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Form 8832 MS: What You Should Know

Special Purpose Corporation; or Sole Proprietor. The IRS says the election is made by filing Form 8832 with the Internal Revenue Service, with IRS regulations defining this designation. Form 8832 is a simple tool that allows businesses to change the way they are classified and pay taxes on their profits. A business can elect to be: C Corporation; C-Corporation; Sole Proprietor. Sovereign and Non-Sovereign entities can also change their classification if the change would not cause the entity's income or deductions to fall below certain thresholds set forth by law. The IRS has regulations that define the applicable statutory thresholds and the maximum amount of income or deductions that may be exempt from taxation. What must I do to make this election? All 501(c)(3) private organizations, or qualified charitable organizations, or limited liability companies (LCS), and corporations, need to file Form 8832 to change their classification. The Form 8832 needs to specifically identify the entity being changed to. The filing requirement for tax year 2023 is February 22, 2023 (or later if the business is operating as part of a larger corporation). Who is the entity? To qualify, an entity has to satisfy all the following requirements. It must be formed or authorized by: A tax return filing authority (IRS, a state, or a foreign financial institution). The IRS. The U.S. government. A U.S. citizen or resident alien. A corporation, foreign partnership, or trust (whether exempt). The entity is the sole person or legal entity of two or more persons that is a tax-exempt organization described in section 501(c)(3) or a qualified organization described in section 170(b). For the definition of an organization, see the IRS Publication 463, or Form 1120-S. How is the election made? The election is made by completing the election form. What is the election form? The Form 8832 is a simple tool and the only way to make the election. However, the form is designed to be a quick, simple, and straightforward way to determine whether your organization can be changed to an electing entity. The IRS has a page that provides instructions on making the election for your organization. However, each organization must take the time to read through the instructions and understand the tax implications and responsibilities of the election.

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