Instructions for LLC revoking S-Corp election
Disclaimer: This article explains how to revoke an S-Corporation election for an LLC. It doesn’t explain specific tax consequences that may be unique to your situation. In addition, this article doesn’t explain what tax forms must be filed before and after your LLC revokes its S-Corporation status with the IRS. Please speak with your accountant before, during, and after making any changes to your LLC’s tax classification.
There are many terms used to describe an LLC revoking its S-Corporation election with the IRS:
- LLC revoking its S-Corporation status
- LLC revoking an S election
- LLC revoking S-Corporation election
- LLC revoking S-Corp status
- LLC cancelling S-Corporation Election
- LLC terminating S-Corporation Election
- and more
(For the purposes of this article, they all mean the same thing.)
Meaning, if you see the term “status” or “election” throughout this article, please know that we are talking about the same thing.
Alright, enough disclaimers… onto the content:
If your LLC is taxed as an S-Corp and you’d like to cancel this election with the IRS, this is known as a “Voluntary Revocation of S-Corporation Status” (essentially “undoing” the filing of Form 2553).
The IRS doesn’t have a specific form to download on their website if your LLC wants to revoke its S-Corporation status.
Instead, you need to mail 3 items to the IRS, which together, “put the IRS on notice” that your LLC is revoking its S-Corporation status.
The items you need to revoke your LLC’s S-Corporation election with the IRS are:
- Letter of Revocation of S-Corporation Election
- Statement of Consent of LLC Members for S Election Revocation
- IRS Form 8832
What do these forms do?
Letter of Revocation of S-Corporation Election:
This tells the IRS to stop taxing your LLC like an S-Corporation. The IRS will then make a note in your LLC’s file that they should not look for an 1120S filing and they’ll place your LLC back into its default tax classification.
Statement of Consent of LLC Members for S Election Revocation:
This shows the IRS that all the Members of the LLC have agreed to make this change.
Form 8832:
This tells the IRS how you want your LLC to be taxed after the S-Corp election is revoked:
- If you have a Single-Member LLC, you’ll tell the IRS to tax your LLC like a Sole Proprietorship/Disregarded Entity.
- If you have a Multi-Member LLC, you’ll tell the IRS to tax your LLC like a Partnership.
Want your LLC to be taxed as a C-Corporation instead? If you want your LLC to be taxed as a C-Corporation, you don’t need to file Form 8832. By not filing Form 8832 during the LLC’s revocation of its S-Corp election, it defaults to an LLC being taxed as a C-Corporation.
LLC’s Revocation of S-Corporation Letter
(We have a free template letter for you to download below.)
Your LLC’s Revocation of S-Corporation Letter must include:
- A statement that the LLC is revoking its election to be taxed as an S-Corporation under Section 1362(a) of the Internal Revenue Code.
- The name of your LLC, the mailing address of your LLC, and your LLC’s EIN (also known as a Federal Tax ID Number).
- A statement that the LLC doesn’t have shares of stock, but rather has percentages of ownership. And a list of the LLC owners and how much of the LLC they each individually own.
- Which taxable year you want the LLC’s revocation of the “S” Election to take effect.
- An attachment must be included along with your Revocation Letter showing that all LLC Members have agreed to the S Election Revocation. This attachment is called a “Statement of Consent of LLC Members for S Election Revocation“.
- (We have a free template letter for this too, which you can download below.)
The Statement of Consent of LLC Members must include the name of your LLC, its EIN, and a statement that the LLC Member(s) agree to revoke the LLC’s S-Corporation Election.
Along with the above, your Statement of Consent must also include:
- the LLC Members’ name,
- the LLC Members’ mailing address,
- the LLC Members’ Tax ID Number (such as SSN or ITIN),
- how much of the LLC each Member individually owns (expressed as a %),
- the date each LLC Member acquired their ownership in the LLC, and
- the date the LLC Member’s tax year ends (for most people they’ll list “12/31”)
Disclaimer: At the time this lesson was written, the forms below meet the IRS requirements for an LLC revoking its S-Corporation election. These forms should be used as sample templates only and should not replace advice given by your accountant, CPA, or tax attorney. If after speaking with your tax professional, you decide these forms will work for your LLC, they may be used – at your own discretion – and mailed to the IRS.
Certified Mail Return Receipt
This is not required, but if you’d like to be certain (and have proof) that your documents arrive properly at the IRS, we recommend sending by Certified Mail Return Receipt.
Letter of LLC Revoking S-Corporation Election
Free template letter download:
Note: If you want to make any changes or edits to the document, download the Microsoft Word format of the LLC Revoking S-Corporation Election letter.
