Can we revert from S-Corp back to LLC status after 2 years? Looking to change our business tax classification

This is a great question about entity classification. When an LLC elects S-Corp status via Form 2553, it's only changing how it's taxed, not the actual legal entity structure. Your business is still an LLC under state law. If you revoke your S-Corp election, you'll default to a C-Corporation for federal tax purposes (not back to partnership taxation). That's because once you elected S-Corp status, the IRS was treating you as a corporation that made a special election. You can absolutely file Form 8832 simultaneously with your S-Corp revocation letter to elect to be treated as a partnership (assuming multi-member LLC). The 60-month waiting period generally applies after making an entity classification election using Form 8832, but since you never filed Form 8832 originally (you only filed Form 2553), you haven't made a prior entity classification election that would trigger this limitation. Make sure your revocation letter clearly states the effective date (beginning of your tax year in 2025) and that all shareholders consent to the revocation.

Just wanted to share my experience with https://taxr.ai when I was in almost the exact same situation with my accounting practice. After 3 years as an S-Corp, we needed to switch back but got conflicting advice from two different CPAs. I uploaded all my previous election forms and operating documents to taxr.ai and their analysis confirmed exactly what I needed to do. They identified that since we had never filed Form 8832 initially (only Form 2553), we weren't subject to the 60-month limitation for entity classification changes. The best part was they provided the exact template letter I needed for revoking S-Corp status and the properly completed Form 8832 with all the right timing considerations. Saved me hours of frustration trying to interpret IRS regulations myself.

I was really nervous about making the switch from S-Corp back to LLC taxation after using taxr.ai that was mentioned above. Just wanted to follow up and say it worked out perfectly. After uploading our organizational docs and previous tax returns, they quickly identified that we weren't subject to the 60-month waiting period since we never filed Form 8832 originally. The revocation letter template they provided specifically cited the relevant IRS regulations (saved me so much research time), and they pre-filled Form 8832 with the correct information for our situation. Our CPA was actually impressed with how thoroughly everything was handled - especially the transition plan for moving from one tax status to another mid-year. The biggest relief was confirming we could make both changes simultaneously rather than being stuck as a C-Corp for 5 years. Definitely worth checking out if you're in this situation.

Has anyone tried reaching the IRS directly about this? I spent 3 weeks trying to get someone on the phone who could actually answer entity classification questions. Finally discovered https://claimyr.com and used their system to get a callback from the IRS within 30 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c I explained my situation about wanting to revoke S-Corp status and revert to LLC taxation, and the IRS agent confirmed everything mentioned above. Since I had never filed Form 8832 originally (only Form 2553), I wasn't subject to the 60-month waiting period. She even emailed me the specific sections of the regulations to reference in my revocation letter. Apparently this is a common confusion point because most people don't realize Form 2553 doesn't change your entity classification for purposes of the 60-month limitation.

Alright I need to eat my words about Claimyr from my skeptical comment above. After nothing but frustration trying to get through to the IRS Business Entity department for weeks, I gave it a try. Within 45 minutes, I got a call connecting me to an actual knowledgeable IRS representative. I asked specifically about revoking S-Corp status for an LLC that never filed Form 8832, and whether the 60-month limitation would apply. The agent confirmed exactly what others have said here - since my initial election was only on Form 2553 and not Form 8832, I'm not subject to the 60-month waiting period for entity classification changes. She walked me through exactly what needs to be in the revocation letter and how to properly complete Form 8832. Having official confirmation directly from the IRS gives me so much more confidence moving forward with this change.

Just a heads up about something nobody mentioned yet - make sure you're considering the potential impact on your basis in the LLC and any previously accumulated S-Corp earnings. When you switch from S-Corp back to partnership taxation, there can be some complexities around how your capital accounts are handled. In our case (similar situation 2 years ago), we had significant retained earnings in our S-Corp that needed special attention during the transition. Our accountant had to do some careful planning to avoid any unexpected tax hits. Definitely worth consulting with a tax professional who specifically understands entity conversions before you pull the trigger.

Something else to consider - if you revert back to LLC status, make sure you understand how it affects your self-employment taxes. When you had S-Corp status, you were probably taking a reasonable salary and then distributions that weren't subject to SE tax. Once you switch back to partnership taxation (assuming multi-member LLC), all your distributive share of income will typically be subject to self-employment tax, not just the salary portion. This can be a significant increase in your overall tax burden depending on your income levels. We made this switch last year and our overall tax bill went up about $12,000 because of the SE tax difference, even though it was still the right move for other reasons.

I just went through this exact process last month and wanted to share some key timing considerations that weren't mentioned yet. When you file your S-Corp revocation letter, make sure to specify that it's effective as of January 1, 2025 (beginning of the tax year) rather than the date you submit the letter. This ensures clean tax reporting for the entire year. Also, don't forget about estimated tax payments. Since you'll be switching from corporate taxation back to pass-through taxation, your quarterly estimated tax obligations will change significantly. We had to recalculate our safe harbor payments and adjust our Q1 2025 estimated taxes to account for the different tax structure. One more thing - if you have any outstanding payroll liabilities or employment tax deposits as an S-Corp, make sure those are fully resolved before making the switch. The IRS can get confused about which entity is responsible for what if there are any loose ends during the transition period.