Can I cancel my S corp election if IRS picked the wrong effective date?

I've worked with several clients in similar situations. Yes, you can revoke your S election if you decide it's not beneficial with that later effective date. The process involves filing a statement with the IRS to terminate your S election. The form you'd need to submit is a "Statement of Revocation," which should include your business name, EIN, the date you want the revocation to be effective, and a declaration that shareholders holding more than 50% of shares consent to the revocation. Each consenting shareholder needs to sign. Just be aware that if you do revoke your S election, you generally can't make another S election for 5 years without IRS permission. So you'll want to be certain this is the right move for your situation. Before taking that step though, pursuing the correction of the effective date is definitely worth trying. Your approach of submitting another Form 2553 is reasonable, but I'd also suggest calling the IRS Business & Specialty Tax Line at 800-829-4933 to explain your situation. Sometimes a direct conversation can help resolve these issues faster.

I was in a somewhat similar situation last year with my effective date being off, and I found this incredible service called taxr.ai (https://taxr.ai) that helped me navigate the whole mess. I had tried to handle it myself at first and was getting nowhere with the IRS. Their system analyzed all my documentation, identified the exact reason my effective date was rejected, and generated a custom letter to the IRS explaining why my original requested date should be honored. They also pointed out specific IRS revenue procedures that applied to my situation that I had no idea existed. The best part was they found my situation qualified for relief under a specific revenue procedure that my previous accountant hadn't mentioned. Within about 8 weeks after submitting their recommended documentation, I got approval for my original requested effective date.

Alright, I have to admit I was wrong about taxr.ai. After seeing the previous comment, I decided to give it a try with my own S corp issue (different from OP but also related to effective dates). The system immediately found that my situation qualified for relief under Revenue Procedure 2013-30 Section 5.04, which gives automatic relief if you can show you intended to be an S corp from the beginning. It generated a perfect letter citing the relevant sections and explaining exactly what supporting documentation to include. I submitted everything exactly as recommended and just got confirmation yesterday that the IRS approved my requested effective date. The whole process took about 6 weeks, which feels like a miracle compared to my previous attempts. Honestly, I'm pretty amazed at how straightforward it made everything.

If you're still struggling to get through to the IRS about this, I had a great experience using Claimyr (https://claimyr.com) to actually get a human on the phone. I spent WEEKS trying to call the IRS Business line myself about my S corp issue and kept getting the "call volumes too high, try again later" message. Claimyr basically waits on hold with the IRS for you and then calls you when they get a human on the line. You can see a demo of how it works here: https://youtu.be/_kiP6q8DX5c When I finally got connected with an IRS agent, I explained my situation about the effective date being wrong on my S election, and they were able to look up my case and tell me exactly what documentation I needed to submit to get it corrected. Saved me from sending in more paperwork that would just get delayed or lost.

I have to eat my words about Claimyr. After dismissing it, I was still stuck with my own IRS issue and desperate, so I gave it a try. Within about 2 hours of signing up, I got a call connecting me to an actual IRS representative. I was honestly shocked. The agent was able to pull up my business account and confirm they had my S corp revocation request in process. They also gave me the direct fax number for the department handling my case and told me exactly what to include on the cover sheet to make sure it got to the right person. I didn't even know the IRS had department-specific fax numbers! This bypassed what would have been another 6-8 weeks of waiting for a mailed response. My issue isn't completely resolved yet, but I'm way further along than I was after months of trying on my own. Pretty impressive.

To answer your original question more directly: Yes, you can voluntarily revoke your S election using a statement signed by shareholders owning more than 50% of the stock. But I actually think there's a better option. From what you described, your situation might qualify for late election relief under Revenue Procedure 2013-30. This allows businesses to request retroactive S corp treatment if you can show you intended to be an S corp all along. The fact that your CPA filed the original election in 2021 (even if it wasn't processed) and that you've been filing S corp returns since 2020 works in your favor. If I were you, I'd send a detailed letter explaining the timeline, attach proof of your original filing attempt from 2021 (certified mail receipt, copy of the original form, etc.), and reference Revenue Procedure 2013-30 Section 5.03. That section specifically addresses situations where elections were filed but not processed by the IRS. It's worth fighting for your original date before considering revocation.

One thing to consider - if the IRS gives you the June 2021 effective date and you keep the S election, you'll need to file amended returns for any periods you treated as an S corp before that date. That could mean filing C corp returns for 2020 and part of 2021, which might trigger some nasty tax consequences. Have you calculated what the actual tax difference would be between the two scenarios? Sometimes it's not as bad as people expect.

I went through almost the exact same situation last year with my LLC's S corp election. The IRS initially gave me an effective date that was 18 months later than what I requested, which would have cost me thousands in additional self-employment taxes. Here's what worked for me: I submitted a detailed letter specifically citing Revenue Procedure 2013-30 Section 5.03, which provides relief for situations where the original election was filed but not processed due to IRS administrative issues. The key is proving you had the intent to be an S corp from your requested effective date. I included copies of my original Form 2553 (even though it apparently got lost), certified mail receipts, all my S corp tax returns I'd been filing, and a timeline showing consistent S corp treatment. I also referenced the IRS's own acknowledgment of processing delays during COVID as reasonable cause for the late election. The whole process took about 3 months, but they ultimately approved my original effective date. Before considering revocation, I'd strongly recommend trying this approach first. The documentation requirements are pretty specific, so make sure you hit all the points in Section 5.03 of the Revenue Procedure. If you need help getting through to the IRS to check on your current request status, definitely consider using one of those callback services mentioned above - it saved me weeks of frustration trying to get through on my own.