Who Must Use Form 8804
Along with Form 8805, A Foreign Partner’s Information Statement of Section 1446 Withholding Tax , Form 8813, and Form 8804 is used by partnerships (except publicly traded partnerships) to pay and report section 1446 withholding tax based on effectively connected taxable income (ECTI) allocable to foreign partners (as defined in section 1446(e)).
ECTI is the partnership’s gross income that is treated as effectively connected with the conduct of a U.S. trade or business, less deductions allocable to the income. Every partnership that has U.S. ECI allocable to a foreign partner must file a Form 8804, regardless of whether it had effectively connected taxable income allocable to a foreign partner.
In other words, Form 8804 must be filed even if the partnership has an overall loss.
Form 8804, Annual Return for Partnership Withholding Tax (Section 1446) specifically is used to report the total liability under section 1446 for the partnership’s tax year. Form 8804 is also a transmittal form for Form(s) 8805.
The Form 8813 payment voucher accompanies the payment of any taxes required by Form 8804.
The partnership must also file a Form 8805 for each foreign partner even if no section 1446 withholding tax was paid. Copy A of each Form 8805 is attached to the Form 8804 when filed with the IRS.
Form 8804 Due Date
Generally, the Form 8804 and associated forms must be filed on or before the 15th day of the 4th month following the close of the partnership’s tax year.
If the partnership keeps their records outside of the US and Puerto Rico, the due date is automatically extended to the 15th day of the 6th month following the close of the partnership’s tax year
Form 8813 must be filed on or before the 15th day of the 4th, 6th, 9th, and 12th month of the partnership’s tax year.
Extension Of Time To File
If you need more time, you can file Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns, to request an extension of time to file Form 8804.
It is important to note that this is an extension to file and not extension to pay tax.
Where To File The Form 8804
File Forms 8804, 8805, and 8813 with:
Internal Revenue Service Center
P.O. Box 409101
Ogden, UT 84409
Form 8804 Penalties – Why You Should File
Penalties can apply in a number of different scenarios regarding the Form 8804 as follows.
Late Filing Of Form 8804
A partnership that fails to file Form 8804 when due (including extensions of time to file) generally may be subject to a penalty of 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax. The penalty will not apply if the partnership can show reasonable cause for filing late
Late Payment Of Tax
The penalty for not paying tax when due is usually 1/2 of 1% of the unpaid tax for each month or part of a month the tax is unpaid. The penalty cannot exceed 25% of the unpaid tax.
The penalty will not apply if the partnership can show reasonable cause for paying late.
Failure To Withhold And Pay Over Tax
Any person required to withhold, account for, and pay over the withholding tax under section 1446, but who fails to do so, may be subject to a civil penalty under section 6672.
The civil penalty is equal to the amount that should have been withheld and paid over.
Penalties may also be imposed, absent reasonable cause and good faith, for failing to accurately report the amount of tax required to be shown on a return, if any portion of the resulting underpayment is attributable to negligence, substantial understatement of income tax, valuation misstatement, or fraud. See sections 6662 and 6663.
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Taxpayers that have foreign partners need to study the Form 8804 instructions extensively and the applicable tax code to thoroughly understand the reporting and compliance requirements to be in full compliance and to limit penalty and other risk exposure.
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