While entities taxed as S-Corps are the default recommendation of most business and tax planners, there are a number of benefits derived from being taxed as a C-Corp that should be carefully considered. C-Corps can deduct expenses that other tax entities cannot, such as 100% of the health insurance paid for employees, including shareholders in the corporation, as well as the costs of any medical reimbursement plan. While C-Corps do leave its shareholders open to the notorious double tax, this may not be a problem if profits are low.
If after careful consideration with your CPA, you decide that you would like to revoke the S-Corp status of your closely-held business, the following is a form letter that can be used:
_______________ ____, 20____
Department of the Treasury
Internal Revenue Service
_______________, ____ __________
Re: Revocation of S Corporation Election of _______________, Inc., Taxpayer Identification Number: ____-______________
To Whom It May Concern:
Notice is hereby given, pursuant to Section 1362(a) of the Internal Revenue Code, that _______________, Inc., a corporation incorporated in the State of _______________, with address of _______________, _______________, ____ __________, revokes its S corporation election filed with you on IRS Form 2553 dated _______________ ____, 20____.
The number of shares of the corporation’s stock (including non-voting stock) issued and outstanding at the time of this revocation is __________. The first taxable year for which this revocation is intended to be effective is the corporation’s taxable year beginning _______________ ____, 20____. Required shareholder consents to this revocation of election are attached.
______________________
President of _______________, Inc.
Shareholders' Consent to Voluntary Revocation of
Election of S Corporation Status
The undersigned, being shareholder(s) of _______________, Inc., a corporation incorporated in the State of _______________, hereby consent to the revocation of its election under Section 1362(a) of the Internal Revenue Code to which this consent is attached. The address of the corporation is _______________, _______________, ____ __________. The corporation’s Taxpayer Identification Number is ____-______________. Each of the undersigned shareholders taxable year ends on December 31.
The undersigned shareholders’ name, address, taxpayer identification number, number of shares owned, and date acquired are as follows:
Shareholder Name: Address: TIN: No. of Shares: Date Acquired:
______________________ ____________________ ______________ ____________ __________________
______________________ ____________________ ______________ ____________ __________________
______________________ ____________________ ______________ ____________ __________________
______________________ ____________________ ______________ ____________ __________________
Signed: ____________________ Title: ____________________ Date: __________________
Signed: ____________________ Title: ____________________ Date: __________________
Signed: ____________________ Title: ____________________ Date: __________________
Signed: ____________________ Title: ____________________ Date: __________________