TAP B06-002

Form 2553 Subchapter S Election

Issue Statement:

The IRS experiences an average of 46,000 unpostable 1120S Income Tax Returns per year due to missing, or incomplete or unposted Subchapter S elections.  This creates a major burden on the IRS as well as on the taxpayers who must clear up the status of their corporate tax filings. The root cause appears to be a complex and burdensome set of requirements for seeking Subchapter S elections using Form 2553.

Proposal:

The Burden Reduction Committee proposed two options: eliminate Form 2553 and its requirements altogether, or permit the election at the time the entity files its first return and simplify Form 2553 by eliminating duplicate information requirements and the need for signatures of shareholders of record.

Response Notes:

IRS acknowledged the committee recommendations on the Sub- S Issue sent in March and thanked the committee for the work done. The recommendations were apparently well received by the staff team working on the issue.