IRS Form 8832: Understanding Entity Classification Election for Businesses

IRS Form 8832 allows you to choose how your business is classified for federal tax purposes, such as a corporation, partnership, or disregarded entity. This election can have a significant impact on your tax obligations and filing requirements with the IRS, so understanding your options is crucial for effective planning and compliance.

If you operate an LLC or other eligible entity, you likely have more flexibility in your tax classification than you realize. The IRS assigns a default tax status to your business when you form it, but with Form 8832, you can request a change to better suit your needs and goals. This process can help you optimize how your business is taxed, whether you’re starting up or responding to growth.

Learning when and why to submit Form 8832 is important so you don’t miss opportunities for savings or inadvertently choose a structure that doesn’t fit. By exploring your options with this IRS form, you can take greater control over your business’s tax future and make informed decisions from the start. For a complete overview of how this works, see the official information on Form 8832 at the IRS website.

What Is IRS Form 8832?

IRS Form 8832 lets you decide how your business will be taxed at the federal level. You use it to choose a classification that fits your specific type of business structure and tax needs.

Purpose and Overview

Form 8832 is officially called the “Entity Classification Election.” It allows an eligible entity, such as an LLC or partnership, to choose how it is classified for federal tax purposes. By default, the IRS assigns a tax classification based on your business structure, but this form gives you the flexibility to change it.

You can elect for your business to be taxed as a corporation, partnership, or as a disregarded entity. For example, a single-member LLC can use this form to be taxed as a corporation instead of a sole proprietorship. Making a classification election can change how your business reports income, pays taxes, and files returns.

The ability to choose your tax treatment can have a significant impact on your tax obligations, so it’s important to consider your options carefully. More details about the form and its function are available on the IRS’s official page for Form 8832.

Who Should Use Form 8832

Eligible entities for Form 8832 include domestic LLCs, partnerships, and certain foreign entities. If your business wants a different tax classification than the default set by the IRS, you should consider filing this form.

You do not need to use Form 8832 if you accept the default classification. However, if you’re looking to have your LLC taxed as a corporation or change your existing status, filing is necessary. Common scenarios for filing include LLCs wanting to be taxed as C corporations or partnerships.

The selection you make on IRS Form 8832 will determine your federal tax reporting requirements going forward. Businesses should review the IRS instructions for Form 8832 or consult a tax professional before submitting the form to avoid unintended consequences.

Eligible Entities for Form 8832

Form 8832 allows certain business entities to choose how they are taxed for federal purposes. Not every business qualifies, so it is important to know if your structure meets the requirements before you file.

Domestic and Foreign Businesses

Both domestic and foreign entities may qualify to file Form 8832. Domestic businesses typically include Limited Liability Companies (LLCs) and partnerships created under U.S. laws.Foreign entities can also use the form if they are recognized as eligible entities by the IRS and are not automatically classified as corporations for federal tax purposes.

Entities classified as corporations by default, such as certain banks or insurance companies, do not qualify for this election. Reviewing the IRS guidelines helps you verify if your business fits the “eligible entity” definition.

Domestic entities gain more flexibility with federal taxation when they meet the requirements. Foreign businesses need to consider any treaties or local laws influencing IRS eligibility.

Single-Owner Entities

A single-owner business, such as a single-member LLC, is typically considered a disregarded entity unless an election is made. By default, the IRS treats these entities as part of the owner’s tax return.

Filing Form 8832 lets a single-member LLC elect corporate taxation if preferred.You might choose this election for liability reasons, tax planning, or investment purposes. However, some entities like sole proprietorships that are not formed as LLCs cannot use this form.

Make sure the single owner listed on Form 8832 matches what the IRS has on file, as mismatched information can delay processing. More details are available from the official IRS guide on Form 8832 eligibility.

Partnerships and Limited Liability Companies

Multi-member LLCs and general partnerships are commonly eligible to use Form 8832.By default, the IRS treats a partnership or multi-member LLC as a partnership for tax purposes, but you can elect to be taxed as a corporation if it benefits your operations.

Using Form 8832, a partnership or LLC may choose between partnership and corporate tax classification. Some states may have their own rules regarding the classification, so always review state requirements separately.

LLCs in particular use this form to access tax treatment that fits specific business goals. Learn more about making a classification election at the IRS official page.

