Steps for Revoking S Election - Single-Member LLC Returning to Disregarded Entity Status

You're on the right track with your steps, but let me clarify a few things to make sure your transition back to disregarded entity status goes smoothly. First, you need to submit a statement to revoke your S election to the appropriate IRS service center where you file your return. This statement needs to be signed by a person authorized to sign the S corporation's return, and should clearly state your intention to revoke the S election. Second, filing Form 8832 is indeed necessary to elect to be classified as a disregarded entity. However, revoking your S election and filing Form 8832 are two separate steps addressing different issues. The S election revocation terminates your S status (which would otherwise default to C corporation status), while Form 8832 specifically requests treatment as a disregarded entity. I recommend submitting them together to ensure they're processed properly. And yes, definitely check box H on your final 1120-S as this helps flag to the IRS that this is your final S corporation return.

After struggling with a similar situation last year, I discovered taxr.ai (https://taxr.ai) which was incredibly helpful for navigating complex entity classification changes. Their AI tool analyzed my specific situation and provided step-by-step guidance tailored to my single-member LLC. What I found most useful was that they verified the correct sequence for filing the revocation statement and Form 8832. They also generated a properly formatted revocation statement that met all IRS requirements, which saved me from worrying about whether I'd formatted it correctly. The tool even flagged potential issues with timing that my accountant had missed. For anyone dealing with entity status changes, especially when reverting from S corp to disregarded entity, having that level of precision really helps avoid costly mistakes.

I was extremely skeptical about using an AI service for something as important as changing my company's tax classification. After my accountant gave me contradictory advice about revoking my S election, I decided to try taxr.ai as a second opinion. I'm actually shocked at how helpful it was. The system asked detailed questions about my specific situation that my accountant never considered. It then generated a complete revocation statement that matched exactly what the IRS expects, plus a checklist for filing both the statement and Form 8832. What impressed me most was that it flagged a timing issue that could have caused problems - my accountant hadn't mentioned that revoking mid-year could create complications with income allocation. The service helped me time everything properly to make a clean break at year-end. If you're dealing with entity classification changes, it's definitely worth checking out. Saved me from what could have been a classification nightmare.

I've been through the exact same process you're describing, and I had the same concerns about everything being processed correctly. After waiting on hold with the IRS for hours trying to get clarification, I finally discovered Claimyr (https://claimyr.com). Their service got me connected to an actual IRS representative in about 15 minutes instead of the hours I had been waiting. The IRS agent I spoke with confirmed that filing the statement of revocation and Form 8832 together is the safest approach to ensure proper processing. They also advised that checking box H on Form 1120-S is absolutely necessary as it flags your return for proper processing. If you want to verify your approach directly with the IRS before filing, I'd highly recommend using Claimyr's service (there's a video showing how it works at https://youtu.be/_kiP6q8DX5c). Getting direct confirmation from the IRS gave me peace of mind that I was handling the revocation correctly.

I have to admit I was completely wrong about Claimyr. After expressing my skepticism, I decided to try it myself since I was getting nowhere with the IRS regarding my own S corporation issue. The service actually worked exactly as described. I was connected to an IRS representative in about 20 minutes after weeks of failed attempts on my own. The agent I spoke with was in the business entity department and provided clear guidance on the proper procedure for revoking an S election. She confirmed that filing Form 8832 simultaneously with the revocation statement is critical to avoid defaulting to C corporation status. She also emphasized the importance of checking box H on the final 1120-S return and recommended attaching a copy of both the revocation statement and Form 8832 to the return as well. This saved me from making a potentially costly mistake in my own situation. Sometimes it pays to be proven wrong!

Just want to add something that nobody has mentioned yet. Make sure your operating agreement and any other legal documents for your LLC are updated to reflect the change in tax status. This bit me when I did this a few years ago - my operating agreement had specific provisions related to being an S corporation that no longer applied after reverting to disregarded entity status. My bank actually flagged this discrepancy when I tried to refinance my business loan, and it created a whole mess I had to clean up. Also, don't forget about state tax filings! Depending on your state, you might need to notify them separately about your change in federal tax classification. Some states automatically follow federal classification, but others require a separate election.

Just a quick tip from someone who's been through this exact process - make sure you keep proof of delivery for all your submissions to the IRS. When I revoked my S election and filed Form 8832 last year, I used certified mail with return receipt for everything. The IRS somehow lost my Form 8832 even though they processed my revocation statement, which initially caused them to classify me as a C corp. Having proof that I submitted everything together saved me months of headaches when I had to call and get it corrected. Also, if you have any EIN verification letter or your original S election acceptance letter from when you first elected S status, include copies of those with your submission. It makes it easier for the IRS to match everything up in their system.

