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

Would it make sense to maybe form a completely new LLC entity instead? Could they start fresh with a new EIN and elect S corp status for that one?

That's a good question. The IRS looks at the "substance over form" principle when evaluating new entities. If the new LLC is essentially the same business with the same ownership, they could potentially treat it as a continuation of the old entity and deny the S election. Some taxpayers have succeeded with this approach, but it comes with risks. If the IRS determines the new entity was created primarily to circumvent the 5-year rule, they might disallow the election retroactively, potentially creating tax issues down the road.

How long did it take them to give you their analysis? I'm on a bit of a timeline with my quarterly filings coming up.

Are they actual CPAs? I'm concerned about getting advice from anyone who isn't properly licensed to provide tax guidance, especially for something this technical.

The analysis took about 48 hours for my case, but they said complex situations might take a bit longer. Still way faster than scheduling with a traditional CPA. They have tax attorneys and CPAs on staff that review everything, but they use technology to do the initial analysis. That's how they're able to process things faster and cheaper than traditional firms. All their recommendations are reviewed by licensed professionals before they're sent out.

How much did this Claimyr thing cost? Seems like it could be worth it because I've been avoiding calling the IRS.

This sounds sketchy. How does it even work? I can't imagine the IRS is cool with some third-party service manipulating their phone system.

They have different options depending on which IRS department you need to reach. For business tax issues it was actually very reasonable - less than what I bill for an hour of my own time, and it saved me literally half a day of waiting on hold. It's completely legitimate - they don't "hack" anything. They just use automated technology to stay on hold, and when a real agent answers, they conference you in. The IRS doesn't even know you used the service. You're still the one talking directly to the IRS agent. I was skeptical too but after wasting an entire afternoon on hold, it was absolutely worth it.

I hadn't actually considered that option. How complicated would it be to switch from LLC to C corp? And then eventually to S corp once my waiting period is up?

The transition from LLC to C corp is relatively straightforward. You'd file Form 8832 to elect to be treated as a corporation for tax purposes. Your state may have additional requirements for converting an LLC to a corporation. Once the 5-year waiting period is up, you can file Form 2553 again to elect S corporation status. The main considerations during the C corp period would be managing your salary vs. corporate profits to optimize tax treatment. You'd want to avoid accumulating too much cash in the corporation to prevent accumulated earnings tax issues.

That's actually a viable approach. The key is demonstrating that your revocation was based on faulty information or misconceptions about how S corp status would affect your tax situation. The IRS has been somewhat receptive to these arguments when there's evidence you weren't primarily seeking tax advantages.

This is really solid advice, Samuel! The point about self-employment tax is huge - I hadn't fully calculated that impact. At $180k, we're talking about a significant difference between LLC and S corp treatment. I'm curious about your suggestion to pursue multiple approaches simultaneously. Wouldn't filing for a new entity while also requesting a private letter ruling for the existing entity potentially conflict with each other? I'm worried the IRS might view that as contradictory or undermining the "reasonable cause" argument. Also, do you have any experience with the documentation process for these situations? I'm trying to piece together what I was thinking back in 2023, but I didn't keep great records of my research process at the time.

Hunter, you raise a great point about potential conflicts between approaches. You're absolutely right to be cautious about that. I should have been clearer - I meant exploring these options sequentially or with careful coordination, not literally filing everything at once. The general strategy would be: Start with the PLR request since that addresses your current entity directly. While that's pending, you can research the new entity approach as a backup plan. Only pursue the new entity route if the PLR gets denied or if your tax advisor determines it's a stronger option given your specific circumstances. Regarding documentation, don't stress too much about perfect records. The IRS understands that small business owners don't always document every decision like a Fortune 500 company. Focus on reconstructing your reasoning: What was your income level? What online resources did you reference? What were your business goals at the time? Even recreating searches or finding similar articles from 2023 can help demonstrate your thought process was reasonable. You could also check if you have any emails, text messages, or even social media posts from that time period that show you were researching the decision. Sometimes we forget about casual conversations or informal advice that influenced our thinking. The key is showing the IRS that you weren't trying to game the system - you were a part-time business owner making the best decision you could with the information available.

Hunter, that's a really good point about potentially conflicting approaches. You're absolutely right to be cautious about that. I should clarify - I didn't mean pursuing both simultaneously, but rather evaluating both options and choosing the strongest path forward. If you go the PLR route for your existing entity, you'd want to focus entirely on that and avoid any actions that could undermine your "reasonable cause" argument. Creating a new entity while claiming your original revocation was inadvertent could definitely send mixed signals to the IRS. Regarding documentation, don't worry too much about not having perfect records from 2023. The IRS understands that most small business owners don't document every research step. What you can do now is: 1. Try to recreate your research path - what websites, articles, or forums did you likely consult? 2. Look at your 2023 tax situation objectively - the numbers alone (minimal business income + full-time W-2) tell a compelling story 3. Check if you have any emails or texts from that period discussing the decision Sometimes bank records, business expenses, or even social media posts can help establish your business circumstances and mindset from that time period. The goal is just showing you made a rational business decision, not that you're a tax planning expert. The self-employment tax savings alone probably justify the PLR costs, so I'd lean toward that approach for your situation.

