Form 2553 is called "Election by a Small Business Corporation", and it is the form you must file with the IRS if you want to be taxed as an S corporation. If you've been thinking about making the switch to S corporation status, now is the time to make a decision.

Both C corporations and LLC's can avoid two notorious tax traps by becoming an S corporation. C corporations can avoid the dreaded double taxation of corporate profits because S corporation profits are only taxed once. And LLC owners who are currently being taxed as sole proprietorships or partnerships can reduce self-employment tax by paying themselves reasonable compensation as an employee of the S corporation.

The rules for filing Form 2553 on time are a bit tricky, so let's review them.

If your C corporation or LLC was already in existence at the beginning of the year, the general rule is this: you must file Form 2553 by March 15, 2009 in order to be recognized as an S corporation as of January 1, 2009. If you file Form 2553 after March 15, 2009, you may have to wait until 2010 to receive S corporation status.

One important note about the March 15 due date: since March 15, 2009 is a Sunday, you actually have until the next business day (Monday March 16) to file the form.

If you form a C corporation or LLC anytime after January 1, you have 75 days from the incorporation date to file Form 2553 in order to be recognized as an S corporation as of the incorporation date. Example: You incorporate on March 1, 2009. You must file Form 2553 within 75 days of March 1, 2009 in order to receive S corporation status effective March 1, 2009.

Like any tax rule, there are exceptions to the general rule. So if you miss these filing dates of March 15 or 75 days from incorporation date, consult with a tax professional to determine whether you qualify for relief from the general rule.

Also be sure to determine whether you qualify for S corporation status. Here are a few of those requirements:

1) The corporation cannot have more than 100 shareholders.

2) All shareholders must consent to becoming an S corporation, and demonstrate that consent by signing Form 2553.

3) Only domestic corporations can apply.

4) Each shareholder must be a U.S. citizen or a U.S. resident.