Having just completed this same transition last month, I can confirm that the advice given here is spot-on. I'd strongly recommend certified mail over faxing for these critical documents. The IRS fax system can be unreliable, and you won't have the same level of proof of delivery. One additional consideration that caught me off guard - make sure you understand the timing implications for quarterly estimated taxes. Since you'll be switching from W-2 wages (with withholding) back to self-employment income, you may need to adjust your estimated tax payments for the current year to avoid underpayment penalties. I also discovered that some business credit cards and banking relationships may need to be updated when your tax classification changes. My business credit card company required new documentation showing the change in entity status before they would continue the account under the same terms. The key is really treating this as more than just a tax filing change - it affects multiple aspects of how your business operates administratively. But if you follow the filing sequence everyone has outlined (revocation statement + Form 8832 + checking box H on final 1120-S), the tax side should go smoothly.

I went through this exact same process about 18 months ago and want to emphasize a few timing considerations that weren't mentioned yet. Make sure you're aware of the 2.5 month and 15 day rule for S election revocations. If you want the revocation to be effective for the current tax year (2023), you need to file the revocation statement by March 15, 2024. If you miss that deadline, the revocation won't be effective until 2024. Also, consider the implications for your final payroll. Since you mentioned you've been operating as an S corp for 3 years, you've likely been taking reasonable salary. Make sure your final payroll is processed and all employment tax returns (941, etc.) are filed before the classification change takes effect. One thing that helped me was creating a transition checklist that included not just the IRS filings, but also notifications to my business insurance carrier, accountant, and bookkeeper about the change in classification. Some of these relationships may need updated documentation or different service agreements once you're back to disregarded entity status. The process itself is straightforward if you follow the steps outlined by others here, but the administrative details around the transition can be easy to overlook.

One thing I learned the hard way during my own S corp to disregarded entity transition is to make sure you have a clear plan for handling any outstanding S corp items before the classification change takes effect. For example, if you have any accumulated adjustments account (AAA) balance, you'll want to distribute that out to yourself before revoking the S election, since once you become a disregarded entity, those S corp concepts no longer apply. Similarly, if you have any loans to/from the corporation on your books, you'll need to decide how to handle those since the separate entity treatment will end. Also, don't forget about depreciation - if you've been depreciating business assets as an S corp, you'll need to continue tracking that depreciation as a sole proprietorship once you convert. Your depreciation methods and schedules should remain the same, but the reporting moves from Form 1120-S to Schedule C. I'd recommend sitting down with your accountant before filing the revocation to do a complete review of your S corp balance sheet and make sure there aren't any loose ends that could create complications after the classification change. It's much easier to clean these things up while you still have S corp status than to try to unwind them later. The filing process itself is straightforward following the advice others have given, but these operational details can trip you up if you don't plan ahead.

I want to add one more critical consideration that hasn't been mentioned yet - make sure you understand the impact on your business's legal liability protection when transitioning from S corp back to disregarded entity status. As an S corp, you've had the protection of corporate limited liability. Once you revert to disregarded entity status, you'll lose that corporate veil protection and return to the LLC's liability protection structure. While LLCs do provide liability protection, it's different from corporate protection, and you'll want to review your business insurance coverage to ensure it's still adequate. Also, if you have any contracts, leases, or agreements that were signed in the corporate name with S corp status, you may need to review whether those need to be updated or amended. Some agreements have specific provisions related to the contracting entity's tax status or corporate structure. Finally, consider the impact on business credit. Your business credit profile was likely established under S corp status, and the classification change might affect your business credit reporting or require notifications to credit agencies. The tax filing steps everyone has outlined are absolutely correct, but don't forget these business operation aspects that extend beyond just the IRS requirements. A smooth transition requires thinking holistically about all the ways this change affects your business relationships and legal structure.

I've been following this thread closely as I'm considering a similar transition, and the comprehensive advice shared here is incredibly valuable. One additional consideration I'd like to add from my research is about state-specific requirements that might not be obvious. While several people mentioned checking state requirements, I discovered that some states have specific forms or notifications required when changing federal tax classification. For example, some states require you to file a separate state entity classification election even if they generally follow federal tax treatment. Also, if you're in a state that has franchise taxes or annual report requirements that vary based on entity type, you'll want to understand how the classification change affects those obligations. In my state, LLCs and corporations have different annual filing requirements and fees. Another thing I learned from my attorney is that if you have any pending legal matters, litigation, or regulatory issues involving your business, the entity classification change might affect how those proceedings are handled. It's worth reviewing any ongoing legal matters with counsel before making the switch. The timeline and filing sequence everyone has outlined is spot-on, but these state and legal considerations can sometimes take longer to research and address than the actual federal tax filings. Better to identify them early in your planning process.