How to complete the LLC Revocation of S-Corporation Election
Date:
At the top of the form enter today’s date.
To:
For the IRS’s mailing address, you will need to enter the address where you originally mailed Form 2553.
If you’re not sure which address you mailed it to, there are a few ways to figure this out:
- If you have a copy of your Form 2553, look at the address you listed at the top.
- If you don’t have your Form 2553, but have your Approval Letter (CP261), look at the address where the IRS mailed the approval.
- If you don’t have either of those items, you’ll need to call the IRS business line (800-829-4933) and ask them which address they have on file for your LLC. Their hours are Monday through Friday, 7am to 7pm local time (unless calling from Alaska or Hawaii; then use Pacific time).
Now that you have your LLC’s address (also known as your “Principal Business Address”), open the IRS’s Instructions for Form 2553. Then look for the section titled “Where To File”. You’ll then see different mailing addresses based on the address you used for your LLC (at the time you filed Form 2553).
Tip: Instead of tirelessly scrolling through the IRS’s instructions above looking for a specific section (“Where To File”), you can use the search functionality already built into your computer. If you’re on a Windows computer, hold ‘control’ and press ‘f’ on your keyboard, and then enter “where to file”. If you’re on a Mac, hold ‘command’ and press ‘f’ to search.
Company:
Enter the complete name of your LLC.
EIN:
Enter your LLC’s EIN.
To Whom It May Concern:
List the name of your LLC, the state in which your LLC was formed, your LLC’s mailing address, and the date that you listed at the bottom of Form 2553.
LLC Member(s):
In the next section, enter the LLC Member(s) name, how much of the LLC they own (expressed as a %), and their Tax ID Number, such as their SSN or ITIN.
Note: If you need room for more LLC Members, please download the form in Microsoft Word format above and copy/paste additional lines. It’s okay if your form extends onto the second page. If the LLC has only one Member, then you will just list that name at 100%.
Taxable year for which the revocation will be effective:
Make sure that you’ve spoken with your tax professional and decided what taxable year you want your revocation to take effect.
Then enter the first day of that taxable year, expressed as the “month, day, and year”.
For example, if it’s currently June 15th, 2024 and you want your revocation to take effect in the 2025 tax year, you’d enter “January 1st, 2025”. This is the first day of the taxable year for those running on the calendar year; January 1st to December 31st (which is the case for the majority of people).
Note: On the rare occasion that your LLC has a different fiscal year (something different than January to December 31st), please speak with your tax professional to determine the first day of your taxable year.
Postmark date:
As per IRS regulations, your envelope needs to be postmarked by the “15th day of the 3rd month of the tax year for which it is requested to be effective.”
That’s a lot to digest, so let’s look at an example:
Let’s say you’ve decided that 2024 is the last year you want your LLC taxed as an S-Corporation. So the year in which the new election will become effective is 2025 (technically 1/1/2025). In this example, your envelope needs to be postmarked by 3/15/2025.
Source: IRS: 3.13.2 BMF Account Numbers. See “3.13.2.27.9 (01-01-2021) Request to Withdraw Classification Election”.
Signature:
At the bottom of the letter, sign your name, then below, enter your name and title (likely “Member” or “Manager”). Then put your phone number at the bottom in case the IRS has any questions.
- Related article: LLC officer titles
Consent of LLC Members to Revoke
S-Corporation Election
Free template letter download:
- Consent of LLC Members to Revoke S-Corporation Election (PDF)
- Consent of LLC Members to Revoke S-Corporation Election (Word)
Note: If you want to make any changes or edits to the document, download the Microsoft Word format of the Consent of LLC Members form.
How to complete the Consent of LLC Members to Revoke S-Corporation Election
LLC Name:
Enter the complete name of your LLC.
LLC Address:
Enter your LLC’s mailing address.
EIN:
Enter your LLC’s EIN.
The undersigned:
Enter your LLC’s name again, followed by the state in which your LLC was formed.
LLC Member(s) and Signature:
Enter the information for each of your LLC Members, including their name, mailing address, Tax Identification Number (SSN or ITIN), and how much of the LLC they own (expressed as a %).
For the “date acquired” section, enter the date when this person became a Member of the LLC. This will likely be the same date your LLC became effective (the date it was approved by the state). Please look at your LLC’s Articles of Organization, Certificate of Organization, or Certificate of Formation to find this date.
Then enter the date for each Member’s “tax year ends”. Most people run their taxes on the calendar year (January 1st to December 31st) so they will enter “12/31”. If you’re not sure when your tax year ends, please ask your accountant. Then have each Member sign their name and enter today’s date.
Note: If you don’t need the 2nd page, you can just discard it (don’t send it to the IRS). We included it in case your LLC has more than 4 Members.
