IRS Form 8832: What you need to know

Tax form 8832 is typically used by partnerships or Limited Liability Companies (LLCs) to choose or change their tax classification. In technical terms, Form 8832 lets taxpayers elect to classify or reclassify their entity structure from one type to another.

While each entity type has its own compliance requirements, they also have different tax implications. That said, choosing the right entity structure is important because it can help lower your tax bill. This is true no matter if you have a U.S. or foreign-based business.

When to file Form 8832 - classification options for foreign entities

When you complete IRS Form 8832, you choose from one of three options for your foreign entity. You can elect to be:

  • Classified as an association taxable as a corporation.
  • Classified as a foreign partnership.
  • Disregarded as a separate entity if your LLC has a single owner. This type of business will typically have pass-through income like a sole proprietorship, but the business is considered separate for liability purposes.

If you want to have your LLC taxed as an S Corporation, you won’t use Form 8832. Instead, you’ll need Form 2553.

What’s the deadline to file Form 8832?

You can file IRS Form 8832 at any time. You might choose to file it at the same time you start your business, or you might decide to file at a later point. Additionally, you can choose the effective date of your election – within certain timeframes.

Generally, your effective date:

  • Cannot be more than 75 days before your Form 8832 is filed
  • Cannot be more than 12 months after your Form 8832 is filed

If you don’t choose a date, then the effective date will be the same as the date on the Form. Additionally, you should note that if you’re reclassifying, you can only change your election once every five years (60 months) unless an exception applies.

What if you have never filed Form 8832?

As a foreign eligible entity, the IRS will classify your business using the following default options. Your entity would be:

  • Considered a partnership if your organization has two or more members and at least one member does not have limited liability.
  • Considered an association taxable as a corporation if all members have limited liability.
  • Disregarded as an entity separate from its owner if it has a single owner that does not have limited liability.

Tax help with Form 8832

Have questions about IRS Form 8832 for your foreign entity? Our experienced tax advisors can help. Get started with virtual Expat Tax Preparation from H&R Block today.