Instructions for IRS Form 8804 Schedule a - Penalty for Underpayment of Estimated Section 1446 Tax for Partnerships 2018

December 3, 2018 "Instructions For Irs Form 8804 Schedule A - Penalty For Underpayment Of Estimated Section 1446 Tax For Partnerships" contain the updated filing procedures for the IRS-issued Form 8804. Download your copy of the instructions by clicking the link below.

IRS Form 8804 is a tax form issued by the United States Internal Revenue Service.

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2018
Department of the Treasury
Internal Revenue Service
Instructions for Schedule A
(Form 8804)
Penalty for Underpayment of Estimated Section 1446 Tax for Partnerships
Who Must Pay the
How To Use Schedule A
Section references are to the Internal Revenue
Code unless otherwise noted.
Underpayment Penalty
Complete this schedule as follows.
Future Developments
Generally, a partnership is subject to the
Check one or both of the boxes in
penalty if it didn’t timely pay in
Part I that apply. If the partnership
For the latest information about
installments at least the smaller of:
checks a box in Part I, attach
developments related to Schedule A
1. The tax shown on line 5f of its
Schedule A (Form 8804) to Form 8804.
(Form 8804) and its instructions, such
2018 Form 8804; or
Be sure to check the box on Form 8804,
as legislation enacted after they were
line 8.
2. The total section 1446 tax that
published, go to
IRS.gov/Forms-Pubs/
If the total section 1446 tax, shown on
would have been due for 2017, without
About-Schedule-A-Form-8804.
Part II, line 1 is $500 or more, complete
regard to reductions for certified foreign
the rest of page 1 to determine the
What’s New
partner-level items, on the ECTI
underpayment for any of the installment
allocable to foreign partners for 2017,
due dates.
New tax rates for 2018. For tax years
provided that (1) this amount is at least
If there is an underpayment on line 12
beginning after 2017, the maximum tax
50% of the sum of the amounts shown
(column (a), (b), (c), or (d)), go to Part
rate for non-corporate foreign partners
on lines 4d, 4h, 4l, 4p, and 4t of its 2018
VII to figure the penalty.
has decreased from 39.6% to 37%.
Form 8804; and (2) the tax year was for
Complete Parts IV through VI as
Also, for tax years beginning after 2017,
a full 12 months. See the instructions for
appropriate if the partnership uses the
the maximum tax rate for corporate
line
2, later, for more details.
adjusted seasonal installment method
foreign partners has decreased from
In these instructions, “Form 8804”
and/or the annualized income
35% to 21%.
generally refers to the partnership's
installment method.
General Instructions
original Form 8804. However, an
amended Form 8804 is considered the
Specific Instructions
original Form 8804 if the amended Form
Purpose of Form
8804 is filed by the due date (including
Part I. Reasons for Filing
Partnerships that have effectively
extensions) of the original Form 8804.
connected taxable income (ECTI)
Adjusted seasonal installment meth-
Also, for purposes of determining a
allocable to foreign partners use
od and/or annualized income install-
required installment, if an amended
Schedule A (Form 8804) to determine:
ment method. If the partnership's
Form 8804 is filed for the prior tax year,
Whether they are subject to the
income varied during the year because,
then “prior tax year” includes the
penalty for underpayment of estimated
for example, it operated its business on
amended Form 8804, but only if the
tax and, if so,
a seasonal basis, it may be able to
amended Form 8804 is filed before the
The amount of the underpayment
lower or eliminate the amount of one or
applicable installment due date.
penalty.
more required installments by using the
The penalty is figured separately for
adjusted seasonal installment method
Who Must File
each installment due date. Therefore,
and/or the annualized income
Generally, the partnership doesn’t have
the partnership may owe a penalty for
installment method.
