Retroactively revoking S Corp Status

[angela999]

I elected S corp status for my sole proprietorship in 2019. On my 2019 tax return, I mistakingly filed a Schedule C included with my personal return, rather than filing a separate S-Corp return. For 2020, I am wondering if I can retroactively revoke the S-corp status, not have to amend my 2019 return, and continue to file a schedule C for 2020. Any advice appreciated!

[Mike9241]

did you conduct business in 2019/2020 in the name of the corporation? example providing FEIN of S-corp to vendors, customers, etc. then the activity should have been reported by the S-corp.  To revoke the election, the corporation must file a statement with the appropriate service center listed under Where To File in the Instructions for Form 2553. In the statement, the corporation must notify the IRS that it is revoking its election to be an S corporation. The statement must be signed by each shareholder who consents to the revocation and contain the information required by Regulations section 1.1362-6(a)(3).

it would seem you haven't filed written revocation so if the business was conducted in the name of the S-corp you need to file the 1120-S for 2019 and 2020 and amend the 2019 1040.   you also face significant penalties for late filing those returns.  you probably didn't take a salary from the s-corp which can also be an issue.

based on the issues you are facing, I would strongly recommend you seek the assistance of a tax pro   

[angela999]

Only conducted business in 2019, nothing in 2020 due to covid. I'm a single member S-Corp. Would it make more sense to request first time penalty abatement for 2019, and just keep s-corp status and file properly for 2020?

[AmeliesUncle]

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@angela999 wrote:

I elected S corp status for my sole proprietorship in 2019. 

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Is this a LLC (Limited Liability Company)?

Or is it actually a corporation that your formed with the State?

Or some other entity that your formed with the State?

Or none of the above?

Did you actually file Form 2553 with the IRS to elect that "entity" to be taxed as a S-corporation?

[angela999]

Was an LLC, then filed articles of incorporation with the state and filed form 2553 with the IRS

[Rick19744]

You have a mess on your hands and unfortunately I also recommend that you meet with a tax professional who can help you through this.

You have penalties of $2,460 for 2019 alone assuming that you are the only shareholder.

You also have penalties accruing for 2020 assuming you did not file for an extension in March.  So 2020 penalties are now $410 through the end of April and $205 per month or part of a month; maxed out at 12 months.

Spend the $$ to get this fixed so you do not have the IRS sending you letters.