What Form 8832 (2020) Is For
Form 8832 allows an eligible business to choose its entity classification for federal tax purposes. The form lets a business state whether it will be treated as a corporation, partnership, or disregarded entity, depending on its structure and goals.
This election will impact how federal taxes and federal income tax filings are processed in future tax years. Businesses must file when they want a classification different from the default rules set by the Internal Revenue Service, and they must obtain an EIN before submitting the form.
When You’d Use Form 8832 (2020)
You use Form 8832 when your business wants a classification that differs from its default status under Treasury Regulations. This applies when you change from partnership treatment to corporate treatment or from disregarded entity status to corporate status.
You also use it when coordinating tax forms such as Form 2553 or planning for upcoming tax years. Late or amended elections are available when you meet the requirements in Rev. Proc. 2013-30, especially when reasonable cause applies.
Key Rules or Details for 2020
- Eligible entities only: Eligible entities can use the election when they want a classification that supports specific business tax strategies.
- Effective date limits: Businesses can request an effective date up to seventy-five days before filing or twelve months after filing.
- Signature requirements: All required owners or authorized parties must sign using an electronic signature method allowed under Internal Revenue Manual rules.
- EIN requirement: An Employer Identification Number is required before filing Form 8832 for federal tax purposes.
- Additional filing obligations: Some elections require coordination with other tax forms, such as Form 1120, Form 1120-C, or Form 1065.
Step-by-Step (High Level)
Step 1: Gather entity details
Collect ownership information, social security numbers, and the Employer Identification Number. This ensures the Internal Revenue Service can correctly match your tax document with your account.
Step 2: Complete Part I accurately
Provide classification details, prior elections, and ownership structure. This section outlines how your entity will be treated for federal tax purposes and explains the process for future filings, such as Form 1120 or Form 1065.
Step 3: Choose the effective date
Select a valid effective date within the allowed timeframe. This date determines when your new entity classification takes effect and how it impacts your current tax return.
Step 4: Obtain all signatures
Use an approved electronic signature method, such as a digital signature or signature pad. This ensures compliance with IRS Electronic Signature guidelines and avoids delays in processing.
Step 5: File the form
Submit the completed form using the correct address listed by the Internal Revenue Service. This ensures timely processing and helps align the classification with future filings such as Form 1040 or Form 1120.
Common Mistakes and How to Avoid Them
- Incorrect entity type selection: Some filers choose a classification that does not align with their long-term business goals. You can avoid this by reviewing entity classification rules with a tax professional.
- Invalid effective date: Filers sometimes select an effective date outside the permitted timeframe. You can prevent this mistake by confirming that the date falls within the federal rules.
- Missing signatures: Missing signatures can delay processing and impact the consistency of tax returns. You can avoid this by confirming that all owners complete digital signatures that satisfy Internal Revenue Manual requirements.
- Using an incorrect EIN: Using an inactive or incorrect Employer Identification Number causes IRS matching problems. You can prevent delays by verifying the EIN before submitting your form.
- Not attaching required copies: Some filers forget to attach the accepted form to their income tax return. You can avoid this by adding a copy when preparing all related tax forms.
What Happens After You File
The Internal Revenue Service reviews the submitted form and sends a notice stating whether the election is accepted. If accepted, the classification begins on the effective date you selected, and all future filings must follow the new treatment. This decision affects filings such as Form 1040, Form 1120, Form 1065, and other related tax forms. You should retain the acceptance notice with your tax document records for future reference.
FAQs
What entity types can Form 8832 elect for federal tax purposes?
Form 8832 allows an eligible entity to elect treatment as a corporation, partnership, or disregarded entity. These elections determine which tax forms you file and how federal income tax rules apply to your business.
Do I need Form 2553 if I want to become an S corporation?
Form 2553 is required for S corporation status. Form 8832 handles the Entity Classification Election, but S corporation treatment must follow Section 1362 rules and requires the Shareholder's Consent Statement.
Can I use electronic signatures when filing Form 8832?
Yes, the IRS allows electronic signature procedures under the IRS Electronic Signature Program. Digital signatures and biometric-based identifiers are acceptable when they follow the e-Signature Program guidance.
What if I need to request a different fiscal year after filing Form 8832?
A business can request a change to its fiscal year using Form 1128 when necessary. This request must follow the procedures outlined in Section 444 and the applicable Treasury Regulations.
Can community property rules affect an entity classification election?
Yes, community property rules may impact how ownership interests are taxed for federal purposes. Pub. 555 guides how community property affects income tax filings and elections.
Does Form 8832 affect estate or gift tax filings?
Form 8832 affects entity classification only. Estate and gift tax filings, such as Form 706, Form 709, or Form 3520, follow separate federal tax rules and are not changed by this election.
How do I know if my election is accepted?
Upon processing the election, the Internal Revenue Service dispatches a confirmation letter. You should keep this letter with your tax records, along with any related forms such as Form 2848 or Form 3115 if used in your tax practice.