Entity Classification and Tax Implications

Your choice of entity classification on IRS Form 8832 determines how your business is taxed at the federal level. Making the right election can impact your liability, reporting requirements, and overall tax obligations.

Default Classification Rules

When you form a business entity, the IRS applies default classification rules for tax purposes. Single-member LLCs are treated as “disregarded entities,” meaning the IRS considers them sole proprietorships for federal tax purposes unless you file to change the status. Multi-member LLCs default to partnership status. Some eligible entities may also default to corporate status based on their structure.

If you do not file Form 8832 to elect a different classification, your business will continue under these default rules. For example, an LLC with two owners will be taxed as a partnership, unless you elect to be taxed as a corporation. Understanding these defaults is important because they dictate your ongoing federal tax filing requirements and tax rates.

Refer to the IRS guidance on LLC classification for more details on how the defaults may affect your business.

Classifying as a Corporation or Partnership

Form 8832 allows certain entities to elect to be classified as a corporation or a partnership for federal tax purposes. You can use the form to have your business taxed as a C corporation, which may be beneficial if you want to separate business profits from personal income for tax reasons. By contrast, a partnership classification passes income and losses through to the owners’ individual tax returns.

The election process on Form 8832 requires you to specify the entity type and effective date. Once elected, the change takes effect as indicated on the form. Not all elections can be reversed without waiting a period of time, so the decision is significant for your tax planning. For further details, visit the IRS page about Form 8832.

Impact on Federal Tax

How your entity is classified directly affects your federal tax obligations. A corporation pays taxes separately from its owners, subject to the current corporate tax rate. Owners of partnerships or disregarded entities report income and expenses on their personal returns, which could lead to different tax liabilities compared to corporate taxation.

Switching your business’s classification may also change the types of IRS forms you must file, your eligibility for certain deductions, and your responsibility for self-employment taxes. It is also important to consider the level of administrative burden and compliance costs before making a classification election. It’s always a good idea to review IRS information about entity elections and tax treatment for a clearer understanding of how this decision impacts your federal tax.

Making the Entity Classification Election

When choosing how your business is classified for federal tax purposes, specific steps and rules apply. You must use IRS Form 8832 to make what is often called a “check-the-box” election for an LLC, corporation, partnership, or other eligible entity.

Completing Form 8832

To start, download IRS Form 8832 directly from the IRS website. The form will ask for your business’s legal name, address, Employer Identification Number (EIN), and the type of entity making the election.

You’ll need to select the desired classification, such as corporation, partnership, or disregarded entity, by checking the appropriate box. Review each section carefully, as incorrect or missing information can delay processing.

Be prepared to sign and date the form. If your business has multiple owners, a person authorized to act on behalf of the entity must sign. Mailing instructions are included on the form.

Election Information and Requirements

Eligibility to file Form 8832 depends on your business structure. Most domestic LLCs can use the form to elect to be taxed as a corporation, partnership, or disregarded entity. Foreign businesses with U.S. operations may also use Form 8832 to select their preferred classification.

You cannot make a new election if you’ve made a prior classification election within the last 60 months unless there was a substantial change in ownership. Carefully review the instructions regarding timing, as some exceptions may apply for newly formed entities.

The IRS requires strict compliance with filing deadlines and signature requirements. Failing to meet these can result in your default classification being applied. You can learn more about the filing rules from the form instructions.

Effective Date of Election

The effective date you choose for your classification change is important for tax reporting. You may select a date up to 75 days before or up to 12 months after the IRS receives your completed Form 8832, as long as it complies with the IRS’s eligibility rules.

If no date is specified, the default effective date is the date the IRS receives your form. Choose your date carefully, since it can impact your tax obligations and filings for prior or upcoming tax periods.

Be aware that retroactive elections have specific requirements, and submitting late can affect your ability to change your classification. 

Special Considerations for LLCs and S Corporations

LLCs and S corporations face specific tax rules when choosing how to be classified by the IRS. The way you file can affect tax obligations, administrative requirements, and eligibility for different tax benefits.

Choosing S Corporation Status

If you operate an LLC, you can elect for your business to be treated as an S corporation for tax purposes. This is not the default and requires intentional action on your part.

Electing S corporation status can help you save on self-employment taxes if you pay yourself a reasonable salary and take additional profits as distributions. However, S corporation rules require that you adhere to strict ownership requirements, such as having no more than 100 shareholders and only allowing eligible individuals as shareholders.