to file this schedule because the IRS will
an earlier due date even if it paid
Example. A ski shop, which
figure the amount of the penalty and
enough tax later to make up the
receives most of its income during the
notify the partnership of any amount
underpayment. This is true even if the
winter months, may benefit from using
due. However, even if the partnership
partnership is due a refund when its
one or both of these methods to figure
doesn’t owe a penalty, complete and
return is filed. However, the partnership
its required installments. The
attach this schedule to the partnership's
may be able to reduce or eliminate the
annualized income installment or
Form 8804 if the Part II, line 1 amount
penalty by using the annualized income
adjusted seasonal installment may be
on page 1 is $500 or more and any of
installment method or the adjusted
less than the required installment under
the following apply.
seasonal installment method. See the
the current year safe harbor (increased
instructions for Parts IV and V for
1. The adjusted seasonal
by any reduction recaptured under
details.
installment method is used.
section 6655(e)(1)(B)) for one or more
2. The annualized income
Exception to the Penalty
due dates. Using one or both of these
installment method is used.
methods may reduce or eliminate the
A partnership won’t have to pay a
penalty for those due dates.
penalty if the tax shown on line 5f of its
Use Parts IV through VI of
2018 Form 8804 is less than $500.
Schedule A (Form 8804) to figure one or
more required installments. If Parts IV
Dec 03, 2018
Cat. No. 36325U
2018
Department of the Treasury
Internal Revenue Service
Instructions for Schedule A
(Form 8804)
Penalty for Underpayment of Estimated Section 1446 Tax for Partnerships
Who Must Pay the
How To Use Schedule A
Section references are to the Internal Revenue
Code unless otherwise noted.
Underpayment Penalty
Complete this schedule as follows.
Future Developments
Generally, a partnership is subject to the
Check one or both of the boxes in
penalty if it didn’t timely pay in
Part I that apply. If the partnership
For the latest information about
installments at least the smaller of:
checks a box in Part I, attach
developments related to Schedule A
1. The tax shown on line 5f of its
Schedule A (Form 8804) to Form 8804.
(Form 8804) and its instructions, such
2018 Form 8804; or
Be sure to check the box on Form 8804,
as legislation enacted after they were
line 8.
2. The total section 1446 tax that
published, go to
IRS.gov/Forms-Pubs/
If the total section 1446 tax, shown on
would have been due for 2017, without
About-Schedule-A-Form-8804.
Part II, line 1 is $500 or more, complete
regard to reductions for certified foreign
the rest of page 1 to determine the
What’s New
partner-level items, on the ECTI
underpayment for any of the installment
allocable to foreign partners for 2017,
due dates.
New tax rates for 2018. For tax years
provided that (1) this amount is at least
If there is an underpayment on line 12
beginning after 2017, the maximum tax
50% of the sum of the amounts shown
(column (a), (b), (c), or (d)), go to Part
rate for non-corporate foreign partners
on lines 4d, 4h, 4l, 4p, and 4t of its 2018
VII to figure the penalty.
has decreased from 39.6% to 37%.
Form 8804; and (2) the tax year was for
Complete Parts IV through VI as
Also, for tax years beginning after 2017,
a full 12 months. See the instructions for
appropriate if the partnership uses the
the maximum tax rate for corporate
line
2, later, for more details.
adjusted seasonal installment method
foreign partners has decreased from
In these instructions, “Form 8804”
and/or the annualized income
35% to 21%.
generally refers to the partnership's
installment method.
General Instructions
original Form 8804. However, an
amended Form 8804 is considered the
Specific Instructions
original Form 8804 if the amended Form
Purpose of Form
8804 is filed by the due date (including
Part I. Reasons for Filing
Partnerships that have effectively
extensions) of the original Form 8804.
connected taxable income (ECTI)
Adjusted seasonal installment meth-
Also, for purposes of determining a
allocable to foreign partners use
od and/or annualized income install-
required installment, if an amended
Schedule A (Form 8804) to determine:
ment method. If the partnership's
Form 8804 is filed for the prior tax year,
Whether they are subject to the
income varied during the year because,
then “prior tax year” includes the
penalty for underpayment of estimated
for example, it operated its business on
amended Form 8804, but only if the
tax and, if so,
a seasonal basis, it may be able to
amended Form 8804 is filed before the
The amount of the underpayment
lower or eliminate the amount of one or
applicable installment due date.
penalty.
