Revoking SCorp Election made this year - can we go back to SMLLC?

Based on my experience, revoking an S Corp election within the same tax year is certainly possible, but it's not straightforward. The IRS agent gave you good advice about submitting a letter with Form 8832. What's important to understand is that when you initially made the S Corp election, your entity first became a C Corporation for federal tax purposes, then elected S status. Now you want to go back to being treated as a disregarded entity (SMLLC). When you submit your request, make it crystal clear that no tax returns have been filed under the S Corp election yet and emphasize that this is happening within the same tax year. This timing factor is huge and improves your chances significantly. For New Jersey, you'll need to check with them separately since state tax treatment doesn't automatically follow federal. NJ may have their own process for entity classification that's independent of the federal election. The decision between sticking with S Corp or reverting to SMLLC really depends on your client's specific circumstances - income level, payroll requirements, etc. S Corps can offer self-employment tax savings, but come with more administrative requirements.

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I thought Claimyr was total BS but I was desperate after spending 3 days trying to reach the IRS about my LLC tax election. I tried it yesterday and had an IRS agent on the line in 15 minutes. The agent confirmed I could reverse my S-Corp election within the same tax year by sending Form 8832 with a detailed letter, and told me exactly which department to send it to (which wasn't obvious from the form instructions). Still shocked it actually worked. Just got confirmation my fax went through to the right department.

I went through this exact situation last year. If you haven't filed any S-Corp tax returns yet and haven't paid any payroll, you can likely get the S-Corp election revoked. Key points: 1. File Form 8832 checking the box to be treated as a disregarded entity 2. Include a detailed letter explaining that the election was made recently, no returns filed, and the business wants to be treated as if the election was never made 3. Reference Rev. Proc. 2022-19 which provides relief procedures for certain S corporation elections 4. Send via certified mail and keep proof For New Jersey, you'll need to file NJ-REG if you haven't already to ensure proper state tax treatment. NJ generally follows federal classification but requires separate notification. I'd get this done ASAP rather than waiting!

Has anyone dealt with the tax consequences if the IRS accepts the revocation? I'm thinking about revoking my S-Corp too, but I'm worried about how to handle things like the built-in gains tax or other penalties.

I've been through this exact scenario with a client earlier this year. The timing is actually in your favor since you're still within the same tax year. Here's what worked for us: We submitted Form 8832 with a detailed letter explaining that the S-Corp election was made in error and requesting to revert to disregarded entity status. The key was emphasizing that no S-Corp tax returns had been filed and no payroll had been processed under the election. The IRS approved our request within about 6 weeks. What really helped was including a copy of the original S-Corp election acceptance letter and clearly stating that we wanted the entity treated "as if the S-Corp election had never been made." For New Jersey, you'll definitely want to contact them separately. NJ doesn't automatically follow federal changes, so you may need to file additional paperwork there. Honestly, if your client is having serious doubts this early, it's probably worth pursuing the revocation rather than being stuck with an unwanted election for 5 years. The administrative burden of S-Corp compliance isn't worth it if it doesn't fit their business model.