What Form 8832 (2017) Is For
Form 8832 lets eligible business entities choose how they are treated for federal tax purposes. This IRS Form 8832 election enables an entity to be taxed as a C corporation, partnership, or disregarded entity, rather than using its default classification.
An LLC formed under state statute can choose between pass-through taxation and entity-level taxation, depending on its goals. Filing Form 8832 also affects future tax obligations, how income is reported on a tax return, and which forms and schedules are applicable.
When You’d Use Form 8832 (2017)
When your default classification does not match the way you want to be taxed, you fill out Form 8832. An LLC with only one member can choose to be treated as a C corporation, or an LLC with more than one member can elect to become a corporation instead of filing Form 1065. You also have to file if a foreign entity wants a different federal tax classification or if you need help with an election that was made too late. Businesses that need to file taxes soon can use Form 8832 to ensure that the effective date aligns with their tax years.
Key Rules or Details for 2017
- Eligible entities only: Form 8832 applies only to business entities that are not automatically corporations, and these rules matter because certain business structures are restricted for federal tax purposes.
- Default classification limits: The Internal Revenue Service assigns a default classification to each entity, and this rule matters because Filing Form 8832 is necessary when you want something different.
- Timing for effective date: The effective date must fall within the IRS window, as choosing a date outside this range can cause processing issues.
- 60-month restriction: An entity generally cannot change its election again for 60 months, and this rule matters because switching classifications affects income reporting.
- Late election relief: The IRS allows late election relief when requirements are met, and this relief matters because it helps taxpayers correct missed elections.
Step-by-Step (High Level)
Step 1: Gather required business information
Collect the entity’s legal name, mailing address, Employer Identification Number, and taxpayer identification number. This information must match existing IRS paperwork to ensure the Internal Revenue Service processes the election correctly.
Step 2: Choose the correct tax classification
Decide whether the entity wants C corporation status, partnership treatment, or disregarded entity status. This decision determines how income is distributed to owners, how Schedule K-1 is utilized, and how self-employment tax is applied.
Step 3: Complete the classification questions
Answer ownership questions, prior election questions, and specific entity classification details. These responses determine whether the entity qualifies under check-the-box regulations and help the IRS verify the intended business structure for federal taxes.
Step 4: Enter the effective date
Select an effective date that fits within the IRS limits. The chosen date determines when the new classification begins for federal income tax purposes and affects which tax forms apply during the tax year.
Step 5: Obtain required signatures
Ensure all required owners or authorized representatives sign the form. Signatures confirm consent for the entity classification election and prevent delays caused by incomplete submissions at the IRS Service Center.
Step 6: Submit Form 8832 to the correct Service Center
Mail the completed form to the proper IRS Service Center based on your location. Using the correct address helps ensure timely processing and reduces delays that may affect upcoming tax obligations.
Common Mistakes and How to Avoid Them
- Using the wrong classification: Choosing an incorrect option creates reporting issues, and you can avoid this problem by reviewing federal tax classification rules. This step ensures that the entity’s tax return aligns with the intended structure.
- Missing the effective date window: An incorrect date can lead to automatic IRS adjustments. To prevent this issue, calculate the earliest and latest allowed dates. This care keeps tax planning consistent.
- Submitting without an EIN: Filing without an Employer Identification Number causes rejection, and you can avoid this delay by submitting Form SS-4 beforehand. This preparation ensures accurate processing of IRS Form 8832.
- Missing required signatures: Incomplete signatures can delay the election, so always verify that all necessary parties have signed. This step confirms the entity agrees to the new classification.
- Filing inconsistently later: Filing future returns using the wrong classification creates penalties, and you can avoid this issue by updating all forms and schedules. This consistency protects accurate reporting for federal taxes.
What Happens After You File
The IRS verifies the election and sends a confirmation letter to the address provided by the entity. If the IRS agrees, the new classification will take effect on the agreed-upon date. In case you haven't heard back in a few weeks, you can call the IRS Service Center to find out what's going on.
FAQs
How do I determine if my entity is required to file Form 8832?
You must file Form 8832 if you want a tax classification different from the IRS default. LLCs typically file Form 8832 when they choose to be classified as a corporation or when they change their status from a disregarded entity.
Can a single-member LLC use Form 8832 to become a corporation?
Yes, a single-member LLC can elect to be taxed as a C corporation or later file Form 2553 if it meets the requirements of an S corporation.
How does late election relief work for 2017?
Late election relief applies when the entity meets the IRS's requirements for reasonable cause and has consistently filed with the intended classification. You attach the explanation directly to the form.
Where do I send IRS Form 8832 for 2017?
You mail Form 8832 to the IRS Service Center listed in the Form Instructions for your state. The correct address depends on your entity’s location.
Do I need a new Employer Identification Number after changing classification?
No, most entities keep the same EIN even after changing their tax classification unless the IRS specifically requires a new one due to structural changes.
Does electing C corporation status create double taxation?
Electing C corporation status may lead to double taxation because the corporation pays federal taxes, and owners pay tax again on distributions. Reviewing tax planning needs helps determine if this is appropriate.
Can a foreign entity file Form 8832?
Yes, a foreign entity may file Form 8832 if it qualifies under IRS rules and wishes to obtain a different federal tax classification than its default status.
