The Internal Revenue Service (IRS) requires proper procedures for S corporation status termination. Shareholders must formally express their intent to revoke their S election. A well-crafted S Corp Revocation Letter communicates this decision effectively. The Corporation uses this letter as official documentation.
What is an S Corp Revocation Letter Template?
An S Corp Revocation Letter Template is a pre-designed document that provides a standardized format for formally notifying the IRS and relevant state agencies that an S corporation intends to terminate its S election.
Its importance lies in ensuring that the revocation is legally valid, properly documented, and filed within the required deadlines, preventing potential penalties and confusion regarding the company's tax status. This template helps ensure compliance and clarity throughout the revocation process.
The Ideal Structure of an S Corp Revocation Letter Template
Okay, so you're looking to revoke your S Corp status. The first step is to create an S Corp Revocation Letter. You need a clear and concise letter that tells the IRS exactly what you're doing. Think of it like a formal breakup letter – you want to be clear, direct, and leave no room for misinterpretation.
A well-structured template can save you a ton of headaches down the line. Here's the breakdown:
- Heading and Date: Start with the basics – your company's information and the date.
- IRS Addressee: Direct the letter to the correct IRS address. You don't want it getting lost in the shuffle!
- Subject Line: Make it crystal clear what the letter is about – "S Corporation Revocation Election."
- Body of the Letter: This is where you state your intent to revoke the S Corp election, the effective date of the revocation, and the reason (if any).
- Shareholder Consent: Include a statement confirming that all shareholders consent to the revocation.
- Shareholder Signatures: All shareholders must sign and date the letter.
- Corporate Officer Signature: The corporate officer must sign and date the letter.
To summarize all the sections of the letter, here's a table:
| Section | Purpose | What to Include |
|---|---|---|
| Heading and Date | Identifies the company and the date of the letter. | Company name, address, EIN, and the date. |
| IRS Addressee | Ensures the letter reaches the correct IRS department. | Specific IRS address for S Corp revocation filings (check the IRS website for the most current address). |
| Subject Line | Clearly states the purpose of the letter. | "S Corporation Revocation Election" (or similar clear phrasing). |
| Body of the Letter | Formally declares the revocation of S Corp status. | Statement of intent to revoke, effective date of revocation, and reason (optional). |
| Shareholder Consent | Confirms all shareholders agree to the revocation. | Statement confirming unanimous shareholder consent. |
| Shareholder Signatures | Provides legal authorization for the revocation. | Signature, printed name, and date for each shareholder. |
| Corporate Officer Signature | Provides legal authorization for the revocation. | Signature, printed name, title, and date. |
Benefits of a Clear Structure
Why bother with such a structured approach? Well, a clear and well-organized S Corp revocation letter offers several key advantages:
- Reduces Errors: A structured template helps prevent omissions and errors, minimizing the risk of rejection by the IRS.
- Speeds Up Processing: A clear letter is easier for the IRS to understand and process, potentially leading to a faster turnaround time.
- Ensures Compliance: Following a structured template ensures you include all the necessary information required by the IRS.
- Provides a Record: A well-documented letter serves as a clear record of your intent to revoke the S Corp election, which can be valuable for your business records.
- Minimizes Ambiguity: A clear structure eliminates any potential ambiguity, reducing the risk of misinterpretations by the IRS.
Examples of S Corp Revocation Letter Template
Sample 1: Simple Revocation Letter
John Doe 123 Main Street Anytown, CA 54321 (555) 555-5555 [email protected]
October 26, 2023
Internal Revenue Service Department of the Treasury Ogden, UT 84201
Dear Internal Revenue Service,
This letter serves as formal notification that [Company Name], EIN [Company EIN], is voluntarily revoking its S corporation election, effective [Date of Revocation].
The shareholders of [Company Name] have unanimously agreed to this revocation.
Please confirm receipt of this revocation and advise us of any further requirements.
Sincerely, John Doe President
Sample 2: Revocation with Shareholder Consent
Jane Smith 456 Oak Avenue Sometown, NY 10101 (222) 222-2222 [email protected]
October 26, 2023
Internal Revenue Service Department of the Treasury Ogden, UT 84201
Dear Internal Revenue Service,
This letter constitutes a formal revocation of the S corporation status for [Company Name], EIN [Company EIN]. The revocation is to be effective [Date of Revocation].
Attached you will find a copy of the unanimous written consent of all shareholders to this revocation.
We request confirmation of this revocation's receipt and any necessary follow-up instructions.
Sincerely, Jane Smith Secretary
Sample 3: Revocation Due to Business Changes
Robert Brown 789 Pine Lane Othertown, TX 77000 (333) 333-3333 [email protected]
October 26, 2023
Internal Revenue Service Department of the Treasury Ogden, UT 84201
Dear Internal Revenue Service,
Please accept this letter as notification of the revocation of [Company Name]'s S corporation election. The EIN for [Company Name] is [Company EIN], and the revocation will be effective [Date of Revocation].
This revocation is being made due to significant changes in the business structure and operations of the company. The shareholders have agreed that reverting to a C corporation is now in the best interest of the company.
We kindly request confirmation of the revocation and guidance on any required procedures.
Sincerely, Robert Brown CEO
Sample 4: Revocation with Legal Counsel Contact
Emily Davis 101 Elm Street Anotherville, FL 33333 (444) 444-4444 [email protected]
October 26, 2023
Internal Revenue Service Department of the Treasury Ogden, UT 84201
Dear Internal Revenue Service,
This letter formally revokes the S corporation election for [Company Name], EIN [Company EIN], effective [Date of Revocation].
