Tax Guru – Ker$tetter Letter

Q:

Subject: S to C conversion

Dear Kerry,

 

on your web site you mention that a conversion from S to C Corp. status requires a formal request with the IRS.  Is there a form for that?  Or how else is it done?

 

Thank you for your advice.

 

Best regards

A:

There is no official IRS form to revoke the S corporation election of the same kind that is used to elect it in the first place.

The corporation and shareholders holding more than 50% need to submit a properly prepared Statement of Revocation.

This isn’t a do it yourself task and should only be handled by an experienced professional tax advisor, who should also be part of the decision process as to whether revoking the S election is the most appropriate strategy for your particular situation. 

As I’ve mentioned on several occasions, after revoking an S election, there is a five year minimum waiting period before that corp can file for a new S corp election.  I have also frequently mentioned that, depending on your reasons for wanting to terminate the corp’s S status, it is often a more efficient approach to just set up a brand new C corp that isn’t going to be locked into having to use a 12/31 fiscal year end, as a form S corp will be.

Good luck.

Kerry Kerstetter