S Election Revocation

[Randall]

Is there any way to revoke an S election retroactive to Jan 1, 2017?  Client made election without talking to me.  He has two other LLCs taxed as S Corps, which is ok.  But for a 3rd LLC with rental real estate, he made the S election.  We need to revoke it back to Jan 1, 2017

 

[rfassett]

I know of no way to do this.  The revocation can be dated no earlier than when the letter of revocation is submitted.  The only exception to that that I know of is the election can be effective for the first of the year if the revocation is made within the time period ending on the 15 day of the third month of that tax year.  If the revocation is silent on the date of revocation, the IRS will make the revocation effective at the beginning of the next tax year.  If there are exceptions to these rules, I am not aware of them

[Lee B]

 Take a c;lose detailed look at the original circumstances of the election and look for something that disqualifies the original election.

[Edsel]

If the C Corp rate is slashed to 20%, look for many S Corps to bail out of the S Corp election.  Of course, we don't know whether that will happen or not.

[JohnH]

Keep in mind that if you retroactively discover a disqualifying event, that triggers a filing requirement for the S-corp part-year return.  So if the return is filed after that due date, the per-shareholder penalties kick in.

[Randall]

You guys are full of good news.  I was wondering if a request for a waiver of the 75 days (March 15) requirement would work.  Since 2017 is the first year and no returns have been filed yet, I'm hoping they'll approve.

 

[Catherine]

@Randall - you can try; it's not like an attempt is going to hurt.  Blame the taxpayer for sending in paperwork without understanding what he was doing.  I'm sure they've seen a ton of idiotic filings from taxpayers who were clueless and acted on their lack of knowledge.  If they say no, you are no worse off than before.

[BHoffman]

See if this helps. http://smallbusiness.chron.com/terminate-s-corp-election-revert-llc-23511.html

[David]

This seems to apply to my client's situation -

New client's previous CPA told her to file for S Corp election. She did so in April with an April effective date. Now the client wants to undo the S election - to be treated as never having been an S Corp. She hasn't received her acceptance letter from the IRS yet.

Client is a part time piano teacher and has 2 pianos, one for $50K which she took the sec 179 deduction. 

It appears from my research and the posts here that the S election can't be retroactively undone unless it is filed within 2 1/2 months of the year. Does the 2 1/2 month requirement apply from the date of the S election effective date?

I want to make sure that the revocation is effective retroactively to the election date so that no 1120S is required. Also, I don't want the client to pay taxes when she transfers the fully depreciated assets from an S Corp back to her SMLLC.

Thanks for your help.