Instructions For Forms 8804, 8805, And 8813

election under section 754. Also, a

Coordination With Other

by the due date of the partnership return

partnership’s ECTI is not allocable to a

(including extensions).

Withholding Rules

foreign partner to the extent the amounts

If the foreign partner is a foreign trust

are exempt from U.S. tax for that partner

Interest, Dividends, etc.

or estate, the foreign trust or estate must

by a treaty or reciprocal agreement, or a

provide to each of its beneficiaries a Form

Fixed or determinable, annual or

provision of the Code.

8805 completed as described under

periodical income subject to tax under

Schedule T – Beneficiary Information on

section 871(a) or 881 is not included in

Certification of Deductions and

page 5.

the partnership’s ECTI under section

Losses

1446. However, these amounts are

A foreign partner, in certain

Interest and Penalties

independently subject to withholding

circumstances, may certify to the

under the requirements of sections 1441

partnership that it has deductions and

Interest

and 1442 and their regulations.

losses it reasonably expects to be

Interest is charged on taxes not paid by

available to reduce the partner’s U.S.

Real Property Gains

the due date, even if an extension of time

income tax liability on the partner’s

Domestic partnerships. Domestic

to file is granted. Interest is also charged

allocable share of effectively connected

partnerships subject to the withholding

on penalties imposed for failure to file,

income or gain from the partnership. In

requirements of section 1446 are not also

negligence, fraud, and substantial

certain circumstances, the partnership

subject to the payment and reporting

understatements of tax from the due date

may consider and rely on these

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

(including extensions) to the date of

deductions and losses to reduce the

regulations for income from the

payment. The interest charge is figured at

partnership’s section 1446 tax. See

disposition of a U.S. real property interest.

a rate determined under section 6621.

Regulations section 1.1446-6T for

A domestic partnership’s compliance with

additional information.

Late Filing of Form 8804

the requirement to pay a withholding tax

A partnership that fails to file Form 8804

under section 1446 satisfies the

Amount of Withholding

when due (including extensions of time to

requirements under section 1445 for

Tax

file) generally may be subject to a penalty

dispositions of U.S. real property

of 5% of the unpaid tax for each month or

interests. However, a domestic

Figuring the Tax Payments

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

partnership that would otherwise be

maximum of 25% of the unpaid tax. The

exempt from section 1445 withholding by

Under section 1446, a partnership must

penalty will not apply if the partnership

operation of a nonrecognition provision

make four installment payments of

can show reasonable cause for filing late.

must continue to comply with the

withholding tax during the tax year.

If the failure to timely file is due to

requirements of Regulations section

Amount of each installment payment

reasonable cause, attach an explanation

1.1445-5(b)(2).

of withholding tax. In general, the

to Form 8804.

amount of a partnership’s installment

Foreign partnerships. A foreign

payment is equal to the sum of the

partnership subject to withholding under

Late Filing of Correct Form

installment payments for each of the

section 1445(a) during a tax year will be

8805

partnership’s foreign partners. A

allowed to credit the amount withheld

A penalty may be imposed for failure to

partnership will generally determine the

under section 1445(a), to the extent such

file each Form 8805 when due (including

amount of the installment payment for

amount is allocable to foreign partners (as

extensions). The penalty may also be

each of its foreign partners by applying

defined in section 1446(e)), against its

imposed for failure to include all required

the principles of section 6655 and

liability to pay the section 1446

information on Form 8805 or for

Regulations section 1.1446-3. To do so,

withholding tax for that year. This credit is

furnishing incorrect information. The

use Form 8804-W, Installment Payments

allowed on line 6c of the Form 8804 filed

penalty is based on when a correct Form

of Section 1446 Tax for Partnerships.

by the foreign partnership.

8805 is filed. The penalty is:

•

Applicable percentage. For all foreign

$15 per Form 8805 if the partnership

Reporting to Partners

partners, the section 1446 applicable

correctly files within 30 days; maximum

percentage is generally 35%. However, in

When making a payment of withholding

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

some circumstances, the partnership may

tax to the IRS under section 1446, a

a small business). A “small business” has

consider the highest rate applicable to a

partnership must notify all foreign

average annual gross receipts of $5

particular type of income allocated to a

partners of their allocable shares of any

million or less for the most recent 3 tax

non-corporate partner if such partner

section 1446 tax paid to the IRS by the

years (or for the period of time the

would be entitled to use a preferential rate

partnership. The partners use this

business has existed, if shorter) ending

on such income or gain. See Regulations

information to adjust the amount of

before the calendar year in which the

section 1.1446-3(a)(2) for additional

estimated tax that they must otherwise

Forms 8805 were due.

•

information.

pay to the IRS. The notification to the

$50 per Form 8805 if the partnership

foreign partners must be provided within

files more than 30 days after the due date

When to make the payment. Make

10 days of the installment due date, or, if

or does not file a correct Form 8805;

installment payments of the withholding

paid later, the date the installment

maximum penalty of $250,000 per year

tax under section 1446 with Form 8813 by

payment is made. See Regulations

($100,000 for a small business).

the applicable due dates during the tax

section 1.1446-3(d)(1)(i) for information

year of the partnership in which the

If the partnership intentionally

that must be included in the notification

income is earned. The partnership must

disregards the requirement to report

and for exceptions to the notification

generally make the installment payments

correct information, the penalty per Form

requirement.

for each foreign partner on or before the

8805 is increased to $100 or, if greater,

15th day of the 4th, 6th, 9th, and 12th

10% of the aggregate amount of items

If a partnership has ECTI, it must file a

month of the partnership’s tax year.

required to be reported, with no maximum

Form 8804 and it must file a separate

penalty. For more information, see

Generally, pay any additional amounts

Form 8805 for each partner for whom it

sections 6721 and 6724.

due when filing Form 8804. However, if

paid tax. In addition, if the partnership

the partnership files Form 7004 to request

relies on a certificate it receives from a

Failure To Furnish Correct

an extension of time to file Form 8804,

partner under Regulations section

Forms 8805 to Recipient

pay the balance of section 1446

1.1446-6T, it must complete a Form 8805

withholding tax estimated to be due with

for the partner even if no tax is paid on

A penalty of $50 may be imposed for

Form 7004 in order to avoid the late

behalf of the partner. The foreign partner

each failure to furnish Form 8805 to the

payment penalty.

must also receive a copy of its Form 8805

recipient when due. The penalty may also

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Instructions for Forms 8804, 8805, and 8813

Instructions For Forms 8804, 8805, And 8813 - 2007 Page 3

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