Form 8832 Election timing

[axr394]

My partner and I formed a LLC in 2021 but we have not actually started the business so we have no income or deductions so I don't believe we need to file a tax return for 2021. Now we plan to actively start the business in 2022 and we are considering filing form 8832 to be treated as a C corp but I'm a little confused as to when to file form 8832. 

The instruction says "Generally, an election specifying an eligible entity’s classification cannot take effect more
than 75 days prior to the date the election is filed, nor can it take effect later than 12 months after the date the election is filed. " If we want to be treated as a C corp for 2022, does it mean I have to file form 8832 right now? But how do I do that if I don't file a tax return for my LLC for 2021? Or should I wait till next year when we file our tax returns for 2022?

Thanks in advance for your help!

[Rick19744]

Yes.  You need to get the election filed now if you want it effective 1/1/2022.

I also recommend you send the election certified mail return receipt requested.  This is your insurance policy that the election was mailed should the IRS ever question it.

Having said that, hopefully you have discussed this issue with a tax professional and you understand the pros and cons of each entity structure.

The 2021 tax return is a separate matter and based on your facts of no income or expenses, no form 1065 would be required for 2021.

[ZoltanB45]

You do not have to file a 1065 if there were no expenses or income, but you can very easily do so. I'm sure there were organizational costs in forming the LLC and you can expense them on this years return.

However, if you do not want to file this year, you can still make a late election. On the 8832 , there is an area to give an explanation for late election relief. 

[axr394]

Thank you for your response! Our start-up cost was very immaterial and I was reading that we could deduct organizational costs in the year when the business was actually operational so we were planning on only filing for 2022. 

For filing 8832 this year, it sounds like I need to do send it with my personal tax return but if I do it by the April 15th deadline, I would be outside the 75 days window. I guess I technically only have a few days left of the 75 days window so I probably will have to explain the late election anyways? 

[axr394]

Thank you for your help! The instruction for 8832 states that I have to send the form with the owner's tax returns. Do you know by chance if this means I have to file my personal tax return by mail as well then? We are still deciding between the tax structures and our window of the 75 days is definitely closing on us!

[DianeW777]

Yes, that's what it means. According to the rules associated with Form 8832, you must attach this to your return as owner since the partnership return is not required.

In addition, attach a copy of Form 8832 to the entity’s federal tax or information return for the tax year of the election. If the entity is not required to file a return for that year, a copy of its Form 8832 must be attached to the federal tax returns of all direct or indirect owners of the entity for the tax year of the owner that includes the date on which the election took effect.

You will need to mail your tax return to include this form.