Businesses of certain types inside and outside the United States are allowed to choose their classification for taxation purposes. If needed, they can become partnerships, corporations, or entities that cannot be considered without their owners. To apply for such changes, a business must submit IRS Form 8832 explaining details about the classification election to the US Internal Revenue Service (IRS).
This option is available for partnerships or companies with limited liability registered in the United States as well as for corporations formed outside the country. To define whether your business is eligible or not, you shall check the Service’s regulations and publications prior to the form creation.
For instance, check the Code of Federal Regulations (CFR), Title 26, Section 301.7701-2 to get more info. There is no way you can file this document if your entity is a US corporation or belongs to some corporation types outside the country.
The reason to prepare and submit this form is easy: some entities may realize that a certain tax regime and a certain entity type are more convenient for them, and they can reduce the tax burden using another classification.
You can file the document and thus change your entity’s classification once in 60 months and under specific conditions, as stated in the Service’s rules provided in the form. Check the guide to ensure that you can re-file the paper.
You cannot change your classification earlier than 75 days before the document is submitted. Another limitation is that your classification cannot become valid after one year since you have sent the form. It may sound complicated, so we recommend reading the Service’s instructions and consult your accountant (if you have any) or a tax specialist in case of doubts.
Usually, if the form is sent on behalf of an entity, its accountants deal with its content, completion, and submission. So, if you want to change your status using this form, you can delegate the task to those workers.
If for some reason, you do not have any accountants among your personnel, you can try completing the template individually or find a contractor who will provide you with the filled-out form. There are many agencies and individuals who are dealing with such forms professionally day by day. Hiring them is always a smart move that helps to avoid errors when making the document and problems in the future.
To make you feel more confident about this form, we have added guidelines that assist in the completion. Apart from them, you always should stick to the guide issued by the Service that also answers all questions you might have about the document (see the form’s pages from 4 to 7). We will mention this guide in our instructions, too.
Find the Template
It is crucial that you find the proper form before filling it out. All IRS forms are available on the Service’s site, but sometimes looking for them might be time-consuming. Instead, we suggest you try our easy-to-use form-building software to download the correct IRS Form 8832 right away.
Read the Notice
The first page you see in the form is an information sheet that tells you how to file the document. Read it before you begin adding data to the template.
Provide Entity’s Info
To start, identify the entity that will send the form. Write its name, EIN (employer identification number), and full address (see the given instructions to insert all the needed details if the entity is foreign). Below, choose from three options describing your case. See the instructions from the Service if something is not clear here.
Outline Election Info
You have to answer various questions regarding your classification election. Firstly, indicate if you are selecting classification for a new or an existing entity. Then, reply to a set of “yes or no” questions. Near every answer, you will see what lines you should fill out next and what lines you can ignore.
Your entity may have just one owner. If this is the case, indicate the owner’s name and ID number in line 4. If the entity is owned by an affiliated corporation (or corporations), insert the needed data in line 5 (parent corporation’s name and its EIN).
Select the relevant entity type in the following section and answer if the entity is established in a jurisdiction outside the United States (enter the country). Define the date when the election should start being effective.
Below, you have to insert the details on the person who can be questioned by the Service. Add this person’s name, title, and valid phone number.
Ask Co-Members to Provide Their Consent
If this election is about an entity with multiple concerned parties (members, owners, officers, and so on), everyone should know about the potential changes and agree with them. So, the second part of the form is a chart where each relevant person should sign. Besides a signature, everybody should write the current date and their title.
Complete the Last Part (If Applicable)
Your entity might be late with submitting this form. To define what is “late” for this form, scroll down to the Service’s instructions. If this is your case, you can explain the reasons in the form’s last part. Describe all details in the designated lines. Under that lines, everyone concerned should sign again, leaving the current date and their title (as in the previous part).
After the last part, you can scroll down to check the IRS instructions we have mentioned above: they are added to the following pages. We recommend checking them all the time when you complete the form.
As you already know, the template’s very beginning is all about the mailing procedure. Go back to the start and see the information there. You will see a chart with a list of American states. Find the state where your entity is based there and define where you should send the form. There are two centers accepting the document: one in Ogden, Utah, and another in Kansas City, Missouri.
On this sheet, the Service also notifies filers that mailing addresses sometimes change. So, be careful when filing the form and always double-check the address.