Instructions For Form 8881 - Credit For Small Employer Pension Plan Startup Costs - Department Of The Treasury


Form 8881 (Rev. 12-2013)
startup costs paid or incurred during that tax year. For example,
General Instructions
a calendar-year eligible small employer whose eligible plan is
Section references are to the Internal Revenue Code unless
first effective on January 1, 2014, may elect to treat 2013 as the
otherwise noted.
first credit year and claim the credit on its 2013 tax return for
qualified startup costs incurred in 2013.
Future Developments
No Deduction Allowed for Credit Amount
For the latest information about developments related to Form
8881 and its instructions, such as legislation enacted after they
You must reduce your otherwise allowable deduction for startup
were published, go to
costs by the credit amount on line 2.
Purpose of Form
Member of Controlled Group or Business
Eligible small employers use Form 8881 to claim the credit for
Under Common Control
qualified startup costs incurred in establishing or administering
For purposes of figuring the credit, all members of a controlled
an eligible employer plan.
group of corporations (as defined in section 52(a)), all members
The credit is allowed under section 45E and is part of the
of a group of businesses under common control (as defined in
general business credit. You may elect, however, to have
section 52(b)), and all members of an affiliated service group (as
section 45E not apply for the tax year the credit is available by
defined in section 414(m)), are treated as a single employer. As
not claiming it on your tax return for that year.
a member, compute your credit based on your proportionate
Taxpayers, other than partnerships and S corporations,
share of qualified startup costs giving rise to the group’s credit
whose only source of this credit is from a partnership or S
for small employer pension plan startup costs. Enter your share
corporation, are not required to complete or file this form.
of the credit on line 2. Attach a statement showing how your
Instead, they can report this credit directly on Form 3800.
share of the credit was figured, and write “See Attached” next to
the entry space for line 2.
How To Figure the Credit
For an eligible small employer, the credit is 50% of the qualified
Paperwork Reduction Act Notice. We ask for the information
startup costs paid or incurred during the tax year. The credit is
on this form to carry out the Internal Revenue laws of the United
limited to $500 per year for the first credit year and each of the
States. You are required to give us the information. We need it
following 2 tax years. No credit is allowed for any other tax year.
to ensure that you are complying with these laws and to allow
Eligible small employer. To be an eligible small employer, you
us to figure and collect the right amount of tax.
must have had no more than 100 employees during the tax year
You are not required to provide the information requested on
preceding the first credit year who received at least $5,000 of
a form that is subject to the Paperwork Reduction Act unless
compensation from you during that tax year. However, you are
the form displays a valid OMB control number. Books or
not an eligible small employer if, during the 3 tax years
records relating to a form or its instructions must be retained as
preceding the first credit year, you established or maintained a
long as their contents may become material in the
qualified employer plan with respect to which contributions were
administration of any Internal Revenue law. Generally, tax
made, or benefits were accrued, for substantially the same
returns and return information are confidential, as required by
employees as are in the new qualified employer plan. See
section 6103.
section 45E(c) for rules for controlled groups and predecessor
The time needed to complete and file this form will vary
depending on individual circumstances. The estimated burden
Qualified startup costs. Qualified startup costs are expenses
for individual taxpayers filing this form is approved under OMB
paid or incurred in connection with: (a) establishing or
control number 1545-0074 and is included in the estimates
administering an eligible employer plan; or (b) the retirement-
shown in the instructions for their individual income tax return.
related education of employees about the plan.
The estimated burden for all other taxpayers who file this form is
Eligible employer plan. An eligible employer plan is a qualified
shown below.
employer plan (as defined in section 4972(d)) with at least one
. 5 hr., 58 min.
employee eligible to participate who is not a highly
Learning about the law or the form
. 53 min.
compensated employee. All eligible employer plans of the same
Preparing and sending the form to the IRS .
1 hr., 1 min.
employer are treated as one eligible employer plan.
If you have comments concerning the accuracy of these time
First credit year. The first credit year generally is your tax year
estimates or suggestions for making this form simpler, we would
that includes the date that the eligible employer plan becomes
be happy to hear from you. See the instructions for the tax
effective. However, you may elect to have the preceding tax
return with which this form is filed.
year be the first credit year, and claim the credit for qualified


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