Instructions For Forms 8804, 8805, And 8813

the partnership for the partnership’s tax

pay the balance of section 1446

file or pay was due to reasonable cause

year that is properly allocable to the

withholding tax estimated to be due with

and not willful neglect.

partner under section 704, minus (b) the

Form 2758.

Interest

foreign partner’s distributive share of

Coordination With Other

Interest is charged on taxes not paid by

deductions of the partnership for that year

Withholding Rules

the due date, even if an extension of time

that are connected with that income under

to file is granted. Interest is also charged

section 873 or section 882(c)(1) and that

Interest, Dividends, etc.

on penalties imposed for failure to file,

are properly allocable to the partner under

Fixed or determinable, annual or

negligence, fraud, and substantial

section 704. This income must be

periodical income subject to tax under

understatements of tax from the due date

computed by taking into account any

section 871(a) or 881 is not included in

(including extensions) to the date of

adjustments to the basis of the

the partnership’s effectively connected

payment. The interest charge is figured at

partnership property described in section

taxable income under section 1446.

a rate determined under section 6621.

743 according to the partnership’s

However, these amounts are

election under section 754. Also, a

Late Filing of Form 8804

independently subject to withholding

partnership’s effectively connected

A partnership that fails to file Form 8804

under the requirements of sections 1441

taxable income is not allocable to a

when due (including extensions of time to

and 1442 and their regulations.

foreign partner to the extent the amounts

file) generally may be subject to a penalty

are exempt from U.S. tax for that partner

Real Property Gains

of 5% of the unpaid tax for each month or

by a treaty or reciprocal agreement, or a

part of a month the return is late, up to a

Domestic partnerships. Domestic

provision of the Code.

maximum of 25% of the unpaid tax. The

partnerships subject to the withholding

penalty will not apply if the partnership

Amount of Withholding

requirements of section 1446 are not also

can show reasonable cause for filing late.

subject to the payment and reporting

Tax

If the failure to timely file is due to

requirements of section 1445(e)(1) and its

reasonable cause, attach an explanation

regulations for income from the

Figuring the Tax Payments

to Form 8804.

disposition of a U.S. real property interest.

Under section 1446, a partnership must

A domestic partnership’s compliance with

Late Filing of Correct Form

make four installment payments of

the requirement to pay a withholding tax

8805

withholding tax during the tax year.

under section 1446 satisfies the

A penalty may be imposed for failure to

requirements under section 1445 for

Amount of each installment payment

file each Form 8805 when due (including

dispositions of U.S. real property

of withholding tax. In general, the

extensions). The penalty may also be

interests. However, a domestic

amount of a partnership’s installment

imposed for failure to include all required

partnership that would otherwise be

payment is equal to the sum of the

information on Form 8805 or for

exempt from section 1445 withholding by

installment payments for each of the

furnishing incorrect information. The

operation of a nonrecognition provision

partnership’s foreign partners. A

penalty is based on when a correct Form

must continue to comply with the

partnership will generally determine the

8805 is filed. The penalty is:

requirements of Regulations section

amount of the installment payment for

•

$15 per Form 8805 if the partnership

1.1445-5(b)(2).

each of its foreign partners by applying

correctly files within 30 days; maximum

the principles of section 6655(e)(2). To do

Foreign partnerships. A foreign

penalty of $75,000 per year ($25,000 for

so, use the worksheet on page 4.

partnership subject to withholding under

a small business). A “small business” has

section 1445(a) during a tax year will be

Alternatively, a partnership may make

average annual gross receipts of $5

allowed to credit the amount withheld

each installment payment during the tax

million or less for the most recent 3 tax

under section 1445(a), to the extent such

year in an amount equal to 25% of the

years (or for the period of time the

amount is allocable to foreign partners (as

withholding tax that would be payable on

business has existed, if shorter) ending

defined in section 1446(e)), against its

the amount of its effectively connected

before the calendar year in which the

liability to pay the section 1446

taxable income allocable to foreign

Forms 8805 were due.

withholding tax for that year. This credit is

•

partners for the prior year if the following

$50 per Form 8805 if the partnership

allowed on line 7c of the Form 8804 filed

three conditions are met:

files more than 30 days after the due date

by the foreign partnership.

1. The prior tax year consisted of 12

or does not file a correct Form 8805;

months.

maximum penalty of $250,000 per year

Reporting to Partners

2. The partnership filed Form 1065 for

($100,000 for a small business).

When making a payment of withholding

the prior year.

If the partnership intentionally

tax to the IRS under section 1446, a

3. The amount of effectively

disregards the requirement to report

partnership must notify all foreign

connected taxable income for the prior

correct information, the penalty per Form

partners of their allocable shares of any

year was not less than 50% of the

8805 is increased to $100 or, if greater,

section 1446 tax paid to the IRS by the

effectively connected taxable income on

10% of the aggregate amount of items

partnership. The partners use this

the current year’s Form 8804.

required to be reported, with no maximum

information to adjust the amount of

penalty. For more information, see

Applicable percentage. For partners

estimated tax that they must otherwise

sections 6721 and 6724.

taxed as corporations, the section 1446

pay to the IRS.

Failure To Furnish Correct

applicable percentage is 35%. For

A partnership must annually provide

Forms 8805 to Recipient

partners not taxed as corporations (e.g.,

foreign partners with a copy of Form 8805

partnerships, individuals, estates), the

even if no section 1446 withholding tax is

A penalty of $50 may be imposed for

applicable percentage is 38.6% for 2002

paid. Send Form 8805 to the foreign

each failure to furnish Form 8805 to the

and 2003.

partner by the due date of the partnership

recipient when due. The penalty may also

When to make the payment. Make

return (including extensions).

be imposed for each failure to give the

payments of the withholding tax under

recipient all required information on each

Interest and Penalties

section 1446 with Form 8813 by its due

Form 8805 or for furnishing incorrect

date during the tax year of the partnership

information. The maximum penalty is

Interest and penalties are described

in which the income is earned.

$100,000 for all failures to furnish correct

below. If the partnership files Form 8804

Forms 8805 during a calendar year.

Generally, pay any additional amounts

or Forms 8805 late, fails to furnish correct

due when filing Form 8804. However, if

Forms 8805, or fails to pay the tax when

If the partnership intentionally

the partnership files Form 2758 to request

due, it may be liable for penalties and

disregards the requirement to report

an extension of time to file Form 8804,

interest unless it can show that failure to

correct information, the penalty is

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Instructions for Forms 8804, 8805, and 8813

Instructions For Forms 8804, 8805, And 8813 - 2002 Page 3

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