Having gone through this exact transition myself last year, I want to emphasize the importance of timing everything correctly to avoid any gaps in your tax classification status. One crucial detail I learned is to submit your revocation statement and Form 8832 using certified mail with return receipt requested, and to include a cover letter that explicitly states both documents are part of the same entity classification change request. This helps ensure the IRS processes them together as a package rather than as separate, unrelated filings. I'd also recommend making copies of everything and keeping detailed records of submission dates. In my case, the IRS initially processed my revocation but somehow misplaced my Form 8832, which temporarily classified me as a C corp until I could get it corrected. Having complete documentation made resolving this much easier. Another tip: consider timing your revocation effective date to align with your tax year end (December 31st in most cases) to avoid any mid-year complications with income allocation or dual-status issues. This creates a clean break between your S corp final year and your first year back as a disregarded entity. The sequence you outlined is correct - just make sure to submit everything together and keep thorough records of the entire process.

Based on everyone's excellent advice here, I wanted to share a resource that helped me tremendously when I went through this same S corp to disregarded entity transition two years ago. The IRS Instructions for Form 8832 have a specific section (Part II, line 6) that addresses single-member LLCs reverting from S corp status back to disregarded entity treatment. What I found particularly useful was that the instructions explicitly state you should file Form 8832 "to be classified as a disregarded entity" when revoking an S election for a single-member LLC. One thing that gave me confidence in my filing was cross-referencing Treasury Regulation 301.7701-3(c), which covers entity classification elections. It confirms that filing both the revocation statement and Form 8832 simultaneously is not only acceptable but recommended to ensure continuous proper classification. For anyone going through this process, I'd also suggest reviewing IRS Revenue Ruling 2004-85, which provides guidance on the timing and procedures for S corp election revocations. It helped me understand exactly why the sequence and timing everyone has mentioned is so critical. The administrative and business considerations everyone has raised are spot-on. Don't underestimate the time needed to coordinate all the non-tax aspects of this change - updating contracts, insurance, banking relationships, and state filings can take just as much effort as the federal tax filings themselves.

This thread has been incredibly comprehensive! As someone who went through a similar transition 18 months ago, I want to add one final consideration that could save you some headaches down the road. Make sure to obtain a written confirmation from the IRS once your revocation and Form 8832 are processed. After I submitted my documents using the certified mail approach everyone recommended, I followed up about 8-10 weeks later with a call to the IRS Business & Specialty Tax Line to confirm my entity classification change had been processed correctly. The representative was able to verify that both my S election revocation and my Form 8832 election for disregarded entity status were on file and properly linked in their system. They provided me with a confirmation number and date, which I kept in my records. This extra step gave me peace of mind and also created a paper trail in case any questions came up later during audits or when filing future returns. Given how many processing issues people have mentioned in this thread, taking that extra step to verify everything was handled correctly seems well worth the effort. Also, once you're back to disregarded entity status, don't forget to update your tax software settings for the following year's return preparation. Many software packages default to the previous year's entity type, so you'll want to make sure it's set up correctly for Schedule C reporting instead of 1120-S.

This thread has been absolutely incredible - I'm amazed by the depth of practical advice everyone has shared! As someone who's been hesitating about making this same transition for months, reading through all these real-world experiences has given me the confidence to move forward. I particularly appreciate how the discussion evolved from the basic filing requirements to all the broader business implications. The points about updating operating agreements, reviewing insurance coverage, handling existing contracts, and coordinating state requirements were eye-opening - I definitely would have overlooked most of these aspects if I'd just focused on the IRS filings. The emphasis on documentation and verification throughout the process is also really valuable. Using certified mail, keeping detailed records, including cover letters that explicitly link the revocation statement and Form 8832, and following up with the IRS for written confirmation - these are the kinds of practical details that can make the difference between a smooth transition and months of headaches. One quick question for those who've been through this - did any of you encounter unexpected costs during the transition beyond the obvious items like legal/accounting fees? I'm trying to budget for this process and want to make sure I'm not missing any hidden expenses. Thanks again to everyone who took the time to share their experiences. This community is an incredible resource!

This has been an incredibly thorough and helpful discussion! As someone who's currently working through a similar S corp to disregarded entity transition, I wanted to add one more consideration that came up during my planning process. If you have any state-specific business licenses or permits that were issued based on your S corporation status, you may need to update or reapply for these after the classification change. In my case, I discovered that my state contractor's license was tied to my S corp EIN and classification, and I needed to file an amendment with the state licensing board to reflect the change back to disregarded entity status. This isn't something that would necessarily show up in the IRS guidance or even in discussions with your tax attorney, but it could affect your ability to continue operating legally in certain regulated industries. I'd recommend reviewing any professional licenses, permits, or certifications your business holds to see if they have entity-type requirements. Also, if you accept credit cards for your business, your merchant services provider may require notification of the entity classification change. Some processors have different fee structures or requirements based on entity type, so it's worth checking with them during your transition planning. The step-by-step filing approach everyone has outlined is excellent - just wanted to add these operational considerations to the comprehensive list that's been developed here. Thanks to everyone for sharing such detailed and practical advice!