IRS Form 8832
You can download IRS Form 8832 (“Entity Classification Election”) from the IRS’s website.
How to complete IRS Form 8832
Form 8832 must be filed in order to let the IRS know how they should tax your LLC (after the S-Corporation election is revoked).
As we’ve mentioned before, please speak with your accountant before filing Form 8832, as it’s easy to mess this form up and make mistakes. And that will not only have negative tax consequences for your LLC, but it will be a major headache and frustration to try and clean up.
LLC Information:
At the top, enter your LLC’s name, its EIN, and its mailing address.
Under the “Check Off” section, check off any boxes that are applicable, or leave them all unchecked if none of them apply.
Part 1 – Election Information:
Under #1, “Type of Election”, you’re going to check off the second box to state that there was a change in the current classification.
Please review #2 (2a and 2b) carefully and make the proper selection based on whether or not you’ve recently made an entity election within the past 60 months.
For #3, check off “Yes” if your LLC has more than one Member (a Multi-Member LLC). Check off “No” if your LLC only has one Member (a Single-Member LLC).
If you checked off “Yes” in #3, then you’re going to skip #4 and go to #5. #5 will only need to be completed if your LLC is owned by another company.
If you checked off “No” in #3, you will need to enter the owner’s name and their Tax Identification Number, such as SSN or ITIN in #4. You’ll need to complete #5 only if it is applicable and your LLC is owned by another company.
Part 1 – Election Information (Continued):
In #6, you’re going to check off the tax status that your LLC is going to revert back to:
- Most Multi-member LLCs are going to revert back to partnership taxation. If that is the case for you, check off “B”.
- Most Single-member LLCs are going to revert back to sole proprietorship taxation. If that is the case for you, check off “C”.
#7 will only apply if your LLC was formed outside of the United States. If your LLC was formed inside the United States, you can write “N/A”.
In #8, you’re going to enter the first day of the taxable year (written as “month, day, and year”) in which you’d like your revocation to take effect. This should be the same as the date you entered in your Letter of Revocation of S-Corporation Election.
In #9 and #10, enter your first and last name, title, and phone number. The IRS will contact you if they have any questions. You will likely be using the title “Member” or “Manager”.
- Related article: Member-managed vs Manager-managed LLC
Consent Statement and Signature(s):
Have each Member of your LLC sign, date, and enter their title.
#11 will only apply if you are seeking late election relief. If you need to complete #11, please speak with your tax professional regarding what information to enter here.
Where to Mail S-Corporation Revocation & Supporting Documents
Remember, you’ll need to mail the above documents to the same IRS mailing center where you sent Form 2553. If you’d like, you can send them via Certified Mail Return Receipt.
To find that address, you’ll want to look at this page: IRS: Where to File Your Taxes (for Form 2553).
Note: All of the mailing addresses for the IRS do not include a street address. The IRS is so big that they have their own zip codes!
Approval time and what you get back
The “Letter of LLC Revoking S-Corporation Election” we provided above asks the IRS to send a Confirmation Letter to your LLC’s mailing address.
After the IRS revokes your LLC’s S-Corporation Election and reverts your LLC back to its default tax classification, they will mail a Confirmation Letter to your LLC’s mailing address (the address that you use in the letter).
Please allow 45-60 days before your Confirmation Letter arrives.
LLC Revoking S-Corp Status – FAQs
Does my LLC need to file a final Form 1120-S?
Not exactly. On Form 1120S, Section H, you – or your accountant – would select “S election termination“.
And on Schedule K-1, you’d select “Final K-1” at the top.
Does my LLC also need to revoke S-Corporation status with my state?
Yes.
Keep in mind that the above information is only for how to revoke your LLC’s S-Corporation tax status with the IRS.
The IRS will not contact anyone else on your behalf to update them of the change.
Depending on the state where you formed your LLC, you likely need to revoke your S-Corp status with your state’s Department of Revenue, Department of Taxation, or equivalent tax office.
In addition to the above, depending where you file state taxes, your accountant will likely be changing the way you file your state income tax return.
You should not only ask them for assistance on how to properly revoke your LLC’s S-Corporation election at the state level, but also make sure they are filing your taxes correctly after your LLC’s revocation of S-Corporation status takes effect (since payroll and withholding amounts, among other things, will change).
What’s the 5-year waiting period for S-Corporation election again?
If you terminate your LLC being taxed as an S-Corporation you will not be able to get tax status as an S-Corporation again (on that same LLC) for 5 tax years.
In some cases, the IRS may grant an exception to this rule, however, you’ll need to consult with your tax professional for details.
