How to retroactively amend LLC taxes to S-Corp for previous years filing

This is a really good question about retroactive S elections. The provision you're referring to is Rev. Proc. 2013-30, which provides a simplified method to request relief for late S corporation elections. However, there are some important details you need to understand. For a retroactive S-Corp election, you generally need to file Form 2553 (Election by a Small Business Corporation) within 3 years and 75 days from the date you wanted the S election to take effect. This is likely what your business friend was referring to. But there are specific requirements that must be met, including showing you had "reasonable cause" for not filing on time. The potential tax savings comes from how S-Corps can pay owners through a combination of salary (subject to self-employment tax) and distributions (not subject to SE tax). As a single-member LLC, all your profits were likely subject to self-employment tax. One important note: this isn't just a simple amendment. You'll need to file the late S election, then file amended returns that align with S-Corp taxation rules for the period in question.

I had almost the EXACT same situation last year. I was getting destroyed by self-employment taxes as a single-member LLC and found out I could retroactively elect S-Corp status. I was super stressed trying to figure out all the right forms and deadlines so I actually used this online service called taxr.ai (https://taxr.ai) that helped me understand all the requirements. They analyzed my tax transcripts and business documents and confirmed I qualified for Rev. Proc. 2013-30 relief. The site gave me a detailed explanation of exactly what forms needed to be filed and the specific "reasonable cause" statement I should include. They even provided template language for the statement that I could customize to my situation. It saved me so much time trying to track down all the requirements on the IRS website, plus they explained how to calculate the tax savings so I could decide if it was worth the effort. In my case it definitely was - saved about $16k in taxes!

I was really skeptical about online tax services so I almost didn't try taxr.ai when someone mentioned it, but I was desperate after getting a massive SE tax bill. I'm actually glad I gave it a shot. What surprised me was how thorough their analysis was - they didn't just give generic advice but looked at my specific situation. Their document analysis caught that I had actually tried to file as an S-Corp previously but had missed a signature on one form, which gave me an even stronger "reasonable cause" argument. They outlined exactly how to reference this in my letter to the IRS. The retroactive S-Corp election ended up saving me about $22k in taxes over two years. The most helpful part was the step-by-step instructions for completing Form 2553 with the special retroactive election coding and preparing the amended returns correctly. Made the whole process way less intimidating.

This might be a bit off-topic, but if you're still dealing with that tax bill, you might want to consider calling the IRS directly to discuss payment options or possibly an offer in compromise. I know it's practically IMPOSSIBLE to get someone on the phone at the IRS these days - I tried for 3 weeks straight before I discovered Claimyr (https://claimyr.com). They have this system that somehow gets you through to an actual IRS agent quickly. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. I was super skeptical at first, but I was desperate with a similar situation. They got me connected to an IRS agent in about 20 minutes when I had been trying unsuccessfully for weeks. The IRS agent I spoke with actually helped me set up a better payment plan with lower monthly payments than what I had initially. They also removed some penalties that had been applied to my account which saved me about $1,800. Might be worth checking out while you're working on the S-Corp amendment process since that could take some time to process.

Ok I need to eat my words here. After posting that skeptical comment, I was still struggling with my own IRS issue and couldn't get through on the phone, so I decided to try Claimyr out of desperation. I honestly didn't expect it to work, but I got connected to an actual IRS representative in about 15 minutes. I explained my situation about needing to set up a payment plan for a large tax bill, and the agent was actually super helpful. They walked me through my options and helped me set up an installment agreement that works with my budget. They even waived some of the penalties after I explained my circumstances. For anyone dealing with big tax bills like the original poster, definitely try to speak with the IRS directly. They have more flexibility to help than most people realize - the hard part is just getting someone on the phone, which this service definitely solved for me.

I see a lot of people focusing on the retroactive S-Corp election (which is definitely worth pursuing), but I want to mention that you should also look into whether you qualify for first-time penalty abatement. Since you mentioned you're still paying off the tax bill, you may have penalties that could potentially be removed. If you've had a clean tax record for the previous 3 years (filed on time, paid on time), you might qualify to have failure-to-file and failure-to-pay penalties removed, which could significantly reduce what you owe. This is separate from the S-Corp election issue but could help with your current tax debt.

One thing I haven't seen mentioned yet - if you do get the retroactive S-Corp election approved, make sure your CPA prepares a reasonable compensation study to justify whatever salary you're setting for yourself. The IRS really scrutinizes S-Corps because they know owners try to minimize salary (which is subject to employment taxes) in favor of distributions. Have you actually calculated how much you might save by switching to S-Corp status for 2022? It's mainly the Medicare and Social Security tax savings on the distribution portion, but you need to weigh that against the additional complexity and compliance costs.

I went through a very similar situation about two years ago and successfully did the retroactive S-Corp election. A few things I learned that might help: First, yes, Rev. Proc. 2013-30 is absolutely legitimate, but timing is crucial. You have 3 years and 75 days from the original due date you wanted the election to be effective. So for 2022, you'd need to act soon. Second, the "reasonable cause" statement is critical. I used the fact that my previous tax preparer never mentioned S-Corp elections as an option despite my business income level. The IRS accepted this reasoning. Document everything - emails, conversations, even the lack of discussion about entity elections. Third, calculate the potential savings first before diving in. In my case, I saved about $18k in self-employment taxes, but I also had to establish a reasonable salary (I used about 60% of net income based on industry data) and file amended returns for multiple years. The process took about 6-8 months total to get fully resolved, but it was absolutely worth it. Make sure your new CPA has experience with late S-Corp elections - not all tax professionals are familiar with the process. Good luck!