more required installments by using the
The penalty is figured separately for
adjusted seasonal installment method
Who Must File
each installment due date. Therefore,
and/or the annualized income
Generally, the partnership doesn’t have
the partnership may owe a penalty for
installment method.
to file this schedule because the IRS will
an earlier due date even if it paid
Example. A ski shop, which
figure the amount of the penalty and
enough tax later to make up the
receives most of its income during the
notify the partnership of any amount
underpayment. This is true even if the
winter months, may benefit from using
due. However, even if the partnership
partnership is due a refund when its
one or both of these methods to figure
doesn’t owe a penalty, complete and
return is filed. However, the partnership
its required installments. The
attach this schedule to the partnership's
may be able to reduce or eliminate the
annualized income installment or
Form 8804 if the Part II, line 1 amount
penalty by using the annualized income
adjusted seasonal installment may be
on page 1 is $500 or more and any of
installment method or the adjusted
less than the required installment under
the following apply.
seasonal installment method. See the
the current year safe harbor (increased
instructions for Parts IV and V for
1. The adjusted seasonal
by any reduction recaptured under
details.
installment method is used.
section 6655(e)(1)(B)) for one or more
2. The annualized income
Exception to the Penalty
due dates. Using one or both of these
installment method is used.
methods may reduce or eliminate the
A partnership won’t have to pay a
penalty for those due dates.
penalty if the tax shown on line 5f of its
Use Parts IV through VI of
2018 Form 8804 is less than $500.
Schedule A (Form 8804) to figure one or
more required installments. If Parts IV
Dec 03, 2018
Cat. No. 36325U
through VI are used for any payment
If the partnership isn’t permitted to
installment to which the payment
due date, those Parts must be used for
use the prior year safe harbor method
pertains. See the
Example
under
Part
all subsequent payment due dates. To
because any of the necessary
VII. Figuring the
Penalty, later.
arrive at the amount of each required
conditions described above isn’t met,
Line 12. If any of the columns in line 12
installment, Part VI uses the smallest of:
skip line 2 and enter on line 3 the
shows an underpayment, complete Part
The adjusted seasonal installment (if
amount from line 1.
VII to figure the penalty.
applicable),
Note. If the partnership qualifies for and
The annualized income installment (if
Parts IV Through VI
uses the exception under Regulations
applicable), or
section 1.1446-3(b)(3)(ii) to switch to
The current year safe harbor
Extraordinary items. Generally, under
the standard option annualization
(increased by any reduction recaptured
the annualized income installment
method during the tax year, the
under section 6655(e)(1)(B)).
method, extraordinary items must be
partnership should include on line 2 the
taken into account after annualizing the
total of all installment payments that
Follow the steps below to determine
ECTI for the annualization period.
were made during the tax year under
which parts of the form have to be
Similar rules apply in determining ECTI
both the prior year safe harbor method
completed.
under the adjusted seasonal installment
and the standard option annualization
If the partnership is using only the
method. An extraordinary item includes:
method. Attach a statement that
adjusted seasonal installment method,
Any item identified in Regulations
explains the computation.
check the applicable box in Part I and
section 1.1502-76(b)(2)(ii)(C)(1), (2),
complete Parts IV and VI of Schedule A
Part III. Figuring the
(3), (4), (7), and (8);
(Form 8804).
A section 481(a) adjustment; and
Underpayment
If the partnership is using only the
Net gain or loss from the disposition
annualized income installment method,
of 25% or more of the fair market value
Line 6. Enter the estimated tax
check the applicable box in Part I and
of the partnership's business assets
payments made by the partnership for
complete Parts V and VI of Schedule A
during the tax year.
its tax year as indicated below. Include
(Form 8804).
any overpayment from line 13 of the
These extraordinary items must be
If the partnership is using both
partnership's 2017 Form 8804 that was
accounted for in the appropriate
methods, check both of the boxes in
credited to the partnership's first
annualization period. However, a
Part I and complete all three parts (Parts
installment period on its 2018 Form
section 481(a) adjustment (unless the
IV through VI) of Schedule A (Form
8804. If an installment is due on a
partnership makes the alternative
8804).
