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Form 8832: Entity Classification Election

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Form 8832: Entity Classification Election

American laws allow several kinds of business entity formation so you can put your aspirations into reality. As an entrepreneur, you have many business structures to choose from according to your unique business needs like LLC, partnership, sole proprietorship, an S corporation or a C corporation. Once you have a chosen business structure for your company, you must file federal and corporate taxes with the Internal Revenue Service (IRS). This is where the confusion starts. There’s a mountain of forms you need to file with the IRS. As a business owner, it’s also crucial to adhere to the regulations so that you don’t face any legal hurdles while running the entity. But don’t be afraid; we’ve got you covered, at least when it comes to Form 8832, which is used to select how you want your business to be taxed. As a business owner, it’s also your responsibility to keep the expenses low, and Form 8832 can help you with that.

Table of contents

What’s Form 8832?...Read more

How to use Form 8832 “Entity Classification Election”...Read more

What’s the eligibility requirement for Form 8832?...Read more

Filing Form 8832 to be taxed as a C corporation...Read more

Filing Form 8832 to be taxed as an S corporation...Read more

Filing Form 8832 to be taxed as a sole proprietorship or partnership...Read more

How to fill Form 8832?...Read more

Filing a Form 8832...Read more

What’s Form 8832?

The IRS Form 8832 is for a corporation (like an LLC), a partnership or an entity that is disregarded as separate from its owner. For this reason, the form is used by corporations, limited liability companies (LLC) and partnerships to indicate and modify their tax classification with the IRS. Your tax bill is influenced by how you want your business to be taxed and your goal must be saving so that you can reinvest the money or find a better use for it. Take advantage of tax tools, like a tax estimate calculator to help with taxes. The selection for being taxed as an LLC or partnership depends on which one of the two will lead to a smaller tax bill. You file Form 8832 to change the classification to save on taxes.

How to use Form 8832 “Entity Classification Election”

Despite creating a complex web of regulations and forms, the IRS is quite thoughtful, and Form 8832 is one example of its thoughtfulness. Because this form gives you a chance to adapt according to the changing circumstances and status of your business. For example, if your company filed as a C corporation for the 2023 tax year, lands in some financial trouble, and ends up making less money than the previous year, you can switch to being taxed as a partnership, an LLC or a sole proprietorship. Although the transition must satisfy certain requirements. For example, if you switch to being taxed as a sole proprietorship, you can only have one employee – who is also the owner. You'll still need to keep a track of your deductions, and you can use a tax deduction calculator to help. The form below takes information about your name, employer identification number (EIN) and other details to check if a certain company is eligible.
Form 8832 for Entity Classification Election by the Department of Treasury, IRS. Information about eligible entity, election type, and prior election. Taxes, self-employed, 1099, freelancer.
Given that you satisfy these regulations, you can use Form 8832 to change the classification your business entity.

What’s the eligibility requirement for Form 8832?

Sole proprietors are not eligible to file this form. This is because they already reap the benefits of having only one employee and minimal paperwork to set up. C Corporations are also ineligible to file. The filing deadline for Form 8832 is 75 days before the date of the election of the entity, which can be extended to 12 months after the election date. If you somehow miss the last date for filing the form, you can still file it, provided the reason is lateness alone and not some irregularity with your filing. In addition, the reason for the delay must be valid.
Image of Form 8832 for Entity Classification Election. Check eligibility & get owner consent. Part II only for late filers. Relevant for taxes, self-employed, 1099, and freelancers.

Filing Form 8832 to be taxed as a C corporation

If you’re already an LLC, you can choose to file as a C corporation. But keep in mind that a C-Corp is taxed separately from your income, which means that it has double taxation. Once when the company is taxed, the second is when you pay taxes on your income. However, there are several advantages of a C Corp:
  • You can write off many expenses like salaries, charitable contributions, health insurance premiums for employees, etc.
  • Your tax cap is 21%, which can be less than the tax rate in case of pass-through taxes.
  • Your assets are protected against company liability and debts.
  • It is highly flexible in terms of paying your taxes during a financial year.

Filing Form 8832 to be taxed as an S corporation

Using the entity classification election, you can also choose to be taxed as an S Corp. Unlike a C corporation, an S corp allows pass-through taxes, and the owners can allocate a ‘reasonable salary’ to themselves. The benefits of an S corporation are:

Filing Form 8832 to be taxed as a sole proprietorship or partnership

If you are an S corporation or C corporation, you can choose to backtrack and go back to being taxed as a sole proprietorship or partnership. This could be due to reasons like:
  • You like the simplicity of a partnership in a multi-party setting.
  • You broke up with your partners and want to work as a sole proprietorship.
  • You don’t want to deal with a mountain of regulations.

How to fill Form 8832?

The IRS 8832 form has two parts. The first part has six questions to check your eligibility for a change of classification. This part also determines the number of owners in the corporation, their consent for changing the classification and employer identification number (EIN), the name of the owner(s) or the EIN of another corporation that is an owner. The owners, officers, managers, and stockholders of the corporation must sign part one of the form. The second part of the form features the section to file the form after a deadline. It’s more for explaining the reasons for not filing the request to change the classification on time.
Image of Form 8832 with text listing permissible businesses that can choose different classifications including single-person/multi-party, S corporation, LLC, C corporation, and FLYFIN. No mention of self-employed, 1099, freelancer, or taxes.

Filing a Form 8832

Once you have all the information in place, you can fill the form at one of the following two addresses:
  • Department of the Treasury, Internal Revenue Service Center Kansas City, MO 64999
  • Department of the Treasury, Internal Revenue Service Center Ogden, UT 84201
You can send the form on one of these addresses, depending on the state you live in.

Form 1041-ES

Manage and pay your estate taxes with Form 1041-ES. Estate owe quarterly taxes if their liability is more than $1,000.

Schedule K-1

There are different Schedule K-1 forms for partnerships, S Corps and trusts. Schedule K-1s should be issued to taxpayers no later than March 15.

Form 1065 (Partnership)

If you are an owner of a partnership, then you also need to be up-to-date with all forms used to file the IRS taxes.

Tax Forms for LLC

There are certain tax requirements and forms needed for an LLC business. Check how you can file your tax return as an LLC company.

Tax Forms for Sole Proprietors

When you are an owner of a Sole Proprietorship, you have to file all your taxes and keep up with forms like the Schedule C of 1040, Form 940, 941 and 944.

Form 1120-S (S Corp)

Form 1120-S is the tax form needed for S corporations. There are certain tax requirements to fulfill for S Corps.

Form 1120 (C Corp)

Tax form 1120 is used for C Corporations to report profits, losses, gains, deductions and credits. Here’s how you can file your C corp taxes.

Tax Forms for NPOs

To maintain their 501c3 tax-exempt status, nonprofits have to file a Form 990 with the IRS to be in step with state and federal regulations.

Do LLCs get 1099s

1099 forms are normally used to report payments to independent contractors and freelancers, but they can report payments to LLCs.

Form 1041-ES

Manage and pay your estate taxes with Form 1041-ES. Estate owe quarterly taxes if their liability is more than $1,000.

Schedule K-1

There are different Schedule K-1 forms for partnerships, S Corps and trusts. Schedule K-1s should be issued to taxpayers no later than March 15.

Form 1065 (Partnership)

If you are an owner of a partnership, then you also need to be up-to-date with all forms used to file the IRS taxes.

Tax Forms for LLC

There are certain tax requirements and forms needed for an LLC business. Check how you can file your tax return as an LLC company.

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