References
IRS: Where to File Your Taxes for Form 1120-S
IRS: Tax information on S-Corporations
IRS: Revoking a Subchapter S Election
IRS: Instructions for Form 1120-S
Matt holds a Bachelor's Degree in business from Drexel University with a concentration in business law. He performs extensive research and analysis to convert state laws into simple instructions anyone can follow to form their LLC - all for free! Read more about Matt Horwitz and LLC University.
Hello,
Thank you for answering so many questions -I had a specific one for my own situation. We are selling 50% of our business -currently we are an LLC (sole owner) that is taxed as an S Corp. if we revoke our S Corp. status once the new owner buys in, do we have to get a new EIN?
You’re very welcome. No, you don’t need a new EIN. The EIN “travels with”, or “is attached to”, the LLC.
I have a new client that is a single member LLC taxed as a S-Corp. she has been a S Corp. since 2017. She has not filled her 2022 tax return yet. Since it’s now mid June 2023, can she revoke her s election starting January 1 of 2023 and be a disregarded entity for the entire 2023 tax year? There is no benefit for her to be a S-Corp.
Hi Joann, you missed the cut off date to have the S-Corp revocation go into effect in 2023. So the entity would finish out the 2023 tax year taxed as an S-Corp. And their revocation filing (if postmarked on time; by 3/15/2024) would be effective 1/1/2024.
Hi Matt,
Thanks for all of the information… very helpful.. We have submitted the SCorp Revocation Documents for our client and have received the CP265 letter terminating the SCorp Election. We had also submitted the Form 8832 with all of these documents… do you receive a separate letter whereby the IRS accepts your entity classification election to a sole proprietorship?
Thank you
Hi Cynthia, yes, in addition to receiving a CP265 letter, you should receive an 8832 “Thank You” letter.
Thanks for your help Matt! Still have not received the 8832 thank you letter but I guess that would come after the CP 265
Thank you!
Hi Matt,
It has been a month since I received my CP265 letter, I have called the IRS 1-800-829-0115 several times concerning the status of my form 8832. I sent everything together (the S-Corp revocation and Form 8832) And I have received different answers from every person. The last person I called said they received the Form 8832 but they cannot do anything with it as you cannot change entities from a C-Corp to a sole proprietorship?? And I would have to terminate my old EIN and apply for a new one.
In my reading of the Form 8832 instructions, The IRS will either accept or deny the form, not just do nothing
What are your thoughts on this… do I continue to wait for acceptance or send a new 8832. Dealing with the IRS is indeed frustrating.
Hi Cynthia, I hear you. The IRS can certainly be frustrating at times. Just touching base, since it’s been a few weeks since you left your comment. Have you received anything back, or gotten any new information?
Hi there!
I have a single member LLC and am revoking my S Corp status. My LLC has made $0 and was incorporated in 2022. The S Corp status has been in effect since day 1. I have a few questions:
1. I filed form 1120-S for 2022 with $0 in all boxes. I am revoking the S-Corp election in 2023. Do I need to submit for 1120-S for 2023 with $0 in all boxes too?
2. If yes, will this form need to be sent in 2024 for the year 2023 with the selection of “Final Return”?
3. Will the S-Corp election be considered terminated from the exact date that I put on the form (eg: May 23, 2023)? I missed the date to revoke it earlier this year.
Let me know. Thank you!
Hi Saleena!
1. Yes, you’ll need to file an 1120-S for the 2023 tax year.
2. Yes, correct. However, instead of marking it “final return”, you should mark it “S election termination”.
3. In that case, in the Revocation of S-Corporation Election form (which you can download above), in the “The first taxable year for which this revocation is intended to be effective is the Limited Liability Company’s taxable year beginning…” section, I’d list January 1st, 2024.
So in 2024, you’ll file the 1120-S (marked “S election termination”; for the 2023 tax year) and for the tax return the following year, you’ll file as an LLC taxed as a Sole Proprietorship. Hope that helps!
Hi Matt ,
Thank you for sharing your knowledge with us. I request your input in a scenario.
An LLC Started & S-Corp election done in 2022, Got the confirmation in 2022 (CP261) its first tax year.
Wanted to revoke the S-Corp election
Once we submit revoking S-Corp election, is it convert as LLC? Can we use same EIN for LLC?
First Tax year under S-corp, and second Tax year on LLC we can file the tax?
Hi Kar, once you revoke the S-Corp election, technically, your LLC becomes an LLC taxed as a Corporation. That’s why you also file Form 8832 to choose a new classification. If you have a Single-Member LLC, it’ll be treated as a disregarded entity. If you have a Multi-Member LLC, it’ll be treated as a Partnership. And yes, the EIN stays the same.
