Single-Member LLC: How to Revoke Your S Corp Election

To revoke an S corporation election for a single-member LLC, send a signed written statement to the IRS service center where you file your Form 1120-S, and file Form 8832 alongside it so the LLC returns to disregarded entity status instead of defaulting to a C corporation. There is no dedicated IRS form for the revocation itself. Timing decides everything: file by March 15 and the revocation reaches back to January 1 of the current year; miss that date without naming a future effective date and you wait until next January.

The Revocation Statement: What to Send

The revocation is a written statement signed under penalties of perjury. For a single-member LLC, the sole member’s signature satisfies the statutory requirement of consent from shareholders holding more than half the outstanding stock.¹ Send it by certified mail with return receipt to the service center where you file the 1120-S. The IRS does not send a confirmation letter, so that receipt is your only proof of timely filing.²

The statement must include:²

The corporation’s name and Employer Identification Number.
A clear statement that the corporation revokes its election under Section 1362(a).
The shareholder’s name, address, taxpayer identification number, number of shares owned, date the stock was acquired, and the date the shareholder’s tax year ends.
The requested effective date, or a statement that the revocation should be retroactive to the first day of the current tax year.
The signature and consent of the shareholder, plus the signature of the person authorized to sign the corporate return.

Timing and the Effective Date

When the IRS receives the revocation controls when it takes effect. Section 1362 creates three outcomes:³

Received on or before March 15 of the current tax year (calendar-year corporation): effective January 1 of that year, as though the S election never applied.
Received after March 15 with no specified date: effective January 1 of the following year.
Any specified future date on or after the filing date: effective on that date, creating a split tax year.

A mid-year effective date splits the year into an S corporation short year running through the day before the effective date and a second short year starting on the effective date. You file a final Form 1120-S for the S corporation short year, reporting all income, deductions, and basis adjustments through the cutoff. The due date of that return ties to the C corporation short-year return due date.⁴

For most single-member LLCs, filing before March 15 for a January 1 effective date is the cleanest choice. It avoids short-year mechanics and lets you report the full year on Schedule C.

Why You Also Need Form 8832

This is the step that catches owners off guard. When your LLC first elected S status, the IRS treated it as having elected corporate classification (a deemed Form 8832 election) and then layered S status on top.⁵ Revoking the S election strips off only the S layer. The corporate classification stays, which means your LLC defaults to C corporation status, not disregarded entity status.

To get back to disregarded treatment, file Form 8832, Entity Classification Election, choosing to be disregarded as an entity separate from its owner.⁶ Submit it together with the revocation statement, using the same effective date. Skip this step and the IRS treats your LLC as a C corporation, with double taxation on profits and none of the simplification you were after.

Filing Form 8832 also starts a 60-month lockout: once the election takes effect, you generally cannot change classification again for five years.⁷

The Deemed Liquidation Tax Hit

When an entity classified as a corporation elects to become a disregarded entity, the regulations do not treat this as a paperwork change. The corporation is deemed to distribute all of its assets and liabilities to the owner in a complete liquidation, recognizing gain or loss on each asset as if it had sold that asset to you at fair market value.⁵

For a service business with a bank account and some equipment, the gain is usually minimal. If your LLC holds appreciated real estate, valuable intellectual property, or low-basis inventory, the deemed sale can generate a real one-time tax bill.

Coordinate the effective dates so the deemed liquidation happens while S status still applies. Any gain the S corporation recognizes on the deemed liquidation increases your stock basis, which reduces the gain you recognize when the stock is treated as redeemed in the liquidation. Net effect: the income is generally taxed once, not twice, as long as the S election is in place when the liquidation occurs.

Distribute the AAA Before the Window Closes

The Accumulated Adjustments Account tracks cumulative S corporation income that has already been taxed to you but not yet distributed. After the S election ends, cash distributions during the post-termination transition period can still reduce your stock basis to the extent of the remaining AAA balance, rather than being taxed as dividends.⁸

The transition period runs from the day after the last day of the final S corporation tax year until the later of one year after that last day, or the extended due date of the final Form 1120-S.⁹ For most calendar-year corporations, that is roughly 15 to 16 months.

