Need to end your S corp status? A Sample Letter to Terminate an S Election helps with that. It’s a formal way to tell the IRS you’re changing your business structure. Maybe your business is growing fast. Perhaps the tax benefits of an S corp no longer work for you.
Writing this letter can be tricky. Don’t worry, we’ve got you covered. We’ll share templates and examples. These samples make the process easier.
This article is all about helping you. We provide letter samples for your use. You can easily write the letter you need. Let’s get started!
Sample Letter To Terminate An S Election
[Your Name]
[Your Address]
[Your City, State, Zip Code]
[Date]
Internal Revenue Service
[IRS Address]
[IRS City, State, Zip Code]
Subject: Termination of S Election for [Company Name], EIN: [Company EIN]
Dear Sir/Madam,
This letter serves as notification that [Company Name], with Employer Identification Number (EIN) [Company EIN], is terminating its S corporation election, effective [Date of Termination].
The revocation is intended to take effect for the tax year beginning [Start Date of Tax Year].
The shareholders, holding more than 50% of the shares of stock of the corporation (voting and non-voting), consent to this revocation. Attached is a statement of consent signed by the shareholders.
If you require any further information, please feel free to contact me at [Your Phone Number] or [Your Email Address].
Sincerely,
[Your Name]
How to Write Sample Letter To Terminate An S Election
1. Crafting the Subject Line
The subject line is your herald, announcing the letter’s intent. Be forthright; avoid ambiguity. Use a subject line like:
- Subject: Termination of S Corporation Election – [Company Name]
2. The Salutation: Setting the Tone
Address the communication to the proper authority. Start with a formal, yet courteous greeting:
- “To Whom It May Concern,” (if unsure)
- “Dear Internal Revenue Service,” (if addressing the IRS directly)
3. Identification of the Entity
Clearly identify the S corporation in question. Provide all pertinent details, ensuring no confusion arises. Include:
- Full legal name of the S corporation
- Employer Identification Number (EIN)
- Principal business address
4. Explicit Declaration of Termination
State unequivocally the desire to terminate the S election. Leave no room for misinterpretation. A sample declaration:
- “This letter serves as formal notification of [Company Name]’s intent to terminate its election to be treated as an S corporation under Section 1362(a) of the Internal Revenue Code, effective [Date].”
5. Effective Date of Revocation
Specify the precise date the termination should take effect. This is crucial; ensure it aligns with regulatory stipulations. Typically, it’s the first day of a tax year.
- “The revocation shall be effective as of [Date – e.g., January 1, 2025].”
Secure consent from shareholders holding more than 50% of the stock. Include their signatures to validate their agreement. Each signature should be accompanied by:
- Shareholder’s name (printed)
- Number of shares held
- Signature
- Date of signature
7. The Closing and Contact Information
Conclude with a professional closing. Provide contact information for any follow-up inquiries.
- Closing: “Sincerely,” or “Respectfully,”
- Your Name and Title
- Phone Number
- Email Address
Frequently Asked Questions: Terminating an S Election
Terminating an S election involves specific procedures. This FAQ provides answers to common questions regarding the process of formally ending S corporation status.
What is a revocation of S election?
A revocation is the process by which an S corporation voluntarily terminates its S election, reverting to C corporation status.
Who must consent to the revocation?
Shareholders holding more than 50% of the corporation’s issued and outstanding shares of stock (including non-voting stock) must consent to the revocation.
When is the revocation effective?
The revocation is effective on the date specified, provided that date is on or after the date the revocation is filed. If no date is specified, the revocation is effective on the first day of the tax year in which the revocation is filed.
Where should the revocation letter be sent?
The revocation letter should be sent to the Internal Revenue Service (IRS) service center where the corporation’s S election was originally filed.
What information should be included in the revocation letter?
The letter should clearly state that the corporation is revoking its S election, include the corporation’s name, address, employer identification number (EIN), the effective date of the revocation, and the signatures of shareholders holding more than 50% of the stock.
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