Regarding tax filings, you’ll need to file an 1120S for the LLC as well as a default-style return. So for whatever year the revocation takes place, you’ll be filing both types of returns (since the LLC was treated as an S-Corp for a part of the year and also treated in its default status for the other part of the year). Hope that helps.
Hi I made SCorp election in Dec 2022. IRS sent me notice that it is applicable from dec 12 2022.
But in the month of January, i lost two of my clients and due to some more reason SCorp will not make sense for me. Is it possible to revoke S-election this quick and go back to sole prop?
And should i file 1120S for between Dec 12 and Dec 31? Or can i ask to make Sole prop applicable from Dec 12 itself?
Hi Bobby, yes, you can request the revocation this soon. Feel free to double-check with an accountant, but you most likely still need to file an 1120-S for the 2022 tax year.
Hi Matt,
Wonderfully informative article! The most thorough out of them all.
Can you help me clarify my situation? I started my company in 2019 as a regular SINGLE member LLC (I’m the only owner). I heard the whispers of electing to be taxed as an S-corp and so I filled out Form 2553 and got approved to be taxed as an S-corp for 2020. I realized this was a mistake since my company makes no money (of course I was expecting to be rich my now lol).
Anyway, I found the steps to “revoke a subchapter s election.” As I found your page, I hear I have to also fill out this IRS Form 8832 as well? I never elected to be a C corp so wouldn’t I just revert back to being a single member LLC? *Update* I just read your response, “Meaning, when an LLC files Form 2553, it’s as if the LLC files Form 8832 (electing C-Corp) and then subsequently files Form 2553 (electing for that C-Corp to be taxed under Subchapter S).” to another person. What a bummer.
Also, I’m assuming I can’t make any new elections since my business has already elected to file as an S Corp only 2 years ago and not the minimum requirement of 60 months (5 years).
Is there anything else I’m missing?
Hey Morg, thanks so much! Hey, nothing wrong with thinking big ;) You should be okay to revoke the S-Corp election and revert back to a Single-Member LLC taxed in its default status. The 60 months rule isn’t always enforced. Said another way, I’d still send in the revocation request and see if it gets granted.
My LLC has revoked it’s S Corporation election and elected to file as a partnership as of 1/1/2023. The LLC will continue to use its exisitng Tax ID number when filing Form 1065. Should I be marking my 2022 1120S as a ‘final return’?
Hi Mike, on Form 1120-S, you’ll select “S election termination”. And on Schedule K-1, you’ll select “Final K-1” at the top.
Hi Matt,
I actually saw that checkbox on the 1120-S and used ot to prepare the return before I received your initial response. Thanks for confirming that what I did was correct.
Oh so glad to hear that Mike! You’re very welcome.
Hi Matt
After the conversion, what is the beginning retained earning on Form 1120/C Corp tax return? is it the ending balance on the 1120-S/S Corp tax return or zero. In other words, do you zero out the ending balance on the 1120-S when you convert to a Corp or carry the ending balances to the beginning balances of the C Corp tax return?
I cannot find any example on how to prepare the Schedule L or M-2 of the 1120 tax return after the conversion.
Hi Pierre, that I’m not sure. I recommend speaking to an accountant about that. Thank you for your understanding.
Hi,
Thank you for sharing your knowledge with us. I request your input in a scenario.
An LLC filed as S corp in 2021, its first tax year. The 100% shareholder will become a non-resident in 2023. From 2023, the SMLLC intends to file as a disregarded entity.
Is filing a form 8832 sufficient or is there any other paperwork needed?
You’re very welcome. I’m not 100% sure in this scenario. My guess would to still be to revoke the S election, but I recommend calling the IRS to ask and/or speak with a few accountants.
If I am a sole member LLC s-corp(with an EIN for 2 years) and I want to revoke s-corp and change to a LLC taxed as a disregarded entity, what EIN do I put on form 8832? Do I request a new one for my LLC and put the new EIN on the form or do I put my current EIN? Thank you.
Hi Ronald, you use the same EIN Number. The EIN will always stay the same, regardless of how the LLC is taxed.
Matt, also when I called and spoke with someone that deals with corporations at the IRS, they instructed me to mark 1120-S under section H #5 “s election termination” and to mark Final K-1 on Schedule K 1. Informed me marking Final Return on 1120-S would be wrong because my LLC with continue to operate as a single owner electing to be disregarded as a separate entity. Thanks for all your help.
Hi Ronald, thank you very much for sharing this! We added an FAQ on the page to cover this.
My wife and I opened a new LLC business in April 2016, filed Form 2553 in December 2016 to be treated as S-Corp, and received our approval Feb 2017 retro to start up date. We would now like to change to a disregarded entity effective Jan 1 , 2023. The step by step outline above and templates are very helpful. Thanks you.
