(IRS) Form 8869 instructions 2017/2018

What is form 8869?

The form 8869 is filed by a parent corporation (S-Corporation), which wishes its subsidiary to be treated as a qualified subchapter S subsidiary (QSub). It means that from the effective date of the election, the QSub is deemed liquidated, and all its assets, liabilities, income, deductions or credit belong to a parent company. The QSub becomes a wholly-owned S-Corporation subsidiary and is not considered as a separate entity for tax purposes.

What conditions have to be fulfilled to make the election?

First of all, the subsidiary which is to be deemed liquidated, has to be a domestic entity. What is more, it cannot be “ineligible company”, so it cannot be a financial or insurance company or a current or former domestic international sales corporation. All the subsidiary’s company assets have to be held by the parent company. As a result of the election, the subsidiary company ceases to be treated as a separate entity, for instance for tax purposes.

Instructions to form 8869

The form 8869 shall be filed by the parent company, which has to enter its details at the beginning of the form in part I. It has to provide its name, address, and the details of personal representative, including telephone number, who can be contacted in matters related to the data in the form or for some additional information. It is also necessary to enter the employer ID number, the tax year ending, and the institution to which the last tax return was submitted.

The data of the subsidiary that is to become a part of the parent company shall be entered in part II. Apart from the basic information about the subsidiary corporation, like name, address, EIN number, if the subsidiary possesses it, date and state of incorporation, it is required to enter the data of the institution to which the last tax return was sent by the subsidiary, if the entity filed such a return previously. If the subsidiary does not have an EIN number, N/A should be provided in line 8. However, if the subsidiary is in the course of proceedings for assigning an EIN number, the information “Applied for” should be provided in line eight. We should also enter the date from which the election is to become effective. If the subsidiary wished to obtain an EIN number, it has to file an SS-4 form, which is called the Application for Employer Identification Number. However, the EIN number of a parent company has to be entered, otherwise the form will not be accepted and the company will receive a notification about the delinquent submission of the form.

Form 8869 late election relief

It is also possible to file a request relief for late election. In order to do so, the parent company has to request a private letter ruling, and additionally pay a fee for that.

When to file form 8869

The form may be submitted at any time during the tax year. However it is important when the parent company wants it to become binding, since it is possible to ask the service center to make the election valid 2 months and fifteen days before the submission of the form or not longer than twelve months after its submission. Therefore, it is necessary to determine the moment from which the subsidiary is to be treated as fully owned by the parent company. The effective date should be stated in line eleven.

When the election becomes effective?

In the form, the parent company may either request the subsidiary to be treated as a separate corporation with a reverse date, however not more than two months and fifteen days before filing the form, or it can provide a future date, which must fall within one year from the moment the form has been submitted.

Where to file form 6689

The form should be submitted to the institution to which the subsidiary sent its last tax return. However, if the subsidiary has not filed any tax returns yet, for instance because it has just been established, then the form 6689 shall be submitted to the service center, where the parent company sent its last tax return.

The service center will notify the parent company whether the election has been accepted or not within 60 days after the file 6689 has been submitted. It is very important to keep a certified or registered mail receipt from the postal service or a similar confirmation from a private delivery service, because it is a proof of sending the form. If the parent company will not receive any notification from the service center within two months, it should call to explain the matter.

After filing the form 6689 and the acceptance of the election, the subsidiary is treated as wholly-owned by the parent company, until it wishes to terminate such a state of affairs.

If the parent company would like to send the form for more than one subsidiary, it needs to fill in the information in part II on a separate sheet for each of them, only providing its name and employer identification number at the top of each sheet.

The form 8869 must be signed by a person authorised to represent the company and sign the parent company’s return. It can be the president or vice-president of the corporation, chief accountant, assistant treasurer or another corporate officer.

Form 8869 Example:

(IRS) Form 8869 instructions

Form 8869 example



1 Comment

  1. User977

    Is there any state entity that deals with it?
    I do not fully understand all of this, and after I saw the form of penalties, I prefer to pay more attention to it.
    I am fresh in the topic of taxes, formulas, and stuff like that, I have no clue how it works. Should I visit some tax consultant? I am not running any company btw.


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