S-Corporations Termination of Election

To revoke a Subchapter S election/small business election that was made on Form 2553, submit a statement of revocation to the service center where you file your annual return.

The statement should state:

• The corporation revokes the election made under Section 1362(a)
• Name of the shareholders
• Address of the shareholders
• Taxpayer identification number of the shareholders
• The number of shares of stock owned by the shareholders
• The date (or dates) on which the stock was acquired
• The date on which the shareholder’s taxable year ends
• The name of the S corporation
• The S corporation’s EIN
• The election to which the shareholders revokes
• The statement must be signed by the shareholders under penalties of perjury
• Signature and consent of shareholders who collectively own more than 50% of the number of issued and outstanding stock of the corporation, (whether voting or non-voting)
• Indication of the effective date of the revocation (or prospective date)
• Signature of person authorized to sign return

Due Date of Revocation:

• If revoking effective the first day of the tax year, the revocation is due by the 16th day of the third month of the tax year,
• If revoking effective any day other than the first day of the tax year, the revocation must be received by IRS by the requested effective date.
• For example, the S corporation is on a December 31 tax year ending and requests a revocation effective January 1, the revocation is due March 15.
• The S corporation is on a December 31 tax year ending and requests a revocation effective February 14, the revocation is due February 14.

Revoking the S election

To voluntarily terminate its S status, a corporation may file a revocation for any of its tax years, including the first tax year for which the election is effective (Sec. 1362(d)(1)(A)).

The revocation is made by a corporation in the form of a statement filed with the IRS Service Center where the corporation properly filed its S election, Form 2553, Election by a Small Business Corporation. The statement should be signed by a person authorized to sign Form 1120S, U.S. Income Tax Return for an S Corporation, (i.e., a corporate officer) and must provide (Regs. Sec. 1.1362-6(a)(3)):

• The number of shares of stock, including nonvoting stock, outstanding at the time the revocation is made.
• That the corporation is revoking its election under Sec. 1362(a) to be taxed as an S corporation.
• The effective date of the revocation, if it is to be a prospective revocation.