There is a very small net asset value (a cargo trailer which has been depreciated and a checking account with no liabilities) in the LLC. I am confused if the change from Sub-S to Disregarded creates a “distribution of the net assets” for tax purposes and if anything needs to be reported as part of the final 1120-S to be filed this year. The LLC legal entity will remain open and title to assets will be unchanged. If you can provide any clarity, or point me to the correct IRS guidance that would be helpful. Thanks
Hi Daryl, this isn’t something we can comment on as we’re not a tax firm. I recommend speaking to an accountant or two. And to note one thing, you mentioned “we” and “disregarded entity”. If you have a Multi-Member LLC, there is no such thing as a disregarded entity. A disregarded entity only applies to a Single-Member LLC. Also, instead of marking 1120-S as “Final return”, you’d instead select “S election termination”. And on Schedule K-1, select “Final K-1” at the top. Hope that helps.
Matt,
Regarding the “Taxable year for which revocation will be effective;” and “Postmark date:” – My understanding from the IRS website at https://www.irs.gov/forms-pubs/revoking-a-subchapter-s-election, under “Due Date of Revocation” is that the revocation can be made after the start of a calendar year, for that calendar year, so long as it’s received before the 16th day of the 3rd month of the after the first day of the effective calendar year. Per the IRS website, “If revoking effective the first day of the tax year, the revocation is due by the 16th day of the third month of the tax year.” So if I want to revoke S Corp status effective January 1, 2021, as long as they receive it by March 16, 2021 it will be effective for the January 1, 2021 calendar year.
Is this understanding correct? I’m asking for clarification because the postmark date paragraph above says the letter must be postmarked before the date you want your revocation to take effect.
Thanks for you help!
Hi Keith, apologies for the slow reply. We got backed up. Yes, if you want to revoke the S-Corp status effective 1/1/2021, the envelope must be postmarked by 3/15/2021. We’ve update the paragraph above on the page to further clarify.
Sole member LLC that elected S Corp status in 2011. Plan to revoke S Corp election and I’ve already terminated my LLC with the TX Sec of State since I don’t live in TX or have an office in TX anymore. I will be a Sole Proprietor starting January 1, 2021. My question is “Do I fill out and file Form 8832?” My understanding is if the LLC wants to change to a disregarded entity is why you fill out Form 8832; however, my LLC has been terminated. Please advise. Thanks.
Hi Elizabeth, you don’t need to revoke the S-Corp election for the LLC. Since the LLC has already been terminated, you can just file a final Form 1120S. Hope that helps.
Thanks Matt. I found the information on your site very helpful and I appreciate your prompt reply. I had marked the 1120S and the K-1 as final. I also checked the box for S Corp termination box on the 1120S. Do I need to do anything about the EIN? I won’t have any employees as a sole proprietor.
Hi Elizabeth, that is wonderful to hear. You’re very welcome! You can deactivate the EIN after the final return has been filed.
Hi Matt,
I’m sort of in the same boat as Elizabeth. My Husband & Wife LLC was teminated with TX Sec of State on 7/1/22. Anticipating the termination, we filed an 1120-S for 2021 on 4/16/22 and checked “S-Election Termination” on the 1120-S, as well as “Final K-1” on Schedule K-1. We DID NOT check the “Final Return” box. Also, we never filed the formal S-Corp Revocation and 8832 out of ignorance. What do we do now? Do we need to file another 1120-S with “Final Return” checked? And if so, should it be a 2022 1120-S or an amended 2021 1120-S? Since our LLC technically existed for 2 1/2 months after the 2021 1120-S, how should we handle that? Sorry so long – in hindsight, we never should have tried to handle all the LLC financials without an expert !
Hi Cathy, so you just have an S-Corporation termination, not a revocation. And you filed an 1120S in 2022 for the 2021 tax year, so that is fine. However, because the entity still existed for part of 2022, you should file an 1120S (marked final) this year for the 2022 tax year. Hope that helps!
Sole owner LLC thought we’d grow. Changed to S Corp. Had a change of heart and Sent a letter of revocation in Nov. Didn’t file it completely correct, I believe. Never got any reply from IRS, so my status is unclear. I really don’t want to revert to a C Corp. What can I do to just get my LLC status back?
Hi David, the delay in response time is due to the pandemic. We can’t say what the status of the S-Corp revocation is, but we recommend calling the IRS and checking the status. You can use the Advanced Business Department (aka Business Accounts Line) at 800-829-0115. There is an option for “Corporations”. And Option 1 for English > Option 3 for all other businesses notices or letters. It’s best to call at 7am – 8am for the shortest hold time. The earlier, the better. Hope that helps. And feel free to share your findings if you’d like.