Changing your LLC’s tax classification involves filing specific IRS forms. By default, a single-member LLC is treated as a disregarded entity, while a multi-member LLC is treated as a partnership. If you want your LLC to be classified as a corporation (including an S corporation), you need to file Form 8832. For S corporation treatment, further steps are necessary.

Relation to Form 2553 S Election

Filing Form 2553, known as an S election, is required if you want your LLC or corporation to be taxed as an S corporation. This form must be submitted after your entity is recognized as a corporation (if you are an LLC, this often follows the approval of Form 8832).

Form 2553 must be completed accurately and submitted within the specified IRS deadlines. Missing the deadline can delay your S corporation status or prevent it for the current tax year.

It’s important to note that an LLC must first check eligibility, such as having only one class of stock, before attempting the S election. If you do not file Form 2553 after changing your classification with Form 8832, your business will remain taxed as a C corporation by default. This can result in double taxation, which many business owners want to avoid.

Common Scenarios and Compliance

Form 8832 is crucial for determining your entity’s federal tax treatment. It can impact your reporting obligations, deadlines, and structure, so understanding when and how to use it is essential.

Initial Classification Election

When you form a new eligible entity, you must decide how it will be taxed. By default, the IRS assigns a classification based on the number of members: single-member LLCs are disregarded as entities separate from their owners, while multi-member LLCs are treated as partnerships unless you choose otherwise.

Filing Form 8832 lets you elect to be treated as a corporation or partnership. This is especially useful for LLCs that want the legal benefits of a pass-through entity but prefer corporate tax treatment for growth or financial reasons. The election becomes effective on the date you specify or up to 75 days before the filing date.

Most businesses submit the form at inception. Missing this step means the IRS default classification applies, so consider your long-term tax strategy before filing. 

Changing Classification

Over time, your business needs may shift, prompting a change in tax classification. Form 8832 allows you to alter your status—such as moving from partnership to corporation—as your company grows or restructures.

You can only change your classification once every 60 months without IRS approval. This limit prevents frequent changes that could lead to strategic tax advantages. The new classification takes effect on a date you specify or 75 days prior to filing.

Review your business goals, as a new classification can have significant tax and legal consequences. Transitions often involve updated ownership structures, so consult a tax advisor before submitting a new election.

Late Election Relief Options

If you miss the standard 75-day filing window, late election relief may be available. The IRS can grant relief if you can show you had reasonable cause for filing late and you acted promptly once you discovered the oversight.

To request this relief, submit Form 8832 along with a statement explaining why the deadline was missed. The IRS considers factors like misinformation from tax advisors or reasonable misunderstanding of the requirements. Not all requests are granted, so provide thorough documentation. Late election relief helps avoid penalties and unintended default classifications. 

Impact on Tax Year and Information Returns

Your classification election directly affects your tax year and how you file your information returns. Switching to a corporation may shift your fiscal year, which requires updates to both IRS records and internal accounting systems. You may need IRS approval if you want a fiscal year that differs from the default.

Form 8832 also determines which information returns—such as Form 1120 for corporations or Form 1065 for partnerships—you must file annually. Failure to file the correct information returns can result in penalties and audits.

When making an election or change, update your tax calendar and review your reporting requirements. Timely compliance is critical to avoid financial consequences and keep your entity in good standing.

Important Details and Filing Requirements

Filing IRS Form 8832 involves specific requirements that impact tax classification, liability, and reporting. Proper handling ensures your business is classified and taxed as intended for federal and, in some cases, state purposes.

Employer Identification Number (EIN) Use

When you file Form 8832, the IRS requires your business to have an Employer Identification Number (EIN). The EIN is used to track your entity for all federal tax purposes. If you do not have an EIN, you must obtain one before submitting the form.

You should enter your EIN, not your Social Security Number, on Form 8832. If you are changing your entity’s classification and a new EIN is required, you must apply for one before the change takes effect.

For partnerships or multi-member LLCs electing to be treated as a corporation, the same EIN typically continues unless a new entity is formed. Single-member LLCs moving to corporate taxation should check if a new EIN is needed based on IRS guidelines.

Liabilities and Reporting Obligations

Electing a new tax classification with Form 8832 can change your tax liabilities. For example, choosing to be taxed as a corporation may result in double taxation—on both profits and distributions. If you remain classified as a partnership, taxes are usually passed through to individual owners.