Saturday, Sunday, or legal holiday,
choice under Regulations section
payments made on the next day that
Part II. Current Year and
1.6655-2(f)(3)(ii)(C)) is treated as an
isn’t a Saturday, Sunday, or legal
extraordinary item occurring on the first
Prior Year Safe Harbors
holiday are considered made on the due
day of the tax year in which the item is
date to the extent the payment is
taken into account in determining ECTI.
Line 2 (prior year safe harbor). Enter
applied against that required
the total section 1446 tax that would
For more information regarding
installment.
have been due for 2017, without regard
extraordinary items, see Regulations
Also include on line 6 any of the
to reductions for certified foreign
section 1.6655-2(f)(3)(ii) and the
following.
partner-level items on the ECTI
examples in Regulations section
Section 1446 tax paid or withheld by
allocable to foreign partners for 2017.
1.6655-2(f)(3)(vii). Also see Regulations
another partnership in which the
The partnership can generally use
section 1.6655-3(d)(3).
partnership filing this Schedule A (Form
the prior year safe harbor only if it paid
8804) was a partner during the tax year.
De minimis rule. Extraordinary
the required amount using that method
See the instructions for Form 8804, lines
items identified above resulting from a
for each of its installment payments of
6b and 6c, in the Instructions for Forms
particular transaction that totals less
section 1446 tax during the tax year.
8804, 8805, and 8813.
than $1 million (other than a section
However, see Regulations section
Section 1445(a) or 1445(e) tax
481(a) adjustment) can be annualized
1.1446-3(b)(3)(ii) for an exception. Also,
withheld from or paid by the partnership
using the general rules of Regulations
see the
Note
below. In addition, the
filing this Schedule A (Form 8804)
section 1.6655-2(f), or, if the partnership
partnership can only use the prior year
during the tax year for a disposition of a
chooses, can be taken into account
safe harbor if all of the following apply.
U.S. real property interest. See the
after annualizing the ECTI for the
Each installment payment that was
instructions for Form 8804, lines 6d and
annualization period.
made during the tax year, when
6e, in the Instructions for Forms 8804,
averaged with all prior installment
Part IV. Adjusted Seasonal
8805, and 8813.
payments, must have been 25% of the
Installment Method
partnership's total section 1446 tax
Column (a). Enter payments made by
liability under the prior year safe harbor.
the date on line 4, column (a).
Note. Part IV doesn't reflect the lower
The prior tax year consisted of 12
Columns (b), (c), and (d). Enter
preferential rates permitted under
months.
payments made on or before the date
Regulations section 1.1446-3(a)(2).
The partnership timely files (including
on line 4 for that column and after the
These were omitted because, for most
extensions) a U.S. return of partnership
date on line 4 of the preceding column.
taxpayers, the income reported in Part
income (for example, Form 1065) for the
IV will be predominantly (or exclusively)
prior tax year.
Note. A payment of estimated tax is
ordinary income. If the partnership
The amount of ECTI for the prior tax
applied against unpaid installments in
wishes to consider lower preferential
year isn’t less than 50% of the ECTI
the order in which installments are
rates for Part IV (and if the requirements
shown on the current year Form 8804
required to be paid, regardless of the
outlined in the third paragraph of the
that is (or will be) timely filed.
-2-
Instructions for Schedule A (Form 8804) (2018)
line 31 instructions are met), it must
appropriate period. Also include on
sufficient documentation to meet the
attach a statement which appropriately
line 22b the de minimis extraordinary
requirements of Regulations section
expands lines 15 and 22 through 25 to
items that the partnership chooses to
1.1446-3(a)(2)(ii).
show the applicable special types of
exclude from line 15. See
Extraordinary
If the partnership has net ordinary
income or gain and the applicable
items, earlier.
loss, net short-term capital loss, or net
percentages (see, for example, lines 33
Line 23. Enter the amount by which
28% rate loss, each net loss should be
and 34 of this schedule). Also, Part IV,
line 22c is being reduced for state and
netted against the appropriate
lines 15 and 22 through 25 don’t provide
local taxes under Regulations section
categories of income and gain to
the separate entries for corporate and
1.1446-6(c)(1)(iii) and for certified
determine the amounts of income and
non-corporate partners necessary to
foreign partner-level items submitted
gain to be entered on lines 31b, 31c,
apply the rates on lines 25a and b. A
using Form 8804-C. See Reductions for
31d, and 31e, respectively. See section
partnership with corporate and
State and Local Taxes and Certification
1(h) and Notice 97-59, 1997-45 I.R.B. 7,
non-corporate partners completing Part
of Deductions and Losses in the
for rules for netting gains and losses.
