Instructions For Form 8903 - Domestic Production Activities Deduction

•

Form W-2 wages from an

Unmodified box method.

2. Add any amounts reported in

•

S corporation or partnership. S

Modified box 1 method.

box 1 of the relevant Forms W-2 that

•

corporations and partnerships that

Tracking wages method.

are both:

meet specific requirements can

a. Wages for federal income tax

After you figure Form W-2 wages,

choose to figure Form W-2 wages at

withholding purposes, and

see Form W-2 Wages Allocable to

the entity level and report the

b. Supplemental unemployment

DPGR to determine the Form W-2

allocated portion of Form W-2 wages

compensation benefits.

wages to report on line 14 of Form

on Schedule K-1 to the S corporation

3. Subtract (2) from (1).

8903.

shareholder or partner who then

4. Add any amounts reported in

combines the allocated portion with

Relevant Forms W-2. To figure

box 12 of the relevant Forms W-2 that

Form W-2 wages from other sources

your Form W-2 wages, generally use

are properly coded D, E, F, G, or S.

on Form 8903 to determine the

the sum of the amounts you properly

5. Add (3) and (4).

DPAD.

report for each employee on Form

W-2, Wage and Tax Statement, for

Form W-2 Wages Allocable to

If the S corporation or partnership

the calendar year ending with or

meets the requirements to be

DPGR

within your tax year. However, do not

classified as one of the eligible

After you calculate Form W-2 wages,

use any amounts reported on a Form

entities listed below, it can figure

as discussed above, you must figure

W-2 filed with the Social Security

Form W-2 wages at the entity level

Form W-2 wages that are properly

Administration more than 60 days

and allocate Form W-2 wages to S

allocable to DPGR. You report the

after its due date (including

corporation shareholders or partners.

Form W-2 wages that are properly

•

extensions).

Eligible small pass-through entity.

allocable to DPGR on line 14 of Form

See S corporations and partnerships,

Non-duplication rule. Amounts that

8903.

under Small Business Simplified

are treated as Form W-2 wages for a

You can figure Form W-2 wages

Overall Method, on page 5 for the

tax year under any method cannot be

that are properly allocable to DPGR

requirements.

treated as Form W-2 wages for any

•

under one of the following methods.

Eligible widely-held pass-through

other tax year. Also, an amount

•

Small business simplified overall

entity. See S corporations and

cannot be treated as Form W-2

method safe harbor.

partnerships, under Simplified

wages by more than one taxpayer.

•

Wage expense safe harbor.

Deduction Method, on page 5 for the

•

Any other reasonable method

Unmodified box method. Under

requirements.

•

based on all the facts and

the unmodified box method, Form

Eligible 861 partnership. See

circumstances.

W-2 wages are the smaller of:

Partnerships, under Section 861

Method, on page 6 for the

1. The sum of the amounts

Small business simplified overall

requirements.

reported in box 1 of the relevant

method safe harbor. If you use the

Forms W-2, or

small business simplified overall

Form W-2 wages from an estate or

2. The sum of the amounts

method to allocate costs between

trust. An estate or trust generally

reported in box 5 of the relevant

DPGR and non-DPGR (see Small

will figure its Form W-2 wages and

Forms W-2.

Business Simplified Overall Method

apportion them between the

on page 5), you can use the small

beneficiary and the fiduciary (and

business simplified overall method

Modified box 1 method. Under the

among the beneficiaries) and report

modified box 1 method, Form W-2

safe harbor to determine the amount

each beneficiary’s share on Schedule

wages are figured as follows.

of Form W-2 wages allocable to

K-1 (Form 1041).

DPGR. Under this safe harbor

1. Add the amounts reported in

Figuring Form W-2 Wages

method, the amount of Form W-2

box 1 of the relevant Forms W-2.

Used To Figure the 50%

wages that is properly allocable to

2. Add all the amounts described

DPGR equals the proportion of

Limit

below and included in box 1 of the

DPGR to total gross receipts.

relevant Forms W-2.

You figure Form W-2 wages used to

Wage expense safe harbor. If you

a. Amounts not considered wages

figure the 50% limit in two steps.

are using either the section 861

for federal income tax withholding

First, you must determine the amount

method of cost allocation under

purposes.

of wages to classify as Form W-2

Regulations section 1.199-4(d) or the

b. Supplemental unemployment

wages under Regulations section

simplified deduction method under

compensation benefits.

1.199-2(e)(1). See Figuring Form W-2

Regulations section 1.199-4(e), you

c. Sick pay or annuity payments

Wages, below. Second, you must

determine the amount of wages

from which the recipient requested

figure Form W-2 wages that are

properly allocable to DPGR by

federal income tax withholding.

properly allocable to DPGR.

multiplying the amount of wages for

3. Subtract (2) from (1).

You can figure Form W-2 wages

the tax year by the ratio of your wage

4. Add any amounts reported in

that are properly allocable to DPGR

expense included in calculating QPAI

box 12 of the relevant Forms W-2 that

using one of the safe harbor methods

for the tax year to your total wage

are properly coded D, E, F, G, or S.

discussed below under Form W-2

expense used in calculating your

5. Add (3) and (4).

Wages Allocable to DPGR. Also, you

taxable income (or adjusted gross

can use any reasonable method

income) for the tax year without

Tracking wages method. Under

based on all the facts and

regard to any wage expenses

the tracking wages method, Form

circumstances.

disallowed by sections 465, 469,

W-2 wages are figured as follows.

704(d), or 1366(d).

Figuring Form W-2 Wages

1. Add the amounts reported in

You can use one of the following

box 1 of the relevant Forms W-2 that

If you use the section 861 method

three methods to figure your Form

are also wages for federal income tax

or the simplified deduction method,

W-2 wages.

withholding purposes.

you must use the same expense

-7-

Instructions for Form 8903

Instructions For Form 8903 - Domestic Production Activities Deduction - 2007 Page 7

Related Articles

Related forms

Related Categories