Hey Matt,
I have an single member LLC and I made an election to be taxed as an S-Corp in 2019. A non-resident investor wants to buy %51 percent of my S-Corp but I know that according to rules it is not possible to own a S-Corp as a non-resident.
I wanna know:
1- If it is possible to revoke S-Corp status and sell %51 shares to a non-resident investor?
2- Will revoking a S-Corp and selling shares require a new EIN?
Thanks in advance,
Amber
Hi Amber, revoking the S-Corp will not require a new EIN, however, you may not be able to revoke the S-Corp election because of the IRS’s “60-month rule” (the S-election can’t be changed for 60 months). The two exceptions are 1) if you made the S-Corp election at the time the LLC was formed and 2) if there is change in ownership greater than 50%. However, it’s still up to the IRS to grant the revocation. However, I’m not sure if selling 51% of the LLC membership interest (S-Corp stock in the IRS’s eyes) counts. I’d recommend calling the IRS and asking to speak to the Advanced Business Department or calling 800-829-0115 and pressing the prompt for “corporations”. Call as early as you can to get through and have a short waiting time. I hope that helps.
Hey Matt,
I have an single member LLC and we made an election to be taxed as an S-Corp in 2018. Last year was horrible for our business and I don’t think it makes sense to be taxed as a S Corporation anymore.
Do I have to wait the 60 months or can I revoke it by filling the forms with the IRS & state of California? Curious to get your thoughts and thank you.
Sincerely,
Dave
Hi Dave, it depends on if your LLC meets one of the exceptions (more than 50% of ownership changed or the the S-Corp election was made by a newly formed LLC and the S-election was effective on the date of formation). If you don’t meet one of those exceptions, you can still attempt to file the revocation and include an explanation letter. We can’t guarantee it’ll work, but the IRS may make an exception besides the two official exceptions. If that is the case, and you do make that request, please do feel free to follow back up here. I’m very curious how you make out. Hope that helps.
HI Matt,
I like what you wrote but i still need some clarity. Let’s use this fact pattern i have as an example.
I formed an multi member LLC in 2019 and elected to be taxed as an S Corp by filing form 2553 with my initial return. My S Corp election is the same as my date of incorporation, Jan 1, 2019.
Now in 2021 say I decide that I want to revert to my default classification of being taxed as a partnership. Can I elect to revert by filing form 8832 in addition to the other 2 items above or would I be limited by the 60 month rule?
Now let’s say that it is permissible to file form 8832. My next question is in regards to part I, line 2a and 2b:
Line 2a – Does filing the form 2553 with the initial 1120s count as filing an entity election and as a Yes for this questions?
Line 2b – Since I’d be filing form 8832 in 2021, would I still mark yes noting that my prior election was an initial classification election as a newly formed entity which was effective on the date of formation?
Kindly, please let me know.
Thank you,
Hi Demetrios, you actually need to file Form 8832 along with the S-Corp revocation or else your LLC’s classification will revert to C-Corporation taxation. This is because of Section 301.7701-3(c)(1)(v)(C) of the Internal Revenue Code. Meaning, when an LLC files Form 2553, it’s as if the LLC first files Form 8832 (electing C-Corp) and then subsequently files Form 2553 (electing for that C-Corp to be taxed under Subchapter S). So if you only revoke the Subchapter S election, the classification as C-Corporation remains.
Regarding Form 8832 (2a), yes. You would select “Yes” for 2a. Regarding Form 8832 (2b), you would select “Yes”. Hope that helps.
HI Matt,
Yes you answered my questions and confirmed what I have researched. I greatly appreciate it.
I just have one last question. Am I still permitted to file form 8832 given the fact that I filed an 1120s in 2019 and will be filing an 1120s in 2020 since I am preparing and submitting form 8832 in 2021? Again, same facts as above in which I initially elected and filed as an S Corp in 2019 which was my initial year of operations. Kindly, please let me know.
Thanks again for your help.
Hi Demetrios, you’re welcome. Yes, you can file Form 8832. You are not limited by the 60-month rule because you meet one of the two exceptions (you made the S-Corp election at the time the LLC was formed). The filing of the 2019 1120-S and the 2020 1120-S (marked “S election termination”) doesn’t impact your ability to file Form 8832 along with your S-Corp revocation. You’ll also want to mark your federal employment tax forms as final. So 2020 Form 940 and Q4 2020 Form 941 (or Form 944). And the same thing applies for your state withholding and employment tax filings. Depending on the payroll company you use, they may be able to mark the employment tax returns final. If not, you can write a letter to the IRS and include it with your S-Corp revocation documents, asking the IRS to close your LLC’s employment tax filing requirements. You’ll need to contact your state Department of Revenue (or equivalent agency) regarding closing the payroll/employment tax filings.
