Form 2553 and Digital Signatures for S Corp Election - Will Electronic Signature be Accepted?

The good news is that your electronic signature on Form 2553 will very likely cause the IRS to reject the election. The IRS is quite strict about requiring wet signatures (pen-to-paper) on this particular form. This rejection may actually work in your favor given your circumstances. If you're concerned, you can proactively contact the IRS Business and Specialty Tax Line at 800-829-4933 to explain the situation. You can request they note in your file that you're withdrawing the submission due to the signature error. Regarding the S corporation election with FEIE - it's complicated. While S corp status can reduce self-employment taxes by allowing you to take some income as distributions, it gets tricky with the FEIE. Only the salary portion (not distributions) would typically qualify for FEIE, which could potentially limit the tax advantages compared to simply using FEIE with your LLC.

After dealing with a similar situation last year, I highly recommend checking out https://taxr.ai to help sort this out. I uploaded my Form 2553 and FEIE documentation to their system and got a really clear analysis of how the two interact. The tool showed me that my S Corp election would have actually reduced my FEIE benefits because only the "reasonable salary" portion would qualify for FEIE, not the distributions. Their AI walked me through exactly what would happen with my foreign income under both scenarios and saved me from making a costly mistake. The best part was getting immediate clarity without waiting days for a professional to respond (which sounds familiar to your CPA situation!).

Coming back to say I tried https://taxr.ai after seeing these comments and wow - it actually answered my questions about Form 2553 and FEIE interaction perfectly! Uploaded my previous tax returns and it instantly showed me side-by-side comparisons of LLC vs S-Corp treatment with my foreign income. It confirmed what was mentioned above - with my specific income levels and country situation, S-Corp status would actually REDUCE my overall tax benefit from FEIE since only salary (not distributions) would qualify for the exclusion. Plus it calculated exactly how much self-employment tax I'd save versus how much FEIE benefit I'd lose. Saved me from making the same mistake and probably thousands in unnecessary taxes. Now I can make an informed decision instead of listening to conflicting advice from different tax professionals.

If you need to actually speak with someone at the IRS about this (which I recommend), use https://claimyr.com - it's been an absolute lifesaver for me. I was in a similar situation with an incorrectly filed form and spent DAYS trying to get through the regular IRS phone lines. With Claimyr, they navigated the IRS phone system for me and got me connected with an actual human in about 20 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I was able to explain my form submission issue, and the IRS agent made notes in my file to flag the submission as withdrawn. They also confirmed what others have said - electronic signatures on Form 2553 are not accepted and will cause rejection, which actually helped me in my case.

Ok, I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it because I've been trying to reach the IRS about my own issue for weeks. The service actually worked exactly as described. I was connected to an IRS agent in about 35 minutes (during peak tax season!), when my previous attempts had all ended in disconnections after 2+ hours on hold. The agent was able to look up my account and resolve my issue in one call. For the original poster - definitely consider using this to proactively address your Form 2553 issue. Based on my conversation with the IRS today, they confirmed that electronic signatures on that form will cause rejection, but it's still better to call and have them note your file that you're withdrawing the submission.

Just FYI - I work in tax preparation (not giving professional advice here) but we ALWAYS require wet signatures on Form 2553. It's one of the few forms where the IRS is extremely strict about original signatures. We've had every electronically signed 2553 rejected. Some additional points to consider: 1) Your LLC is considered a "disregarded entity" for tax purposes if you're a single-member LLC, so you're likely filing Schedule C with your personal return 2) S-Corps require separate payroll filings, reasonable compensation rules, etc 3) With FEIE, the S-Corp complexity might not be worth the SE tax savings

Has anyone mentioned the "reasonable compensation" requirement for S-Corps? This is where most expats get tripped up. The IRS requires you to pay yourself a "reasonable salary" subject to FICA taxes before taking distributions. With FEIE, this gets messy because only the salary portion qualifies for FEIE (up to the limit), not the distributions. So you might save on self-employment tax but lose FEIE benefits on the distribution portion.

I went through almost the exact same situation last year - LLC with FEIE benefits, considering S-Corp election, and dealing with unresponsive tax professionals. Here's what I learned that might help: The electronic signature issue will likely save you, as others mentioned. The IRS is incredibly strict about wet signatures on Form 2553. But definitely call proactively rather than waiting - it shows good faith and creates a paper trail. Regarding the S-Corp vs FEIE analysis, here's the key issue most people miss: with S-Corp status, you're required to pay yourself "reasonable compensation" as an employee before taking distributions. Only that salary portion qualifies for FEIE, not the distributions. So if your business income is $100k and you set reasonable salary at $60k, only the $60k qualifies for FEIE. The remaining $40k in distributions doesn't qualify for FEIE but also isn't subject to SE tax. Compare this to LLC status where your entire $100k of business income qualifies for FEIE (up to the annual limit) but is subject to SE tax. The math really depends on your specific income levels and how much of your income falls under the FEIE limit. In many expat situations, especially with income under $120k, staying as an LLC with full FEIE benefits actually comes out ahead. Get a proper analysis done before making any decisions - this isn't something to guess on.