Please direct any questions or correspondence regarding this revocation to our legal counsel, [Attorney Name], at [Law Firm Name], [Law Firm Address], [Law Firm Phone Number], [Attorney Email Address].
Thank you for your attention to this matter.
Sincerely, Emily Davis CFO
Sample 5: Short and Direct Revocation
Michael Wilson 222 Maple Drive Someplace, OH 44444 (555) 666-7777 [email protected]
October 26, 2023
Internal Revenue Service Department of the Treasury Ogden, UT 84201
Dear Internal Revenue Service,
We are writing to revoke the S corporation election for [Company Name], EIN [Company EIN], effective [Date of Revocation].
Sincerely, Michael Wilson Owner
Sample 6: Revocation with Confirmation Request
Olivia Garcia 333 Cherry Court Nowheretown, WA 99999 (777) 888-9999 [email protected]
October 26, 2023
Internal Revenue Service Department of the Treasury Ogden, UT 84201
Dear Internal Revenue Service,
This letter serves as formal notification of our decision to revoke the S corporation election for [Company Name], EIN [Company EIN]. The effective date of this revocation is [Date of Revocation].
Kindly acknowledge receipt of this revocation notice at your earliest convenience. Confirmation can be sent to [Confirmation Email Address] or [Confirmation Mailing Address].
Thank you for your time and attention to this matter.
Sincerely, Olivia Garcia Treasurer
Sample 7: Detailed Revocation with Explanation and Request
David Rodriguez 444 Peach Street Anytown USA, AA 00000 (111) 222-3333 [email protected]
October 26, 2023
Internal Revenue Service Department of the Treasury Ogden, UT 84201
Dear Internal Revenue Service,
This letter officially notifies you of the revocation of the S corporation election for [Company Name], EIN [Company EIN]. This revocation is effective as of [Date of Revocation].
After careful consideration of our business needs, particularly regarding [Brief Explanation of Reason for Revocation, e.g., attracting investment, simplifying tax structure], the shareholders have unanimously voted to revert to C corporation status. A copy of the shareholder resolution is attached.
We understand that this change will affect our tax reporting obligations. We would appreciate any information or resources you can provide regarding the transition from S corporation to C corporation status, especially concerning [Specific Question about Transition, e.g., accumulated earnings and profits].
Thank you for your assistance in this matter. Please confirm the receipt of this letter and the enclosed resolution.
Sincerely, David Rodriguez Director
Step-by-Step Process
- Prepare the Revocation Letter: Use the template provided and fill in all the necessary information, ensuring accuracy. This includes the S corporation name, address, EIN, shareholder names, and the effective date of revocation.
- Obtain Shareholder Consent: Secure written consent from shareholders holding more than 50% of the shares. Document this consent and keep it with the revocation letter.
- File Form 966 (Corporate Dissolution or Liquidation): While technically for dissolution, it's generally recommended to file Form 966 with the IRS when revoking S corp status. Consult with a tax professional.
- Submit the Revocation Letter to the IRS: Mail the revocation letter to the appropriate IRS service center based on your state. You can find the address on the IRS website.
- Keep a Copy for Your Records: Retain a copy of the revocation letter, shareholder consent forms, and Form 966 (if filed) for your business records.
- Update State and Local Authorities: Notify your state's Secretary of State (or equivalent agency) and any relevant local authorities about the change in your corporate status.
- Adjust Accounting and Tax Practices: Ensure your accounting and tax practices are updated to reflect the new business structure (e.g., C corporation or sole proprietorship). Consult with your accountant or tax advisor.
Common Mistakes
- Incorrect Effective Date: Choosing an effective date that doesn't align with your business needs or that is not permitted by the IRS.
- Missing Shareholder Consent: Failing to obtain consent from shareholders holding more than 50% of the shares.
- Incomplete or Inaccurate Information: Providing incorrect details such as the S corporation name, address, or EIN.
- Not Filing Form 966 (if needed): Overlooking the recommendation to file Form 966, which can lead to complications later on.
- Failing to Notify State and Local Authorities: Neglecting to inform state and local authorities about the change in corporate status.
- Not Updating Accounting Practices: Continuing to use S corporation accounting and tax practices after revocation.
- Missing Deadlines: Failing to submit the revocation letter by the required deadline.
Frequently Asked Questions
What happens after I revoke my S corp election?
After revoking your S corp election, your business will typically revert to a C corporation. This means it will be subject to corporate income tax, and shareholders will be taxed again on dividends they receive. Alternatively, you may have chosen to operate as a sole proprietorship or partnership if your business has only one or two owners, respectively.
Can I reinstate my S corp election after revocation?
Yes, but there are restrictions. Generally, once an S corp election is terminated or revoked, the corporation (or a successor corporation) is ineligible to make another election for five years unless the IRS consents to an earlier election.
Where do I find the correct IRS address to mail the revocation letter?
The correct IRS address for mailing the revocation letter depends on your state. You can find the most up-to-date address information on the IRS website by searching for "Where to File Form 2553" or by contacting the IRS directly.
We hope this guide has provided you with a comprehensive understanding of how to use an S corp revocation letter template. Remember to consult with legal and financial professionals to ensure a smooth and compliant process.
Good luck with the transition!