Your reporting obligations will align with your selected classification. Corporations must file Form 1120 each year, while partnerships submit Form 1065. LLCs classified as disregarded entities for tax purposes report activity on the owner’s individual tax return.

It is important to remember each entity type may have different employment, excise, and information return requirements. Failing to file the correct reports after an election can result in penalties or unintended tax consequences.

Federal and State Requirements

Form 8832 only determines your business’s federal tax classification. The IRS does not require state notification but some states have extra filing or registration requirements after a change. Your company may also need to update business registrations, sales tax accounts, or employer status at the state level.

Certain states do not follow federal tax elections, so you could face different state tax treatment than at the federal level. It is recommended to check with your state’s tax authority to confirm whether you need to file additional forms or take action.

IRS Processing and After Submission

After you file IRS Form 8832, the IRS follows specific procedures set by the check-the-box regulations. You’ll need to be aware of how your entity classification election is handled and the timing of notifications that confirm its status.

Check-the-Box Regulations Review

Form 8832 is governed by the IRS’s check-the-box regulations. These rules let eligible entities select their federal tax classification, such as corporation, partnership, or disregarded entity.

When you submit the form, the IRS reviews the election to ensure it fits within the parameters established under the check-the-box system. Errors or inconsistent elections can lead to delays or rejected submissions.

The IRS also verifies compliance with effective dates and prior elections. If you have made a recent election or if there are conflicts with current classification, this can affect processing. Using clear and accurate information on the form is critical for smooth review.

Confirmation and Notice Timelines

Once the IRS receives your Form 8832, you should expect a written notice confirming their acceptance or denial of your classification election. This confirmation generally arrives by mail.

Processing time for paper submissions can vary. Find current information about IRS processing for mailed forms. In most cases, allow at least 60 days for processing and notice delivery, but it may take longer depending on IRS workload and the completeness of your submission.

If you do not receive confirmation within 60 days, you can contact the IRS for an update. Always keep a copy of your filed form and any related correspondence for your records.

Frequently Asked Questions

You may need to file Form 8832 if you are managing a business entity and want to change your tax classification. Understanding the process, timing, and eligibility requirements helps ensure you file correctly and receive the intended tax treatment.

How do you file IRS Form 8832 for a newly formed entity?

To file Form 8832 for a new entity, submit the form after your business is formed and has received an Employer Identification Number (EIN). Complete the required sections, indicating the preferred tax classification effective date.

You must mail or fax the completed form to the designated IRS address found in the form instructions. The election will generally be effective on the date you specify, but it cannot be more than 75 days prior to or 12 months after the date you file.

What are the eligibility requirements for an entity electing classification using Form 8832?

Most domestic entities with at least two members that are not automatically classified as corporations are eligible to file Form 8832. Single-member LLCs and multi-member LLCs commonly use this form to choose their tax classification.

Certain businesses, such as banks or insurance companies, are not eligible to make this election. The IRS offers a full explanation of eligibility requirements and restrictions.

Can a single-member LLC use Form 8832 to elect corporation tax treatment?

Yes, a single-member LLC can use Form 8832 to elect to be treated as a corporation for federal tax purposes. By default, a single-member LLC is treated as a disregarded entity, but Form 8832 allows you to change this classification.

The process involves providing your EIN and indicating the desired classification on the form.

What is the difference between Form 8832 and Form 2553 for tax classification?

Form 8832 is used to elect to be treated as a corporation or partnership or to revert to default status. Form 2553 is specifically for entities already classified as corporations that wish to be taxed as S corporations.

If you want S corporation status, you must first file Form 8832 (if necessary) to elect corporate status, then file Form 2553 to become an S corporation.

How long does it take for the IRS to process an entity classification election made on Form 8832?

The IRS usually processes Form 8832 within 60 days of receipt. If approved, you will get a letter confirming your election and its effective date.

Occasionally, it can take longer if the IRS needs additional information or clarification on your form.

Are there specific instructions for completing the IRS Form 8832 and where can I find them?

Yes, the IRS provides detailed instructions with the form. You can access the official instructions and the form itself directly from the IRS website.

Review the instructions carefully to understand which sections to fill out, where to send the form, and what supporting documentation may be needed.