IRS Form 8832: Instructions to Fill Out and File On Time

As your business income grows, so does your tax bill. While your small business may require minimal planning early, it's important to implement a pro-growth tax strategy as your operations mature. One of the first strategic financial decisions you can make is altering your business's entity structure.

Do this by filing IRS Form 8832, Entity Classification Election, which is a simple strategic move to lower your business tax burden. Form 8832 is a tax election used by newly formed entities and existing businesses. However, not every eligible business takes advantage due to the perceived complexity of the form, which is why we created this guide.

Use this article for step-by-step instructions for filling out and filing IRS Form 8832. You'll have the information you need to elect for a new entity, although professional support is available if you prefer to simplify the process. 1-800Accountant, America's leading virtual accounting firm, can act as your advisory partner, ensuring you understand the benefits and timing considerations of Form 8832 and other pressing tax matters throughout the tax year.

Key Takeaways

• Use IRS Form 8832 to choose how your business is taxed

• LLCs, partnerships, and other eligible entities can file this form

• Operating as the right business entity can reduce your tax burden or optimize your long-term growth strategy

• File IRS Form 8832 within 75 days before or up to 12 months after your desired effective date

• Once submitted, you will likely have new filing requirements to adhere to, as is the case with corporate tax returns

What Is IRS Form 8832?

IRS Form 8832 allows a business to elect a federal tax classification other than its default treatment. This election impacts federal taxes, but does not create a business.

For example, a single-member LLC defaults to a sole proprietorship for federal tax purposes. The LLC files Form 8832 to elect a C corporation tax treatment. Once complete, the LLC will file corporation tax returns and pay corporate income tax (C corporations pay 21% federal income tax)

Form 8832 elections can help growing companies. Smaller businesses often benefit from pass-through entity taxation because the business owners pay tax at their personal income tax rates. Your tax advisor can help you determine the most tax-efficient structure for your business.

When you’re ready to file an election, let professional CPAs handle the paperwork on your behalf. 1-800Accountant offers budget-friendly entity formation services so you can confidently choose the best business entity type for your operations.

Who Should File Form 8832?

An eligible company can use Form 8832 to file an entity classification election. Eligible businesses include:

Because they're already taxed as corporations, C corps are generally ineligible.

Sole Proprietorship or Single-Member LLC

If a business has one owner, the company defaults to a disregarded entity for federal income tax purposes. The owner is a sole proprietor. Disregarded entities do not file separate entity income tax returns. Instead, the owner must report the entity’s business income on its federal tax return. You can register a single-member LLC with your Secretary of State.

A sole proprietorship or single-member LLC can elect corporate tax treatment as “an association taxable as a corporation.” After filing Form 8832, the entity should file a C corp tax return to report taxable income and calculate its income tax liability.

Business owners must report corporate dividend income on their personal tax returns. Corporation owners do not use Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship), to report business income.

Let 1-800Accountant's team of tax professionals ensure you comply with your new tax filing requirements.

Partnership or Multi-Member LLC

A business with more than one owner defaults to pass-through entity tax treatment. A partnership or multi-member LLC must file partnership returns to report business income and ownership information. The company must also issue a Schedule K-1 to each owner, reporting income and expense distributions.

Multi-member LLCs can file IRS Form 8832 to elect corporate tax treatment as “a partnership or an association taxable as a corporation.” After filing, the entity must file a C corp tax return to report taxable income and calculate its income tax liability. Business owners report corporate dividend income on their personal tax returns and will no longer receive Schedule K-1s.

We recommend partnering with tax professionals for help managing your new tax forms and due dates.

C Corporation

Corporations cannot use Form 8832 to elect a different tax classification. However, an LLC or partnership that previously elected corporate tax treatment can file a new Form 8832 to change its election:

• A company with one owner can elect sole proprietorship tax treatment.

• An entity with multiple owners can elect partnership tax treatment.

Always consult your tax advisor about tax planning strategy optimization.

Why File Form 8832? (Strategic Benefits)

A new entity election offers strategic benefits to many business owners, including:

• A lower income tax rate (21% corporate rate vs. individual rates of up to 37%)

• Retained earnings reinvested in the business avoid double taxation

• Reduced self-employment tax exposure in specific cases

• Provides greater flexibility for growth and reinvestment

The right structure for your business depends on your revenue, goals, and long-term plans.

When Should You File Form 8832?

Your company can file IRS Form 8832 at its formation or later, depending on what's most beneficial.

Form 8832 allows taxpayers to choose an effective date of the election. To start your election on a specific date, you must file Form 8832 within the following periods:

• Up to 75 days before the effective date

• Up to 12 months after

For example, if you want your corporate business tax election to be effective as of 1/1/2026, you must file Form 8832 after 1/1/2025 and before 3/17/2026.

Additionally, your business cannot file two 8832 elections within 60 months. However, the five-year rule does not apply to Form 8832 filed by a newly-formed business.

1-800Accountant can help your business file Form 8832 on time and monitor your tax due dates year-round.

How to Fill Out IRS Form 8832

Information Required

Have the following business information handy before filling out your Form 8832:

• Business name

• Employer identification number (EIN)

• Address

Businesses with a single owner or corporate parent must also report the owner’s name and taxpayer identification number (TIN).

Step-by-Step Instructions

Part I: Election Information

IRS Form 8832, Part I, includes questions about your entity election.

IRS Form 8832, Part I, Page 1

• Line 1, type of election: Indicate whether your current business is changing its LLC tax classification or if you're filing as a new entity.

