Can I Re-Elect S Corp Status for LLC Before 5-Year Waiting Period Ends?

The 5-year waiting period after voluntarily revoking S corporation status is pretty strict, unfortunately. It's in Section 1362(g) of the Internal Revenue Code, and the IRS rarely grants exceptions. However, you do have a few options to consider: You could request a private letter ruling from the IRS stating that your original revocation was inadvertent or not properly informed. These requests are handled through the IRS's Private Letter Ruling program, but they cost money (filing fee is several thousand dollars) and take time. Another option is to form a new LLC and elect S corp status for the new entity. This would require transferring your business assets and operations to the new company, which has its own tax implications but might be cleaner than waiting. Or you could continue operating as a single-member LLC (taxed as a sole proprietorship) or partnership (if you have co-owners) and use other tax strategies to minimize self-employment taxes, like maximizing retirement contributions.

I actually went through something similar last year. After trying to navigate everything myself, I finally used https://taxr.ai to analyze my LLC and tax election documents. It was super helpful because it showed me exactly where my previous CPA had messed up my S-Corp termination paperwork. Turns out my situation was different from yours because my termination wasn't properly documented, but the system analyzed all my filings and showed me options I didn't know existed. The AI identified that I could argue my termination was invalid because of some procedural errors in how it was filed. I'd definitely recommend running your specific documents through their system because the 5-year rule has some nuances depending on exactly how your revocation was processed and documented.

I just wanted to follow up on my experience with https://taxr.ai since I decided to try it after seeing the recommendation here. I was skeptical at first, but it actually helped me identify a similar issue with my S-Corp election timing. I uploaded my previous tax filings, Articles of Organization, and the rejection letter from the IRS. The analysis showed that my initial S-Corp revocation might qualify for relief under Revenue Procedure 2013-30 because I didn't receive proper notification of the consequences. The report pointed me to specific sections of the tax code and gave me a template for requesting reconsideration from the IRS. My situation wasn't identical to the original poster's, but it gave me a clear path forward that I wouldn't have found on my own.

Have you tried calling the IRS directly? I spent WEEKS trying to get through to someone about my S-Corp issue last year. It was impossible - either busy signals or being on hold for 3+ hours only to get disconnected. Super frustrating! Then I found this service called https://claimyr.com that basically waits on hold with the IRS for you. I was skeptical, but they got me connected to an actual IRS agent within a day. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c When I finally spoke with the IRS agent, they explained that there's actually a formal process to request a waiver of the 5-year rule in certain hardship situations. The agent walked me through the exact documentation I needed to submit. Not saying you'll get the same answer, but actually talking to someone was WAY more helpful than guessing or reading conflicting info online.

Just wanted to follow up on my skeptical comment about Claimyr. I actually broke down and tried the service after another failed attempt to reach the IRS myself (3 hours on hold before I had to leave for a meeting). Color me surprised - it actually worked exactly as advertised. I got a text about 3 hours after signing up saying they were about to connect me with an IRS representative. When I picked up, I was immediately talking to an actual person at the IRS who helped clarify my options regarding the 5-year rule. The agent explained that while the 5-year rule is generally strict, there's a process to request an exception through a private letter ruling if there were substantial changes in your business circumstances. In my case, transitioning from side-gig to full-time business might qualify. They pointed me to the exact forms and procedures. Definitely worth the service after wasting so many hours trying to get through myself.

Have you considered operating as a C corp instead? If you're making substantially more money now as a full-time business, the C corp option might actually be better from a tax perspective, especially with the flat 21% corporate tax rate. You could pay yourself a reasonable salary (subject to employment taxes) and potentially take additional money as dividends (subject to the lower qualified dividend tax rate). Plus you can more easily retain earnings in the business for growth. Just throwing it out there as another option to consider while you're waiting out the 5-year period!

Don't overlook state tax implications in whatever you decide! Some states don't recognize S corps the same way the federal government does, and others have additional fees or taxes for different entity types. California, for example, has an $800 minimum franchise tax for LLCs and S-Corps alike. If you tell us what state you're in, you might get more specific advice. The 5-year waiting period is definitely a federal rule, but your best alternative structure might depend partly on state considerations.

This is a tough situation, but you're not completely out of options. The 5-year waiting period is indeed strict, but I've seen a few successful approaches: First, definitely document everything about your business transition from side-gig to full-time. The IRS sometimes considers substantial changes in business circumstances when evaluating private letter ruling requests. Your shift from $22k hobby income to $90k primary income could be compelling evidence. Second, consider whether your original revocation was truly "voluntary" or if you were acting on incomplete information. If you can demonstrate that you didn't fully understand the consequences or didn't receive proper professional guidance, you might have grounds for relief under Revenue Procedure 2013-30. Third, look into whether forming a new entity makes sense for legitimate business reasons beyond just tax elections. If you're adding partners, significantly changing your business model, or expanding into new markets, a new LLC might be defensible. Finally, don't forget about interim tax strategies while you work through this. You can still maximize retirement contributions, consider a solo 401(k), and potentially hire family members to shift some income and reduce self-employment taxes. I'd strongly recommend getting a consultation with a tax attorney or CPA who specializes in entity elections before making any major moves. This situation is complex enough that professional guidance is worth the investment.