Revoking S Corp election

[mgkap1]

Hi everyone! I have two questions. Thank you in advance for replying back!

Is it possible to revoke the S Corp election of my LLC going back to the day 1, which was 1.5 years ? I understand, if it's doable, I'll need to refile 2018 return. The reason is that my business is still in the startup costs phase, it has expenses but not income and it would be cheaper for me to have a single member LLC for now. 

And the second question, if I can revoke the S corp election and operate as a single member LLC until I actually open the business doors, will the IRS let me to elect the S corp as of a later date, like in 2020 or 2021?

Thanks!

[Anonymous_]

The site at the link below delineates the effective date of a revocation based upon the date specified and when the revocation is filed.

https://www.thetaxadviser.com/issues/2019/apr/terminating-s-election-rrevocation.html

[mgkap1]

Thank you, Tagteam!

Do I understand the article correctly that if I want to revoke retroactively, I can only go back to the beginning of the current calendar year and not back to 2018?

Someone told me that if I revoke the S corp election I will have to wait 5 years to be allowed to re-elect.. do you know if it's true?

Thanks so much an happy holidays! 

[Anonymous_]

No, 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. 

See https://www.irs.gov/forms-pubs/revoking-a-subchapter-s-election

[mgkap1]

Ok, thanks!

What about re-electing S corp? Is there any information on that? Is there 5 years block out period?

The IRS rep wasn't able to answer it. 

[Anonymous_ · Accepted solution]

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@mgkap1 wrote:

What about re-electing S corp? Is there any information on that? Is there 5 years block out period?

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Yes, there is such a period per Treas. Reg. § 1.1362-5(a):

In general. Absent the Commissioner's consent, an S corporation whose election has terminated (or a successor corporation) may not make a new election under section 1362(a) for five taxable years  as described in section 1362(g). However, the Commissioner may permit the corporation to make a new election before the 5-year period expires. The corporation has the burden of establishing that under the relevant facts and circumstances, the Commissioner should consent to a new election.

[Anonymous]

you seem to be saying you have not actively started your business.   Then I got some bad news.  if this is the case in 2018 or 2019, you had no deductible expenses.  the IRS would rule that any expenses incurred until you actively started it were for those years non-deductible start-up expenses under IRC section 195.      if they are below a certain amount, then they can be deducted in the year the business actively starts.  

the answers provided about revocation and re-electing are correct  to late to revoke for 2018 and 2019 and there is a 5 year wait.