• Lines 2a and 2b, previous elections: Skip if your business hasn’t filed an entity classification election. If you have, indicate whether it was filed within the last five years.

• Line 3, number of owners: Indicate whether your business has one or multiple owners. Your response will determine the eligibility for the election.

• Line 4, sole owner information: List the sole owner’s name and identifying number.

• Line 5, corporate owner information: If a corporation owns your business, list the parent corporation’s name and EIN.

IRS Form 8832, Part I, Page 2

• Line 6, type of entity: Indicate your current entity classification and the election you want to make.

• Line 7, foreign entity information: If applicable, list the country where the business was organized.

• Line 8, effective date: List the effective date of the entity election.

• Line 9, contact information: Provide the person’s name, title, and phone number.

Each owner or member must sign Form 8832. If the business authorized an officer to file the election on its behalf, the authorized officer should sign.

Part II: Late Election Relief

Part II applies to taxpayers who failed to file Form 8832 on time. Leave it blank if you filed by the appropriate deadline.

Correct this issue by requesting late election relief. Taxpayers must meet the reasonable cause requirements explained in the IRS Form 8832 instructions to make a successful request. If you exercised ordinary care but were still unable to meet the deadline, your request may be granted. Incorrect professional advice, honest misunderstandings, or personal hardships are examples of reasonable cause.

If you missed the Form 8832 due date, include an explanation in Part II. Each owner or member must sign the late election relief section.

How to File IRS Form 8832

While the IRS prefers e-file in many instances, a hard copy of Form 8832 must be mailed. Expect IRS confirmation within 60 days of receiving your materials.

Use the Form 8832 instructions or refer to the IRS page that discloses the appropriate mailing address for your state.

After You File: What Happens Next?

After filing, you'll have to wait for confirmation from the IRS. Once confirmed, you'll have new tax obligations for your selected entity type, such as:

• Preparing and filing IRS Form 1120, U. S. Corporation Income Tax Return, if you're operating as a C corp.

• Preparing, filing, and distributing IRS Form 1065, U. S. Return of Partnership Income, and Schedule K-1s for each partner.

These obligations underscore the importance of bookkeeping accuracy and proactive tax planning. 1-800Accountant's full-service advisory and bookkeeping solutions ensure you're covered year-round.

Form 8832 vs. Form 2553

While both forms can be used by your business to elect a new entity, they serve distinct purposes.

• Use IRS Form 8832 to operate as a C corp, partnership, or disregarded entity.

• IRS Form 2553, Election by a Small Business Corporation, is used by a corporation and other eligible entities to elect S corporation status.

If you're unsure which forms your business requires, professional support can identify what you need to move forward.

Common Mistakes to Avoid

Business owners who handle this election themselves tend to make mistakes that can push back timelines or prompt the IRS to scrutinize their operations closely. Avoid these common mistakes when preparing and submitting your materials.

• Missing the critical Form 8832 deadline

• Electing the wrong entity classification

• Failing to plan for the new entity's tax impact

• Forgetting to update accounting processes and protocols

FAQs About Form 8832

What Is an Entity Classification Election?

An entity classification election allows a business to change its tax entity type for federal income tax purposes. The election will affect the company’s federal income tax return filing. Refer to this guide if you'll be filing Form 8832.

Can I file Form 8832 late?

Yes, you can file Form 8832 late. For late election relief, complete Part II of Form 8832 with an explanation that will meet the IRS's reasonable cause standard. Professional tax support ensures you never miss a filing deadline.

What is the 60-month rule?

The 60-month rule limits the number of times a business can switch entities within that period. This rule ensures that you only change entities once within five years, although there are exceptions. If the business changes ownership or the IRS grants explicit permission, the entity can be changed more than once during that period.

Can an LLC file Form 8832?

Yes, an LLC can file IRS Form 8832 to change its default classification. Single-member and Multi-member LLCs are the most common types of LLCs to file. LLCs should follow the steps outlined above to help ensure a successful submission.

Do I need an EIN first?

Yes, you need to obtain an EIN before filing Form 8832. An EIN acts as your business's Social Security number and enables you to do many things, including opening a business bank account and hiring employees. If you're struggling to secure your EIN, 1-800Accountant can help.

What’s the difference between Form 8832 and 2553?

Both forms allow business owners to elect a new entity, but they're not interchangeable. IRS Form 8832 is used for a partnership, disregarded entity, or C corp election, while

IRS Form 2553 is used to elect S corporation status. If you're unsure which entity or status is optimal for your business, professional tax support can help you decide.

What happens if I choose the wrong classification?

Choosing the wrong entity classification can create higher tax liabilities or incorrect filings. You might be locked into this incorrect classification for 60 months if you don't take immediate action. Once the error is identified, correct it by filing with the correct information as soon as possible, request relief, or file an amendment.

Can I change back later?

Yes, you can change back to your previous entity later. Once the 60-month period concludes, file another Form 8832 to revert to your original entity. The IRS had made exceptions to the rule, such as shortening the period if there was a substantial change in ownership.

Partner with 1-800Accountant for Confidence in Your Taxes

The right tax classification can save your business thousands annually. But which is best for your operations? 1-800Accountant's team of CPAs, EAs, and accounting professionals will assist in determining the most tax-efficient structure for your business. We also help you understand the tax implications of each classification and the optimal time to file.

Gain peace of mind and the freedom to focus on your upgraded business while our tax advisory professionals handle year-round strategy and formation.

Schedule a free consultation with 1-800Accountant today to learn more and zero in on the best entity for your operations. We’ll help you lower your tax bill with budget-friendly small business tax services and ensure year-round compliance.