How to Fill Out IRS Form 8832.Hi, I'm Priyanka Prakash, senior staff writer.at Fundera..Today, I'll show you how to fill out IRS Form.8832: Entity Classification Election..This form is used whenever a business wants.to opt out of default tax treatment for federal.tax purposes..A common example is when a limited liability.company (LLC) wants to be taxed as a C-corp..By default, a single-member LLC is taxed as.a disregarded entity, and a multi-member LLC.is taxed as a partnership..This means that business profits and losses.passed through to the owners’ personal income.tax returns..However, if you correctly fill out and submit.Form 8832, you can elect for the LLC to be.treated as a C-corp for federal tax purposes,.and the business will pay a corporate income.tax..Okay, let's get started with the form..Start by providing your basic business information.at the top, including your business name,.address, and phone number..I'm going to provide this information for.a sample business called ABC Bakery LLC..Note that you need an EIN or employer identification.number before filling out and submitting Form.8832..If your business does not already have an.EIN, you'll first need to apply for one using.IRS Form SS-4..However, if you already have an EIN for your.business, there's no need to apply for a new.one now..In general, if you already have an EIN, you'll.continue to use that same EIN for Form 8832.and going forward..Check off this first box if you've changed.your business address after filing Form SS-4.or your most recent tax return..The other two boxes are for late tax classification.relief..When you file Form 8832, the IRS will take.your date of filing as the effective date.of your new tax status unless you provide.an alternate date..You cannot provide an alternate date that's.more than 75 days before you file the form.or more than one year after you file the form..If you fail to file Form 8832, but would like.to apply your change in business tax status.to previous tax years, then you should check.off this box which says late classification.relief sought under revenue procedure 2009-41..If you have reasonable cause for not filing.form 8832, you typically can qualify for late.election relief as long as no more than three.years and 75 days have passed from your requested.effective date of the tax election..This last box which refers to revenue procedure.2010-32 applies to certain types of foreign.business entities..In this case, none of these boxes apply to.ABC Bakery LLC, so I'm going to skip and go.down to Part 1..Part 1 of the form is about election information..In item 1, indicate whether you have a newly.formed business and are electing a tax classification.for the first time, or did you already elect.a tax classification and now you'd like to.change it?.For example, maybe you had an LLC that elected.C Corp tax status, but now you'd like to revert.back to the default tax treatment..In this example, I'm going to assume that.ABC Bakery is making its initial tax classification.and check off box a..Next, we go to item 2a..In general, once you change your tax classification,.the IRS won't let you change it again for.60 months..That's five years..However, if your ownership significantly changes,.by 50% or more, the IRS can make an exception..New businesses, such as ABC Bakery in our.example, will check off “no” in this question..In this case, we can skip item 2b..This question just indicates that only a change.in your tax classification subjects you to.that 60 month rule which I just mentioned..If you elect a classification for a new business.that's effective on the business’s date.of formation, you're allowed to make another.election, and the 60 month rule won't apply.to you..Item 3 essentially tells you your tax status.options after filling out and submitting Form.8832..If you have a solely owned business, you can.choose to either be taxed as a disregarded.entity, which means the business profits and.losses will flow through to your personal.tax return..Or, you can choose for your business to be.taxed as a C-corp, in which case the business.will pay a corporate income tax..Businesses with multiple owners can choose.to be taxed either as a C-corp or as a partnership..In the case of a partnership, the business.profits and losses will flow through to each.partner’s personal tax return..You also have the choice to elect to be taxed.as an S-corporation, but that requires a completely.different form called Form 2553..In this example, let's say that ABC Bakery.is a two person LLC owned by Betty Business.and Chris Corporate..I would select the first box in item 3, and.then I can skip item 4, which applies only.to solely owned businesses..I can also skip question 5 because none of.the owners of ABC Bakery are corporations..Both owners are individuals..item 5 is probably the most important question.on Form 8832..This is where you choose your desired tax.status for your business..In this example, I have a domestic US-based.LLC that's choosing to be taxed as a C-corporation,.so I'll check off the first box..I'll skip item 7, which applies only to foreign.entities..In item eight, I need to provide the effective.date of my tax election..Let's say that ABC bakery wants their new.tax election to take effect starting in 2020..I'll type in January 1, 2020 as my desired.effective date..Remember that if you leave this field blank,.the IRS will use the date of your filing as.the effective date of your tax status..In item 9, note the name, title, and phone.number of the business contact person that.the IRS can get in touch with if they have.any questions about this form..In this example, let's say that the contact.person is Betty Business, who's the CEO of.ABC Bakery..In item 10, have all business owners sign.and date the form and provide their title..Generally, all members of an LLC must sign.the form..Alternatively, any officer or owner should.sign who's authorized by the bylaws or organizational.documents to make this tax election..In this example, I would have both Betty and.Chris sign and date the form after printing.it out..For now, I'll just put in their titles: CEO.for Betty, and let's say that Chris is the.chief financial officer or CFO..Part 2 should only be completed if you're.requesting late election relief for filing.Form 8832..In this section, you'd provide a reasonable.cause for the delay..For example, there could have been a postal.error, or maybe your accountant did not mail.the form in on time..If you do fill out Part 2, you and other business.owners or officers would have to sign at the.bottom of the page and date and provide your.titles..And that's it..You've now completed Form 8832..The cover page at the top will tell you the.filing address based on which state your business.is in..You also should attach a copy of Form 8832.to your business's federal tax return or information.return for the tax year of the election..For example, if you use this form to convert.from an LLC to a C-corporation for tax purposes,.you should attach a copy of your completed.Form 8832 to Form 1120, which is the federal.tax return form for C-corporations..The IRS will notify you within 2 months if.they've accepted requested tax election or.not..We hope this was helpful in filling out Form.8832..For more tax information and small business.insights, head over to https://fundera.com/blog,.and subscribe to our YouTube channel for more.videos..Thank you for watching, everyone..
