What Is IRS Form 8832 and Do You Need It? A Simple Guide for US and International Business Owners
If you want the entity to be treated differently (e.g., as a disregarded entity or partnership), you must file Form 8832. Before using Form 8832, it’s important to understand how your business is treated automatically for tax purposes. Entrepreneurs and nonprofit leaders should also stay connected to ongoing resources. The IRS website supplies up-to-date forms and instructions, while industry peers and advisors can offer hands-on experience and practical tips from their own entity classification journeys. You can find IRS Form 8832 on the IRS website The first page of the form has information about where to mail your tax forms.
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In this article, explore the essentials that could make a big difference for your business. This part of Form 8832 is only required if you are seeking late election relief (otherwise, you may skip it). The IRS has a resource page explaining the rules for late election relief. In this position, he helps business owners at nearly every level and in nearly every industry with asset protection, estate planning, and business formation.
Sign the consent statement.
That’s why it’s a good idea to talk to a tax professional or other financial advisor to help you make the right choice before filing Form 8832. If the late election relief requirements aren’t met, you can still seek relief by requesting a private letter ruling from the IRS. If your business is an eligible entity and you want to take advantage of this opportunity, use Form 8832 to let the IRS know how you would like the business to be classified. You can use the form for a newly-formed business that’s selecting its initial classification, or for an existing business that wants to change how it’s classified.
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Unless otherwise stated, each offer is not available in combination with any other TurboTax offers. Certain discount offers may not be valid for mobile in-app purchases and may be available only for a limited period of time. It’s usually best to send a copy of Form 8832 with the original signatures (in other words, don’t send a copy of the original form). Get $30 off your tax filing job today and access an affordable, licensed Tax Professional. With a more secure, easy-to-use platform and an average Pro experience of 12 years, there’s no beating Taxfyle.
This form is particularly relevant to LLCs—both single-member and multi-member—as well as partnerships and certain foreign organizations operating in the U.S. For example, newly formed LLCs might file Form 8832 if their business plans require corporate taxation, while partnerships may seek to avoid partnership status for various strategic reasons. It’s also vital for organizations with changing ownership structures or plans for significant capitalization.
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Here are instructions on how to fill out IRS Form 8832, as well as FAQs to figure out whether your business is eligible to complete IRS Form 8832. Cassie is a former deputy editor who collaborated with teams around the world while living in the beautiful hills of Kentucky. Focusing on bringing growth to small businesses, she is passionate about economic development and has held positions on the boards of directors of two non-profit organizations seeking to revitalize her former railroad town.
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For instance, choosing C corporation status may reduce taxes on profits retained within the LLC, whereas S Corporation status can reduce self-employment taxes for owners. Plus, filing Form 8832 allows LLCs to change how they’re taxed, which can be strategic as the business grows. This flexibility can help you manage your income tax burden more effectively and align your tax strategy with business goals. In addition to mailing the form to the IRS, you must attach a copy of Form 8832 to the business entity’s federal tax or information return for the tax year of the election.
It just allows eligible business owners to change their entity classification if they want to. Just a heads up – I submitted a late Form 8832 back in March with what I thought was a good reasonable cause statement (basically said I didn’t know about it), and it got REJECTED. Make sure you’re really specific about why you didn’t know and what steps you took once you found out. I had to resubmit with a more detailed statement that explained I was a first-time business owner, didn’t have an accountant initially, and submitted immediately after learning about the requirement during tax prep.
Those without an EIN must apply for one with the SS-4, Application for EIN, and they must have the EIN number before submitting Form 8832. First, review the IRS instructions for Form 8832 and gather the information you’ll need to complete it. Then, download the form from the IRS website.At the top of the form, fill out your basic business information, such as its name, mailing address, and employer identification number (EIN). Filing outside the 75-day window before or the 12-month window after the desired effective date may lead to the IRS denying the election automatically. By following a semantic, structured approach, this article will cover the nuances of LLC tax elections in depth. TurboTax Live Assisted Business is perfect for partnerships, S-corps, LLCs and sole proprietorships.
- Which direction you should take depends on the unique facts and circumstances surrounding your business.
- Part 1 is in the form of a questionnaire that asks about the current classification of your business and your history in regards to filing for a new classification.
- It can also be used if your LLC is currently being taxed as a C Corporation, but you would rather be taxed as a partnership or sole proprietor.
- The address depends on where your business is, and it appears on the first page of Form 8832 PDF.
- When a business owner is an employee—as is required to file as an S-Corp—they have to pay self employment taxes, which can be quite costly.
- Late relief, when it is granted, allows you to classify your business entity differently for past taxable income.
- That person can guide you through the ins and outs of this form — and whether changing your tax status is the right move for your business in the first place.
- If you need the new status of your entity to be applicable to previous financial activity, you can apply for late relief.
Also, an incorrect election can affect how the liability company is taxed, possibly impacting your personal tax obligations. To avoid this, review all information about Form 8832, keep copies of your paperwork, and respond promptly if the IRS reaches out with any questions to ensure your election is correctly accepted by the IRS. An LLC with multiple members defaults to being classified as a partnership. However, by filing Form 8832, your LLC can elect to be taxed as a C corporation, allowing it to benefit from corporate tax rates or even as an association taxable as a corporation. Line 3 – Indicate whether there is more than one owner of your business.
Forms & Instructions
Late relief, when it is granted, allows you how to file irs form 8832 to classify your business entity differently for past taxable income. You may not be approved for late relief, but the form requires that you provide an explanation as to why you did not file as intended previously. Line 7 is only for foreign entities, which will provide the foreign country of organization. On line 8 you provide the month, day, and year that you would like your new tax status to take effect.
If yes, you can elect to be classified as a partnership or association that is taxable as a corporation. If no, you can elect to be classified as an association taxable as a corporation or you can choose to be disregarded as a separate entity. Many businesses are able to reduce their tax liabilities by using Form 8832 to change their tax election status in the eyes of the IRS. In some cases, there’s even the potential to save thousands of dollars in taxes during the year. However, changing your designation is not as simple as snapping your fingers and that’s why we put together the form 8832 instructions below so you can make an election.