Key Entity Actions to Consider Before March 15
Retroactive changes to tax year 2025 are even possible
Entities have until March 16, 2026 to take many important actions (the normal March 15, 2026 deadline falls on a Sunday, so it is moved to the next business day under §7503). Below is a list of actions to consider in the next 10 days.
Most of the actions below can significantly affect a taxpayer’s compliance profile and tax liability and should not be undertaken without a thoughtful, paid tax planning analysis. If that has not been done and there is insufficient time to do so, most of these actions can be made prospectively to take effect mid-year, to take advantage of the benefits for a portion of tax year 2026.
Filing an Extension. Filing an extension not only avoids late-filing penalties but also preserves the right to file a superseding return (covered in this prior article) by the unextended due date of the tax return. Entities that plan to file timely should still consider filing an extension to preserve the right to file a superseding return.
Undoing a Prior Entity Election. An LLC can withdraw a prior election to be treated as a corporation before the unextended due date of the first entity return. This is ideal for unwanted S corporation elections; this is done by filing a withdrawal statement with the IRS Service Center. If the corporation election is withdrawn, the S corporation election is automatically terminated. See Internal Revenue Manual 3.13.2.27.10 (01-01-2024), Request to Withdraw Classification Election, for additional information.
LLC or Corporation Election to be Taxed as an S Corporation. The entity should file Form 2553, Election by a Small Business Corporation, by March 16, 2026, to make an S corporation election effective on January 1, 2026. For the LLC, no Form 8832, Entity Classification Election, is required; an entity is deemed to make the corporation election by filing Form 2553. See §1362(b)(1)(B) and Treas. Reg. §301.7701-3(c)(1)(v)(C).
LLC Election to be Taxed as a C Corporation. An LLC should file Form 8832 by March 17, 2026, for a C corporation election to be effective on January 1, 2026. The corporation election cannot be filed more than 75 days after the effective date; the timing differs from that for an S corporation election. See Treas. Reg. §301.7701-3(c)(1)(iii).
LLC Election to Revert to a Disregarded Entity or Partnership. An LLC should file Form 8832 by March 17, 2026, for the reversion to be effective on January 1, 2026. This is for LLCs treated as both C corporations and S corporations; no separate S corporation election revocation is required. See Treas. Reg. §301.7701-3(c)(1)(iii) and Internal Revenue Manual 3.13.2.23.17(4) (03-08-2023), Termination of S-Election.
Important reminder: if the initial entity classification election was not effective on the LLC’s formation date, the LLC must wait 60 months to elect to revert to its default classification unless there was a significant ownership change. See Treas. Reg. See Treas. Reg. §301.7701-3(c)(1)(iv) for additional information.
LLC or Corporation Revocation of an S Corporation Election. The entity should file a S corporation election revocation statement with the Service Center by March 16, 2026 to be effective on January 1, 2026. The effective date should be stated; if the IRS receives it after March 16, 2026, the revocation will be effective on January 1, 2027. After the revocation, the entity will be taxed as a C corporation. There is no IRS form for this action; the revocation statement must have all the elements outlined in the relevant Internal Revenue Manual provision. See §1362(d)(1)(C)(i) and Internal Revenue Manual 3.13.2.23.15(1) (03-08-2023) for additional information.
Examples. This prior article has several examples of the actions described above.
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