IV must attach a statement which
Instructions for Forms 8804, 8805, and
appropriately expands lines 15 and 22
Line 32. Annualization amounts.
8813, for additional information.
through 25 to show the amounts
Enter on line 32, columns (a) through
allocable to both types of partners.
Part V. Annualized Income
(d), respectively, the annualization
The partnership can use the adjusted
amounts shown in the table below for
Installment Method
seasonal installment method only if the
the option used for line 30. For example,
partnership's base period percentage
if the partnership elected Option 1, enter
Line 30. Annualization periods. Enter
for any 6 consecutive months of the tax
on line 32 the annualization amounts 6,
on line 30, columns (a) through (d),
year is 70% or more. The base period
3, 1.71429, and 1.2, in columns (a)
respectively, the annualization periods
percentage for any period of 6
through (d), respectively.
for the option listed below. For example,
consecutive months is the average of
if the partnership elected Option 1, enter
the three percentages figured by
on line 30 the annualization periods 2, 4,
1st
2nd
3rd
4th
dividing the ECTI for the corresponding
7, and 10, in columns (a) through (d),
Install-
Install-
Install-
Install-
6-consecutive-month period in each of
ment
ment
ment
ment
respectively.
the 3 preceding tax years by the ECTI
Standard
Use Option 1 or Option 2 only if
for each of their respective tax years.
Option
4
4
2
1.33333
the partnership elected to do so
!
Figure the base period percentage
Option 1
6
3
1.71429
1.2
by filing Form 8842, Election To
using the 6-month period in which the
CAUTION
Option 2
4
2.4
1.5
1.09091
Use Different Annualization Periods for
partnership normally receives the
Corporate Estimated Tax, by the due
largest part of its ECTI.
date of the first required installment
Lines 33a, 33e, 33i, 33m, and 33q. If
Example. An amusement park with
payment. Once made, the election is
the partnership has extraordinary items
a 2018 calendar tax year receives the
irrevocable for the particular tax year.
that total $1 million or more from a
largest part of its taxable income during
particular transaction, or a section
a 6-month period, May through October.
481(a) adjustment, special rules apply.
To figure its base period percentage for
1st
2nd
3rd
4th
Include these amounts on line 33a, 33e,
Install-
Install-
Install-
Install-
this 6-month period, the amusement
33i, 33m, or 33q, depending on the type
ment
ment
ment
ment
park figures its ECTI for each May–
of income against which the item
Standard
October period in 2015, 2016, and
applies, for the appropriate period. Also
Option
3
3
6
9
2017. It then divides the ECTI for each
include on line 33a, 33e, 33i, 33m, or
Option 1
2
4
7
10
May–October period by the total ECTI
33q the de minimis extraordinary items
Option 2
3
5
8
11
for that particular tax year. The resulting
that the partnership chooses to exclude
percentages are 69% (0.69) for May–
from line 31a, 31b, 31c, 31d, or 31e,
October 2015, 74% (0.74) for May–
Line 31. Enter on lines 31a through
respectively. See
Extraordinary
items,
October 2016, and 67% (0.67) for May–
31e the ECTI allocable to all foreign
earlier.
