Form 8832

What Is Form 8832?

Every business structure has a default tax status under IRS rules. Form 8832, Entity Classification Election, is an IRS document used to change a business entity's default classification for federal income tax purposes. Only qualifying entities can use this form, such as:

• Limited liability companies (LLCs)
• Partnerships
• Certain foreign entities

With Form 8832, businesses can elect to be classified (or re-classified) as a corporation, a partnership, or a disregarded entity (part of the owner's income tax return).

Reasons to File IRS Form 8832

Form 8832 is commonly used by LLCs. For example, a single-member LLC (SMLLC) is usually taxed as a sole proprietorship by default (which is also treated as a disregarded entity by the IRS). A multi-member LLC (MMLLC) is generally taxed as a partnership. Both entities would need to file Form 8832 to change their tax election status.

If you formed an LLC to reduce your risk exposure as a business owner, you’ll still get that protection. However, if you want to maximize your tax savings, you may need to file Form 8832 to change your default LLC tax classification and request to be taxed as a C-corporation (you must file a different form to be taxed as an S-corp).

The form also includes options to move from being taxed as a corporation to being classified as a partnership or sole proprietorship. So, you could actively choose to revert to the default status if it would benefit your business.

Benefits of Filing IRS Form 8832

Filing IRS Form 8832 for entity classification election can yield three benefits for business owners:

1. Separate tax filings: You can report business income and expenses on a separate business tax return instead of your personal taxes.
2. Greater tax savings: You may save a lot more money on your taxes through special deductions, as well as self-employment and other types of tax savings.
3. Minimized requirements: You may simplify your finances and income tax filings if you elect to be taxed as a partnership or sole proprietorship.

Keep in mind that how much money you can save on taxes depends entirely on your individual business’s circumstances and which type of entity classification you elect for tax purposes.

What Information Do I Need to File Form 8832?

Before filing Form 8832, you should have several pieces of information on hand, including:

• Business name
• Business address
• Business phone number
• Employer identification number (EIN)
• Name and EIN of the parent corporation (if applicable)
• Owner’s name (if only one owner)
• Owner’s Social Security number (SSN) or ID number (if only one owner)

The form also requires you to know what your current tax status is and what status you would like to elect:

Part 1: Election Information

In this part of the form, you’ll answer questions about your tax election status, previous activity regarding entity classification and election, and the identity of either the owner or the parent corporation.

Question 6 requires you to indicate the type of entity classification you want your business to have:

• Choose option 6a to classify an LLC as a C-corporation.
• Choose option 6b to switch a multi-member LLC from C-corporation to partnership status.
• Choose Option 6c if you want your established single-member LLC that's taxed as a C-corporation to be taxed like a sole proprietorship (disregarded entity).
• Options 6d–f are for foreign eligible entities.

Line 8 allows you to designate a specific effect date for your updated tax status. If you don't provide one, the IRS will use your filing date. The effective date can't be more than 75 days before or more than 12 months after the form is filed.

Part 2: Late Election Relief

If you miss the filing deadline, complete this portion of the form. Pages six and seven in the instructions outline the criteria your business must meet to request late election relief.

How to File Form 8832

You can download Form 8832 on the IRS website and fill it in using any PDF editor. Once you've completed the form, you must print it and mail it to the correct address (electronic filing isn't an option). Where you mail the form depends on where your business is located.

Businesses in Connecticut, Delaware, Washington D.C., 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, and Wisconsin mail their forms to the following address:

Department of the Treasury
Internal Revenue Service
Kansas City, MO 64999

Businesses in all other states mail Form 8832 to this address:

Department of the Treasury
Internal Revenue Service
Ogden, UT 84201

If your business is in a foreign country or US possession, send it to the following:

Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0023

How Often Do You Have to File Form 8832??

You don't need to file Form 8832 annually. You can only file this form to change your tax classification status once every 60 months (five years). If you elect to change your tax status on the day you form your LLC, it's not considered a true change and would not be subject to the 60-day limitation.

Additionally, there's no deadline for filing Form 8832—it's based on your effective date and whether it meets the timeframe rules.

After filing Form 8832, the IRS will mail an acceptance or denial letter to the address you listed on the form. If you don’t hear back within 60 days, you can send a letter to the same address to which you mailed your form or call the IRS at 1-800-829-0115.

What's the Difference between IRS Form 8832 vs. 2553?

For those wondering when you would file Form 8832 vs. 2553, the former allows partnerships and LLCs to change their tax classification to C-corp or go back to being taxed as a partnership or sole proprietorship (if they're already taxed as a C-corp).

Currently, Form 8832 does not allow businesses to elect to be taxed as an S-corporation. If your LLC is eligible to be taxed as an S-corp and you wish to select this classification status, you must file Form 2553, Election by a Small Business Corporation with the IRS. Be aware that your business must meet all eight tests outlined on page one of the Form 2553 instructions to qualify.