If your AAA balance is positive, pay it out in cash before the window closes. Once the LLC reverts to disregarded status, the AAA concept ceases to exist, and any special character in a remaining balance is lost.

What Changes on Your Taxes After Revocation

Business income and expenses move to Schedule C of your personal Form 1040, the separate corporate return disappears, and there is no more payroll, W-2, or AAA to track.¹⁰ Several other things shift with it.

Self-Employment Tax Applies to All Net Profit

Your entire net profit becomes subject to self-employment tax. For 2026, that is 12.4 percent Social Security on net earnings up to $184,500, plus 2.9 percent Medicare with no cap.¹¹ Schedule SE is required once net self-employment earnings reach $400.¹² Under S status only your salary faced payroll taxes; for a profitable business, the increase can be substantial.

Quarterly Estimated Payments Replace Withholding

Without payroll, you cover income tax and self-employment tax through quarterly estimated payments on Form 1040-ES.¹³ The safe harbor to avoid an underpayment penalty is 90 percent of the current year’s tax or 100 percent of last year’s tax, whichever is smaller.¹⁴ Start in the quarter your revocation takes effect. If it is effective January 1, the first payment is due April 15.

The Section 199A Deduction Works Differently

Both S corporations and sole proprietorships qualify for the qualified business income deduction of up to 20 percent, which was made permanent for tax years beginning after December 31, 2025.¹⁵ As an S corporation owner, your salary is excluded from qualified business income and only the K-1 profit counts. On Schedule C, the whole net profit counts because there is no salary carve-out.

There is a catch above the income thresholds (roughly $203,000 single or $406,000 married filing jointly for 2026). The deduction is then limited by the greater of 50 percent of W-2 wages paid by the business, or 25 percent of W-2 wages plus 2.5 percent of the basis of qualified business property.¹⁵ A sole proprietor with no employees pays zero W-2 wages, which can reduce the deduction to zero at those income levels. If your income sits above the thresholds, losing the W-2 wage base could cost more than you save by ending payroll.

Health Insurance

You still claim the self-employed health insurance deduction on your 1040, but you pay premiums directly and deduct them as an adjustment to gross income rather than routing them through payroll and a W-2.¹⁶

The Five-Year Lock on Going Back

Two waiting periods apply, and they run on separate clocks.

The S corporation re-election restriction bars a new S election until the fifth tax year beginning after the first year the termination was effective.³ Revoke effective January 1, 2026, and the earliest re-election is for the tax year beginning January 1, 2031. The IRS can waive the period, but waivers are discretionary.

The Form 8832 classification lock separately prevents another classification change for 60 months after the disregarded-entity election takes effect.⁷ The exception for a more-than-50-percent ownership change essentially means selling the business when there is only one member. The two clocks roughly overlap, but they are independent, and either one can block a return to S status.

Treat revocation as at least a five-year commitment. If there is a real chance you will want S status back inside that window, hold off.

1
eCFR. 26 CFR 1.1362-2 – Termination of Election
2
Internal Revenue Service. Revoking a Subchapter S Election
3
Office of the Law Revision Counsel. 26 USC 1362 – Election; Revocation; Termination
4
Internal Revenue Service. Instructions for Form 1120-S
5
eCFR. 26 CFR 301.7701-3 – Classification of Certain Business Entities
6
Internal Revenue Service. About Form 8832, Entity Classification Election
7
GovInfo. 26 CFR 301.7701-3 – Classification of Certain Business Entities
8
Office of the Law Revision Counsel. 26 USC 1371 – Coordination with Subchapter C
9
eCFR. 26 CFR 1.1377-2 – Post-Termination Transition Period
10
Internal Revenue Service. Single Member Limited Liability Companies
11
Social Security Administration. 2026 Social Security Taxable Earnings
12
Internal Revenue Service. Instructions for Schedule SE (Form 1040)
13
Internal Revenue Service. About Form 1040-ES, Estimated Tax for Individuals
14
Internal Revenue Service. Topic No. 306, Penalty for Underpayment of Estimated Tax
15
Office of the Law Revision Counsel. 26 USC 199A – Qualified Business Income
16
Internal Revenue Service. S Corporation Compensation and Medical Insurance Issues