October 2017. Because the average of
partners for the months entered for each
If the partnership has included on
69% (0.69), 74% (0.74), and 67% (0.67)
annualization period in columns (a)
line 33a, 33e, 33i, 33m, or 33q any of
is 70% (0.70), the base period
through (d) on line 30.
the items referred to in the previous
percentage for May–October 2018 is
If the partnership has certain
paragraph, write “EI” and the dollar
70% (0.70). Therefore, the amusement
extraordinary items, special rules apply.
amount of the item next to the affected
park qualifies for the adjusted seasonal
Don’t include on line 31a, 31b, 31c, 31d,
line. Attach a statement which shows
installment method.
or 31e the de minimis extraordinary
the income for that line before the
Line 15. If the partnership has certain
items that the partnership chooses to
extraordinary item, the amount of the
extraordinary items, special rules apply.
include on line 33a, 33e, 33i, 33m, or
extraordinary item, and the net amount.
Don’t include on line 15 the de minimis
33q, respectively. See
Extraordinary
Also include an explanation of the item,
extraordinary items that the partnership
items, earlier.
including the authority under which it is
chooses to include on line 22b. See
being claimed.
With respect to lines 31b through
Extraordinary
items, earlier.
31e, enter the specified types of income
Lines 33b, 33f, 33j, 33n, and 33r.
Line 22b. If the partnership has certain
allocable to non-corporate partners if (a)
Enter the reduction amounts for state
extraordinary items of $1 million or more
the partners would be entitled to use a
and local taxes under Regulations
from a transaction, or a section 481(a)
preferential rate on such income or gain
section 1.1446-6(c)(1)(iii). The netting
adjustment, special rules apply. Include
(see Regulations section 1.1446-3(a)
rules under section 1(h) and Notice
these amounts on line 22b for the
(2)), and (b) the partnership has
97-59 must be considered in
Instructions for Schedule A (Form 8804) (2018)
-3-
determining the category of income the
A payment of estimated tax is applied
Line 43. For each installment, enter the
reduction amounts offset.
against unpaid required installments in
smaller of line 39 or line 42 on line 43.
the order in which installments are
Also enter the result on line 5.
Lines 33c, 33g, 33k, 33o, and 33s.
required to be paid, regardless of the
Enter the reduction amounts resulting
Part VII. Figuring the
installment to which the payment
from certified partner-level items
pertains.
Penalty
received from foreign partners using
Form 8804-C. See Certification of
Example. A partnership underpaid
Complete Part VII to determine the
Deductions and Losses in the
the April 15 installment by $1,000. The
amount of the penalty. The penalty is
Instructions for Forms 8804, 8805, and
June 15 installment requires a payment
figured for the period of underpayment
8813, for additional information. The
of $2,500. On June 11, the partnership
using the underpayment rate
netting rules of section 1(h) and Notice
pays $2,500 for its June 15 installment.
determined under section 6621(a)(2).
97-59 must be considered in
However, $1,000 of this payment is
The period of underpayment runs from
determining the category of income the
applied against the April 15 installment.
the installment due date to the earlier of
reduction amounts offset.
The penalty for the April 15 installment
the date the underpayment is actually
is figured to June 11 (57 days). The
paid or the 15th day of the 3rd month
Part VI. Required
remaining $1,500 is applied to the June
after the close of the 2018 tax year (the
Installments
15 installment as if it were made on
15th day of the 6th month if the
June 15.
partnership keeps its books and records
Line 38. Before completing line 38 in
outside the United States and Puerto
If the partnership has made more
columns (b) through (d), complete lines
Rico). For information on obtaining the
than one payment for a required
39 through 43 in each of the preceding
interest rate on underpayments denoted
installment, attach a separate
columns. For example, complete lines
by an asterisk, see the footnote on
computation for each payment.
39 through 43 in column (a) before
page 5 of the schedule.
completing line 38 in column (b).
Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the
United States. You are required to give us the information. We need it to ensure that you are complying with these laws and to
allow us to figure and collect the right amount of tax.
You aren’t required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the
form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as
their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return
information are confidential, as required by section 6103.
The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden for
business taxpayers filing this form is approved under OMB control number 1545-0123.
If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we
would be happy to hear from you. See the instructions for the tax return with which this form is filed.
-4-
Instructions for Schedule A (Form 8804) (2018)

Download Instructions for IRS Form 8804 Schedule a - Penalty for Underpayment of Estimated Section 1446 Tax for Partnerships 2018

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