What This Notice Means

The IRS is telling you it terminated your corporation's subchapter S election. Your corporation is no longer an S corporation for tax purposes.

An S election ends automatically when the corporation stops meeting the requirements, for example by having an ineligible shareholder or more than one class of stock. Read your notice carefully.

What to Do

  • File Form 1120, U.S. Corporation Income Tax Return, by the due date. See the Instructions for Form 1120.
  • Keep this notice in your permanent records.
  • Send a copy to your tax preparer right away.

Can You Re-Elect S Status?

Not soon. You must generally wait five years before making a new election.

If the Termination Was a Mistake

If you think the IRS has the facts wrong, call the number on your notice and find out exactly what it relied on.

If the event that ended the election really happened but was unintended, the law allows the IRS to treat an inadvertent termination as if it never occurred in some cases. That relief is not automatic. It requires a formal request and corrective steps. The sooner you act, the better your options.

Why It Matters

Losing S status changes how the business is taxed. A C corporation pays its own income tax, and distributions to shareholders can be taxed again. Five years is a long time to live with an unplanned change.

Filing Tips

  • File Form 1120 on time while the corporation is a C corporation.
  • Authorized e-file providers can file Form 1120 through the IRS Modernized e-File system.

If you received a CP265 notice and want to know whether your S election can be saved, call us at (813) 229-7100.