When it comes to your tax fillings, you cannot afford not to know all the requisite forms to be filled and filed by the end of the tax year. There are different tax forms for different work situations and partnerships as well as for foreigners. One of the tax forms you should know about is Form 8804.
In addition, to form 8805, a Foreign Partner’s Information Statement of Section 1446 Withholding Tax, includes 8804 and 8813 are utilized by partnerships such as publicly-traded partnerships to pay and report section 1446. The 1446 withholding tax is based on efficiently connected taxable income (ECTI) allocable to foreign partners.
The ECTI is a partnership’s gross income which is treated as being connected with the way the U.S trade or business has fewer deductions allocable to the revenue.
So, all partnerships with a U.S ECI that is allocable to a foreign partner have to file Form 8804 irrespective of whether they had effectively linked taxable income allocated to the foreign partner. It is therefore compulsory to file Form 8804 even when the partnership has a total loss.
Form 8804 is utilized to report the partnership’s total liability for the tax year as stipulated in section 1446. This form is also a transmittal one for form 8805. All taxes required by Form 8804 must be accompanied by a Form 8813 payment voucher.
Additionally, the partnership is expected to file Form 8805 for every foreign partner, and this must happen even if no section 1446 withholding tax was submitted. Then Copy A of all the 8805 Form is attached to Form 8804 when the filing is done at the IRS.
There is a due date for the submission of Form 8804, and it is on or before the 15th of the 4th month after the partnership’s tax year. Additionally, Form 8813 has to be filed on the 15th of the 4th, 6th, 9th, and 12th months of the partnership’s tax year.
However, if you need more time before filing, you will need Form 7004, an Application for Automatic Extension of Time to file some business Income
Tax. The request is also to file other information, returns, and request for a time to file Form 8804. It is also crucial to mention that this is an extension to file but not a tax extension because you must pay your taxes.
When you are ready to file, you can fill Forms 8804, 8805, and 8813 and send them to the IRS center. There are stiff penalties for several reasons with Form 8804, and some of them include:
Late filing of Form 8804
Any partnership that fails to file Form 8804 when it is due will pay a fine of 5% of the unpaid tax for every month they defaulted, with the maximum penalty being 25%.
Late tax payment
People who don’t pay taxes when it is due will have to pay ½ of 1% of the unremitted tax for every month or for a part of the month when the tax was unpaid. But the penalty will not exceed 25% of the owed tax.
Inability to withhold and pay overtax
An individual who is supposed to report and pay the withholding tax as stated in section 1446 but doesn’t do it will pay a civil penalty mentioned in section 6672.
Several other penalties
Several other penalties can be imposed when one fails to accurately declare the amount of tax needed to be shown on a return. If the underpayment is due to negligence, fraud, or a misstatement of valuation, you’ve got to read IRS sections 6662 and 6663.
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Pat Raskob