Single member LLC originally disregarded entity converted to SCorp tax last year and want to convert back

Forum|Forum|3 years ago
March 7, 2023
3 replies
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My business was a disregarded entity LLC for 10 years and last year I switched to being taxed as Scorp. After running taxes for one year the savings are minimal because of the payroll taxes and also much more complicated. I want to switch back to a disregarded entity. Here is where I am confused:

- I know I have to file a revocation letter

- If accepted, does that revert me back to a disregarded entity? Everything I am reading says it reverts me to a C Corp but that doesn't make sense.

- If I fill in form 8832 it stops me at question #2 and says I have to wait 5 years.

I just want to go back to a disregarded for easy, any thoughts to help with the confusion? Thank you - Paul!!

Best answer by Anonymous_

Once the election is made, it stays in effect until it is terminated or revoked.

See https://www.irs.gov/instructions/i2553#idm139855003307936

Your status will become a C corporation for federal income tax purposes so be sure to file Form 8832 so you are treated as a single-member LLC (sole proprietorship filing on Schedule C).

Anonymous_Answer

Employee

Once the election is made, it stays in effect until it is terminated or revoked.

See https://www.irs.gov/instructions/i2553#idm139855003307936

Your status will become a C corporation for federal income tax purposes so be sure to file Form 8832 so you are treated as a single-member LLC (sole proprietorship filing on Schedule C).

GeorgeM777

Yes, you will revert back to a disregarded entity, assuming you remain a single member limited liability company. The five-year limitation period applies if you wish to re-elect S Corp status after you have previously terminated your S Corp election. The instructions to Form 8832 provide the following regarding the five-year limitation period.

Lines 2a and 2b. 60-month limitation rule.

Once an eligible entity makes an election to change its classification, the entity generally cannot change its classification by election again during the 60 months after the effective date of the election

Based on the above instructions, you get one chance to change your S Corp election. However, if you later decide to elect to file as an S Corp, the five-year limitation applies (60 month limitation). However, the five-year rule has an exception which does require, among other things, a private letter ruling from the IRS.

Based on the information you have provided, it appears you can respond No to question number 2, and then respond to the remaining questions. It also appears you will probably check the box for 6c when you are responding to the question about the type of entity.

@pfsciotti

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Anonymous_

Employee

If you happened to file Form 8832 initially (with Form 2553), you absolutely must file Form 8832 with your statement. If you only filed Form 2553, then you might want to file Form 8832 so it is clear that you want to be treated (again) as a disregarded entity.

@pfsciotti