MATT, I HAVE FORMED AN LLC IN 2019. 2019 WOULD BE THE FIRST TAXABLE YEAR FOR THIS LLC. MULTI MEMBER LLC. CAN I REVOKE S CORP STATUS IN 2020, EFFECTIVE 2019. THANK YOU.
Hi Jackson, we’re not sure about this. You’ll need to check with the IRS and/or an accountant.
I had this same question, you must file before the due date of the initial tax return, for example, if your election was make for the 2020 tax year, (1/1/2020) you must file by 4/16/2021. I got this info directly from the IRS website:
“3.13.2.27.9 (01-01-2021)
Request to Withdraw Classification Election”
https://www.irs.gov/irm/part3/irm_03-013-002r#idm139750792481280
Hi Chris, great find! However, that is for Form 8832.
I believe what you’re looking for is on the same page, under 3.13.2.23.15 (01-01-2021) > Revocation of an S-Election: “The revocation must be filed by the 15th day of the third month of the tax year for which it is requested to be effective.” So if you want to revoke as of 1/1/2021, the S-Corp revocation must be postmark-dated by 3/15/2021.
And to answer Jackson’s original question, he couldn’t do what he wanted. He couldn’t file his S-Corp revocation in 2020 and make it effective for 2019. His S-Corp revocation would have needed to be postmark-dated between 1/1/2019 and 3/15/2019 to take effect in 2019. Thanks for your help on this, Chris!
Hi Matt,
I actually am currently trying to do this for a C-Corp, you are correct the S corp rules do state what you’ve mentioned. I would like to use your template you gave us on here, really good btw. Do you know where the legal code resides so I can look it up and change the word doc?Thanks
Chris
Yeah, I actually thought the S-Corp rules and C-Corp rules where interchangeable. You note (IRS code: Section 1362(a)), in your templates, do you know where the rules in regards to C-Corps reside? I think what I posted wasn’t the actual legal standard/code, but out of the IRS manual.
I am attempting to do the same revocation for my C-Corp, any ideas?
Thanks,
Chris
Hi Chris, they are because as far as the IRS is concerned, there’s no such thing as an LLC. But since we focus on LLCs, we took the process and the forms and “LLC-ifyed” them. You’d just need to change the language/words. And you wouldn’t file Form 8832. It’s still the same code reference: Section 1362(a). Also, please see the References box at the bottom of the page (well, below the content, but above the comments). There is an S-Corp revocation overview page on the IRS website. Correct, you did post the IRS manual, which, although long, is often easier to read than the Internal Revenue Code. Also, if were to call the IRS, the representative would be combing through the exact same file ;)
Hi Matt,
Perfect, Thanks for all of your help. That Manual is a really helpful if you take the time to read through it!
Best,
Chris
You’re very welcome Chris! They certainly are. Have a great week ahead :)
Hi Matt, will the IRS approve the revocation retroactive? We are a sole-member LLC with S corp status approved by the IRS for fiscal year 2019. In looking back our LLC does not have enough revenue to warrant S corp filing status due to administrative costs, etc. We had an accountant last year who hastily file the 2553 and the IRS approved by sending a CP261. I have prepared the Revocation letter, consent and form 8832 but I would like to ask the IRS to revoke S corp status as of 1/1/2019. The postmark date however will be today’s date 1/9/2020. What are your thoughts?
Hi Shannon, sorry to hear about that. This is a really good question, but we don’t know the answer. We recommend calling the IRS and asking if it is possible. Feel free to update us with your findings. Thanks.
Did you ever get an answer to this. I always understood that the IRS would not revoke retroactively. They will accept but not revoke. Did you find something different in your search?
Hi Justin, we also now have the same information: it cannot be revoked retroactively.
Thank you!
If you want LLC to be taxed as C Corp after revocation do you still need to file the Form 8832 making that election or will it default to a C Corp upon revocation.
Hi Thomas, if after revoking the LLC’s S-Corp election, you want the LLC to be taxed as a C-Corp, you don’t need to file Form 8832. This is because of Section 301.7701-3(c)(1)(v)(C) of the Internal Revenue Code. Meaning, when an LLC files Form 2553, it’s as if the LLC files Form 8832 (electing C-Corp) and then subsequently files Form 2553 (electing for that C-Corp to be taxed under Subchapter S).
So by revoking the LLC’s S-Corp election (and not filing Form 8832 electing Disregarded/Sole Proprietorship or Partnership taxation), the default will revert back to C-Corp taxation for the LLC. Hope that helps!