Hunter, you raise a great point about potential conflicts between multiple approaches. You're right to be cautious - the timing and framing matter a lot here. The key is sequencing rather than truly simultaneous filing. I'd recommend starting with the private letter ruling request first, as it addresses your existing entity and establishes your good faith effort to work within the system. If that gets rejected or takes too long, then you could explore the new entity route as a fallback. Regarding documentation, don't worry too much about not having perfect records from 2023. The IRS understands that small business owners don't always document every decision like corporations do. Focus on recreating your thought process: - What was your income situation in 2023? - What resources did you consult (even if just general online articles)? - What were your business projections at the time? - When did your circumstances materially change (quitting your job, business growth)? You can even reference the types of general guidance that were commonly available in 2023 about S corp elections for small businesses. The goal is showing you made a reasonable decision given the information and circumstances you had, not that you followed some perfect process. I'd also suggest reaching out to that taxr.ai service others mentioned - they might be able to help you structure the documentation in a way that strengthens your reasonable cause argument.

Hunter, you raise an excellent point about potential conflicts between pursuing multiple approaches. You're absolutely right to be cautious about that. Let me clarify what I meant by the simultaneous approach. The key is sequencing and documentation. I'd recommend starting with the private letter ruling request for your existing entity first, as that's the most straightforward path given your circumstances. Document that process thoroughly - your request, the reasoning, any correspondence. Only if that approach fails or faces significant delays would I then consider the new entity route. And if you do go that direction later, the documentation from your PLR attempt actually strengthens your position by showing you exhausted other options first. Regarding documentation of your 2023 decision-making: Don't stress too much about perfect records. The IRS understands that small business owners don't always document everything like large corporations do. What you can reconstruct is valuable - try to remember what websites you visited, what general advice you found, maybe even search your browser history if possible. Even rough notes about your thought process at the time can help establish the legitimacy of your decision. The important thing is showing your decision was based on your business circumstances then ($40k side income + full-time job) versus your situation now (full-time $180k business). That change in circumstances is really the strongest part of your case.

Hunter, great questions! You're right to be cautious about potential conflicts. I should clarify - I wouldn't recommend pursuing both simultaneously in the same tax year. Rather, I'd suggest evaluating both options thoroughly upfront and then choosing the strongest path forward. The private letter ruling route is typically the more conservative approach if you have solid documentation of your original decision-making process. The new entity approach carries more risk but might be faster if successful. For documentation, don't stress too much about perfect records. The IRS understands that small business owners don't always keep detailed decision logs. Try to reconstruct your thought process: What was your income level? What resources did you consult? Were there specific articles or discussions that influenced you? Even browser history from that period could be helpful if you still have access to old devices. The key is demonstrating that reasonable people in your situation would have made similar decisions based on available information. Your story of having a $40k side business while earning $115k in W-2 wages is actually quite compelling - most tax guidance would indeed suggest S corp election wasn't beneficial in that scenario. I'd recommend scheduling a consultation with a tax attorney who specializes in S corp elections before making any final decisions. The upfront cost is worth it given the potential tax savings over the next few years.

Hunter, that's a really astute concern about potential conflicts between pursuing multiple approaches. You're right to be cautious about that. The key is timing and how you structure the approaches. If you pursue the private letter ruling first and document it properly, you can always note in any future new entity filing that you attempted to resolve the issue through proper channels first. This actually strengthens your position by showing good faith effort to work within the existing framework. For documentation, don't worry too much about perfect records from 2023. The IRS understands that small business owners don't always keep detailed decision logs. What you can do now is create a timeline of events: your income levels, employment status changes, any articles or resources you remember consulting, conversations with family/advisors, etc. Even approximate dates and general sources help establish your decision-making process. I'd also suggest checking your browser history, email searches, or even old tax software if you used any - sometimes you can find breadcrumbs of your research from that time period. The goal isn't to recreate everything perfectly, but to show you were making informed decisions based on your circumstances at the time. @Samuel, what's your take on the timing aspect? Would you recommend starting with the PLR first, or is there value in exploring both options simultaneously from the beginning?

You raise a good point about potential conflicts between approaches. I should clarify - I'd recommend exploring them sequentially rather than simultaneously to avoid any mixed signals to the IRS. Start with documenting your 2023 decision-making process first. Even if you didn't keep formal records, try to reconstruct what you were researching. Check your browser history if possible, look for any emails or texts where you discussed the decision, even informal conversations with family/friends about the business finances. The IRS understands that small business owners don't always document everything formally. For the private letter ruling vs. new entity question - I'd actually suggest getting a preliminary assessment of your PLR chances before considering the new entity route. If a tax professional thinks your reasonable cause argument is strong, stick with that approach. The new entity option is really more of a backup plan if the PLR route looks unlikely to succeed. The key is presenting a coherent narrative: you made a reasonable business decision in 2023 based on your circumstances and available information, and now those circumstances have fundamentally changed. That story needs to be consistent regardless of which technical approach you ultimately pursue.

Good point about potential conflicts, Hunter! You're right to be cautious about pursuing contradictory strategies simultaneously. Let me clarify what I meant: The timing would be sequential, not parallel. You'd start with the PLR request for your existing entity first, since that's the most direct path and preserves your current business structure. Only if that gets denied or takes too long would you consider the new entity route as a backup plan. Regarding documentation, don't stress too much about having perfect records from 2023. The IRS understands that small business owners don't always maintain extensive documentation of their research process. What you can do now: 1. Recreate your thought process by finding similar articles/resources that were available in 2023 2. Document your income levels and employment status from that time period (tax returns, W-2s, etc.) 3. Write a detailed narrative of your business circumstances then vs. now The key is showing the dramatic change in your situation - part-time side business vs. full-time operation. That alone makes a compelling case for why your 2023 decision was reasonable but no longer applies. @8bffac711774 might have additional thoughts on the documentation piece since they seem to have been through this process before.