Understanding Form 8832
What is Form 8832?
Form 8832, Entity Classification Election, is used by some domestic and foreign businesses to choose how the IRS classifies them for tax purposes. Business owners wishing to change their business tax model do not need to start a new enterprise or business entity. By filling out Form 8832, certain businesses can select whether they want to be taxed as:
– C Corporation
– Disregarded Entity
Essentially, a partnership means multiple owners and a disregarded entity means a single owner. If you are wanting to be taxed as a corporation, you’ll also need to file articles of incorporation with your secretary of state before filing Form 8832.
Note: in order to tax your LLC as an S Corporation, you’ll need to file Form 2553 instead of Form 8832.
Who needs to file Form 8832?
Form 8832 is not mandatory, however if you don’t file it, the IRS will tax you based on your default entity classification, and you might end up paying more than you need to. Through making the right election, you can save thousands of dollars every year.
Businesses eligible to file Form 8832 are:
– Domestic partnerships
– Foreign partnerships
– Domestic LLCs
– Foreign LLCs
– Foreign corporations in certain jurisdictions
– US-owned foreign corporations in certain jurisdictions
Businesses who are typically not eligible to file Form 8832 are:
– Domestic corporations
– Foreign corporations listed in IRS Regulations 301.7701-2(b)(8)
What are the effects of making an election on Form 8832?
Electing a new tax status has a big impact on your business.
Partnership to Corporation:
If your business is currently structured as a partnership and you elect to be treated as a corporation, your partnership will be liquidated. All of the assets and liabilities within this former partnership will be sold for stock in the new corporation, and then be distributed amongst the former partners.
Corporation to Partnership:
If your business is currently structured as a corporation and you elect to be treated as a partnership, the corporation will be dissolved. All of the assets and liabilities within this former corporation will be distributed to shareholders, who will then contribute these items to the new partnership.
Corporation to Disregarded Entity:
If your business is currently structured as a corporation and you elect to be treated as a disregarded entity, all of the company’s assets and liabilities will be allocated to the one owner.
Disregarded Entity to Corporation:
If your business is currently a disregarded entity that is separate from its owner and elects corporate tax status, the owner will contribute all obligations and assets to the corporation.
When is Form 8832 Due?
Because Form 8832 isn’t mandatory, it doesn’t really have a deadline. You are able to file it at any point and change an entity classification throughout the life of an eligible business. For example, you may wish to choose to File Form 8832 at the same time you start your business, or a decade in.
However, when you file Form 8832, the date you choose in which the change in classification will take effect must fit in the following time frame:
– Up to 75 days before you file the form
– Up to 1 year after you file the form
If you don’t choose a date, then the effective date will be the same as the date on your Form.
How long do I need to wait to file another Form 8832?
Typically, you can only change your entity’s classification once every five years. However, there are a few exceptions – so talk to your accountant to see if this is possible.
What information is required to complete Form 8832?
Form 8832 is only a single page that requires the business name, address, phone number, and tax identification number of the entity, alongside an election (by checking the box) and a signature by the eligible members, partners or officers of the entity.
How do I fill out Form 8832?
If you decide to make a change in the entity classification of your business, first review the IRS instructions for Form 8832. Then, you can download the form from the IRS website.
Fill out your basic business information at the top of the form.
Check the box for how you want your business to be taxed in Part 1: Election Information.
You will only need to fill out Part 2: Late Election Relief if you want to set an effective date earlier than 75 days before your filing date. By filling this out, you are requesting that the IRS make an exception. If you don’t want an exception, then skip this part entirely.
What if I’m way behind on my U.S. tax returns?
There is a special IRS program to help you catch up on your U.S. taxes safely, without fines and penalties
It’s for American citizens that didn’t know they had to file U.S. tax returns each year, and have therefore fallen behind. Some more than 30 years! With the IRS Streamlined Procedure, say goodbye to overdue tax returns, late fees, and penalties. If you have children, we can backdate your Child Tax Credit Refund for 3 years.
Get a quote here.
Where should Form 8832 be filed to?
Where you file Form 8832 depends on where you reside. Different locations have different mailing addresses.
You need to submit one copy to one of the below IRS offices and another copy needs to be attached to the income tax or information return of the entity, or with Form 1040 of an individual elected by the entity to be treated as a disregarded entity.
|If you are located in:||Address to Mail Form 8832 to IRS:|
|Connecticut, Delaware, District of Columbia, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia, West Virginia, Wisconsin||Department of the Treasury
Internal Revenue Service
Kansas City, MO 64999
|Alabama, Alaska, Arizona, Arkansas, California, Colorado, Florida, Georgia, Hawaii, Idaho, Iowa, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Tennessee, Texas, Utah, Washington, Wyoming||Department of the Treasury
Internal Revenue Service
Ogden, UT 84201
|A foreign country or U.S. possession|
|Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0023
What are the penalties for not filing Form 8832?
Because the form is not mandatory, there aren’t any penalties. However, it is advantageous to choose whether the entity will be taxed like a partnership, as a corporation, or to be disregarded for uta purposes (single owner entity) and taxed like a proprietorship.
How long does Form 8832 take to prepare?
The IRS estimates the following time investments into preparing Form 8832:
– Recordkeeping: 2 hours and 46 minutes
– Learning about the form: 3 hours and 48 minutes
– Preparing and sending the form to the IRS: 36 minutes
If you are wanting to be taxed as a corporation, you’ll also need to take the time to file articles of incorporation with your secretary of state before filing Form 8832.
Spread the word. Please share… 👉