Form 8832 (Check-the-Box Election)

Form 8832, Entity Classification Election, is how an eligible entity chooses its federal tax classification. The regulations call it entity classification. Everyone else calls it checking the box. An eligible entity may elect to be classified as an association taxable as a corporation, as a partnership, or as an entity disregarded as separate from its owner.

The election only matters against the default. A domestic eligible entity with two or more members defaults to a partnership, and with a single member defaults to disregarded. A foreign eligible entity defaults to a corporation if all members have limited liability, to a partnership if it has two or more members and at least one lacks limited liability, and to disregarded if it has a single member without limited liability. Entities on the per se corporation list, along with entities already corporations under state law, are not eligible and cannot elect anything. Filing a form to confirm a default classification is unnecessary paperwork, and filing one to change it is a transaction, not an administrative act.

That is the point most often missed. A change in classification is treated as a deemed set of transfers with real tax consequences. An election to move from corporation to disregarded is treated as a liquidation of the corporation into its owner. An election to move from disregarded to corporation is treated as a contribution of assets in exchange for stock. Gain recognition, earnings and profits, and foreign tax consequences all follow from the deemed steps, and none of that is disclosed anywhere on the form itself.

An election can be effective up to 75 days before the filing date or up to 12 months after it. Once an entity elects, it generally cannot elect again for 60 months, though the limitation does not apply to an election made by a newly formed entity effective from formation. Late elections have relief: Rev. Proc. 2009-41 provides a 3-year-and-75-day window where the entity has reasonable cause and consistent filing behavior, and the relief is claimed on the form itself rather than through a private letter ruling.

For international work, the check-the-box election is the pivot on which most structuring turns. Electing to disregard a foreign subsidiary converts it from a CFC filing Form 5471 into a foreign disregarded entity or branch reported on Form 8858, moves its income into the branch basket for foreign tax credit purposes, and changes whether the group has Subpart F or tested income at all. Electing the other way creates a CFC and a new set of filings. Neither result is neutral, and the filing consequences change in the year the election takes effect.

Form 8832 is not a Subchapter S election. An eligible entity wanting S status files Form 2553, which carries a deemed corporate classification election with it.

Related terms: S Corporation Election, Form 5471, Subpart F Income, Schedule K-1 (Form 1065)

Go deeper: Form 5471: Who Must File, Every Schedule, and the Errors That Trigger Penalties

The downstream work of a classification change is filing-set work: which forms start, which stop, and what the deemed transaction does to the attributes. Adopt's agents rebuild the entity and filing map from the source documents so the change is scoped before it is elected. Sign up free.