How Do I Convert from S-Corp Back to LLC? Revoke Election, Final 1120-S, Schedule C

Someone on Reddit asked how to convert from S-Corp back to LLC for tax purposes: they had an LLC that had elected S-Corp status and wanted to stop the extra payroll and compliance and be taxed as an LLC again. They wanted to know if they could revoke the S-Corp election by letter, file a final Form 1120-S, and report on Schedule C the next year, and whether they also need Form 8832 to be taxed as a disregarded entity. Yes. You can revoke by signed letter, file a final 1120-S for the last S-Corp year, and for a single-member LLC the entity then defaults to disregarded for federal tax, so you report on Schedule C the next year. Form 8832 is not required for that result, but filing it can give the IRS (and you) a clear record.

Bottom line: Yes. You can revoke your S-Corp election by sending a signed letter to the IRS (with required shareholder consent). File a final Form 1120-S for the last year the S-Corp was in effect. For a single-member LLC, once the election is revoked, the LLC defaults to a disregarded entity under check-the-box rules, so you report on Schedule C (or Schedule F, if applicable) on your personal return the next tax year. You do not have to file Form 8832 to be disregarded; it is the default. Filing Form 8832 is optional and can provide a clear, dated record. For timing, consent, and state rules, consult a tax professional.

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Question from Reddit

Converting from s corp back to LLC

Hi all, I started an LLC a couple years ago to do some side gigs and made s corp election. Now realizing I'm not making enough to justify the extra payroll/compliance costs and want to go back to being taxed as LLC. There aren't any assets held in the s corp. Can I just send the IRS a letter revoking s corp election, file a final year 1120-S, and start reporting on schedule C next year? Or do I also need to file 8832 to say I want to be taxed as disregarded entity

Source: Reddit

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Analysis

The user wants to revoke their S-Corp election and have their single-member LLC taxed again as a disregarded entity (Schedule C). They are asking: (1) Can they revoke by letter, file a final 1120-S, and report on Schedule C the next year? (2) Do they also need to file Form 8832 to be taxed as a disregarded entity?

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Answer

Yes. You can revoke your S-Corp election by sending a letter to the IRS stating your intent to terminate the election (signed by shareholders who together own more than half of the stock, or as required by the regs). You must also file a final Form 1120-S for the last year the S-Corp was in effect (the year of revocation). After that, for a single-member LLC with no other election in place, the LLC defaults to a disregarded entity for federal tax, so you report the business on Schedule C (or Schedule F, if applicable) on your personal return the next tax year. No separate entity return.

Do you need Form 8832?

• For a single-member LLC, once the S-Corp election is revoked, the LLC is automatically treated as a disregarded entity under the check-the-box rules. You do not have to file Form 8832 to get that result; it's the default.
• Filing Form 8832 to elect disregarded-entity status can still be useful: it gives the IRS (and you) a clear, dated record of how you want the entity classified going forward. So: not required for a single-member LLC to be disregarded after revocation, but filing it can avoid confusion and document your choice. If you have any doubt (e.g., multi-member or prior C-Corp election), a tax professional can confirm whether 8832 is needed or recommended.

Summary of steps

1. Revoke the S-Corp election. Send a signed letter to the IRS (address in the Form 2553 instructions or where you file your 1120-S) stating that you are revoking the S-Corp election, effective as of a specific date (e.g., beginning of the current tax year or next). Timing and shareholder consent matter; see the regs (e.g., Treas. Reg. § 1.1362-6) or Form 2553 instructions.
2. File a final Form 1120-S. For the last year the S-Corp was in effect, file Form 1120-S and check the "final return" box. Report all income and expenses through the date the revocation is effective.
3. Next year. Report the LLC's income and expenses on Schedule C (or the appropriate schedule) on your Form 1040. No 1120-S.
4. Optional: File Form 8832 to elect disregarded-entity classification if you want an explicit election on file.

Margen can help you model Schedule C income and self-employment tax so you're ready for the transition.

Related: Revoke S-Corp Election, LLC 2026 (New Jersey) · S-Corp to LLC Tax Consequences, Forced Distribution · Entity Classification Election Mistake (LLC vs C-Corp) · Retroactively File LLC Then S-Corp Election

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Applicable Sections

Federal / IRS

• Revocation of S-Corp election: IRC § 1362(d)(1); Treas. Reg. § 1.1362-6. Revocation must generally be signed by shareholders owning more than half of the stock; effective date and procedural rules apply. (IRS S Corporation)
• Form 1120-S: Final return when the S-Corp election is terminated; check the "final return" box. (IRS Form 1120-S)
• Form 8832: Entity Classification Election; used to elect how an eligible entity (e.g., LLC) is classified (e.g., disregarded entity or partnership). For a single-member LLC with no prior corporation election, disregarded is the default, so 8832 is not required to be disregarded after revoking S-Corp, but you may file it to affirm the classification. (IRS Form 8832)
• Check-the-box regulations: Treas. Reg. § 301.7701-3; single-member LLC with no election = disregarded entity.

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Practical Notes

• Revoke in writing and file the final 1120-S for the last S-Corp year; then report on Schedule C the next year.
• Form 8832 is not required for a single-member LLC to be disregarded after S-Corp revocation, but filing it can provide clarity and a paper trail.
• Timing and consent: Revocation has deadlines and shareholder consent requirements; check the Form 2553 instructions or Treas. Reg. § 1.1362-6 so the revocation is valid.
• State: Some states have their own S-Corp or LLC filing/notification requirements when you revoke or change classification; check state rules or a local pro.
• Margen can help you plan Schedule C and self-employment tax after the switch.

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Limitations

This answer does not cover state revocation or filing requirements, multi-member LLCs (which default to partnership; 8832 may be needed to elect disregarded if eligible), or exact revocation effective dates. For advice tailored to your entity and timing, consult a tax professional. Margen can help you model your income and tax after the conversion.