-860-1101 We are available 24x7.
