Instructions For Forms 8804, 8805, And 8813 - Internal Revenue Service

Interest and Penalties

each Form 8805 or if the partnership

for the tax year in which it claims the

furnishes incorrect information. The

credit.

Interest and penalties are described

maximum penalty is $100,000 for all

below. If the partnership files Form 8804

Publicly Traded Partnerships

failures to furnish correct payee

or Forms 8805 late, fails to furnish correct

statements during a calendar year.

The term “publicly traded partnership”

Forms 8805, or fails to pay the tax when

If the partnership intentionally

means any partnership, interests in which

due, it may be liable for penalties and

disregards the requirement to report

are regularly traded on an established

interest unless it can show that failure to

correct information, the penalty is

securities market (regardless of the

file or pay was due to reasonable cause

increased to $100 or, if greater, 10% of

number of its partners). However, it does

and not willful neglect.

the aggregate amount of items required to

not include a publicly traded partnership

be reported and the $100,000 maximum

Interest

treated as a corporation under the

penalty does not apply. For more

general rule of section 7704(a).

Interest is charged on taxes not paid by

information, see sections 6722 and 6724.

the due date, even if an extension of time

A publicly traded partnership that has

to file is granted. Interest is also charged

effectively connected income, gain, or

Late Payment of Tax

on penalties imposed for failure to file,

loss, generally must withhold tax on

negligence, fraud, and substantial

distributions made to foreign partners. In

The penalty for not paying tax when due

understatements of tax from the due date

this situation, the partnership uses Forms

is usually ½ of 1% of the unpaid tax for

(including extensions) to the date of

1042 and 1042S to report withholding

each month or part of a month the tax is

payment. The interest charge is figured at

from distributions and is not to pay and

unpaid. The penalty cannot exceed 25%

a rate determined under section 6621.

report the withholding tax discussed in

of the unpaid tax.

these instructions.

Late Filing of Form 8804

Failure To Withhold and Pay Over

However, such a partnership may

A partnership that fails to file Form 8804

Tax

elect instead to pay a withholding tax

when due (including extensions of time to

based on effectively connected taxable

Any person required to withhold,

file) generally may be subject to a penalty

income allocable to its foreign partners.

account for, and pay over the

of 5% of the unpaid tax for each month or

withholding tax under section 1446, but

To do this, the partnership must comply

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

who fails to do so, may be subject to a

with the payment and reporting

maximum of 25% of the unpaid tax.

civil penalty under section 6672 equal to

requirements of these instructions by the

the amount that should have been

date on which Form 8804 is due for the

Late Filing of Correct Form 8805

withheld and paid over.

partnership's first tax year. Also, the

partnership must attach a statement to its

A penalty may be imposed for failure to

Other Penalties

first Form 8804 indicating that the

file each Form 8805 when due (including

Penalties can also be imposed for

partnership is a publicly traded

extensions). The penalty may also be

negligence, substantial understatement of

partnership that is electing not to withhold

imposed for failure to include all required

tax, and fraud. See sections 6662 and

on distributions. Once made, the election

information on Form 8805 or if the

6663.

may be revoked only with IRS consent.

partnership furnishes incorrect

information. The penalty is based on

Treatment of Partners

when a correct Form 8805 is filed. The

Tiered Partnerships

penalty is:

A partnership's payment of section 1446

•

withholding tax on effectively connected

$15 per Form 8805 if the partnership

The term “tiered partnership” describes the

taxable income allocable to a foreign

correctly files within 30 days; maximum

situation in which a partnership

partner relates to the partner's U.S.

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

owns an interest in another partnership

income tax liability for the partner's tax

a small business). A “small business” has

(the latter is a “subsidiary partnership”).

year in which the partner is subject to

average annual gross receipts of $5

A partnership that directly or indirectly

U.S. tax on that income.

million or less for the most recent 3 tax

owns a partnership interest in a

years (or for the period of time the

Amounts paid by the partnership under

subsidiary partnership is allowed a credit

business has existed, if shorter) ending

section 1446 on effectively connected

against its own section 1446 liability for any

before the calendar year in which the

taxable income allocable to a partner may

section 1446 tax paid by the subsidiary

Forms 8805 were due.

be claimed as a credit under section 33.

partnership for that partnership interest.

•

The partner may not claim an early refund

$50 per Form 8805 if the partnership

A partnership that is a direct or indirect

of withholding tax paid under section

files more than 30 days after the due date

partner in a subsidiary partnership and

1446.

or does not file a correct Form 8805;

that has had section 1446 tax payments

maximum penalty of $250,000 per

Amounts paid by a partnership under

made on its behalf, will receive a copy of

year ($100,000 for a small business).

section 1446 for a partner are to be

Form 1042S or Form 8805. The

treated as distributions made to that

If the partnership intentionally

partnership that is the direct or indirect

partner on the earliest of:

disregards the requirement to report

partner must in turn file these forms with

correct information, the penalty per Form

1. The day on which this tax was paid

its Form 8804 and treat the amount

8805 is increased to $100 or, if greater,

by the partnership,

withheld by the subsidiary partnership as

10% of the aggregate amount of items

2. The last day of the partnership's tax

a credit against its own liability to withhold

required to be reported with no maximum

year for which the amount was paid, OR

under section 1446. The partnership that

penalty. For more information, see

is a direct or indirect partner must also

3. The last day on which the partner

sections 6721 and 6724.

provide a copy of the forms it receives to

owned an interest in the partnership

its partners, along with the information

during that year.

Failure To Furnish Correct Forms

described in Reporting to Partners on

8805 to Recipient

A partner that wishes to claim a credit

page 3. These statements and forms will

against its U.S. income tax liability for

A penalty of $50 may be imposed for

enable those partners to obtain

amounts withheld and paid over under

each failure to furnish Form 8805 to the

appropriate credit for tax withheld under

section 1446 must attach Copy C of

recipient when due. The penalty may

section 1446.

Form 8805 to its U.S. income tax return

also be imposed for each failure to give

the recipient all required information on

Page 4

Instructions For Forms 8804, 8805, And 8813 - Internal Revenue Service - 1991 Page 4

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