Instructions For Forms 8804, 8805, And 8813

maximum penalty of $250,000 per year

1. The day on which this tax was paid

that is the direct or indirect partner must

($100,000 for a small business).

by the partnership.

in turn file these forms with its Form 8804

If the partnership intentionally

2. The last day of the partnership’s tax

and treat the amount withheld by the

disregards the requirement to report

year for which the amount was paid.

subsidiary partnership as a credit against

correct information, the penalty per Form

3. The last day on which the partner

its own liability to withhold under section

8805 is increased to $100 or, if greater,

owned an interest in the partnership

1446. This credit is allowed on line 6b of

10% of the aggregate amount of items

during that year.

the Form 8804 filed by the partnership

required to be reported, with no maximum

that is the direct or indirect partner. The

A partner that wishes to claim a credit

penalty. For more information, see

partnership that is a direct or indirect

against its U.S. income tax liability for

sections 6721 and 6724.

partner must also provide a copy of the

amounts withheld and paid over under

forms it receives to its partners, along

section 1446 must attach Copy C of Form

Failure To Furnish Correct

with the information described in

8805 to its U.S. income tax return for the

Forms 8805 to Recipient

Reporting to Partners on page 3. These

tax year in which it claims the credit.

statements and forms will enable those

A penalty of $50 may be imposed for

partners to obtain appropriate credit for

each failure to furnish Form 8805 to the

Publicly Traded

tax withheld under section 1446.

recipient when due. The penalty may also

Partnerships

be imposed for each failure to give the

recipient all required information on each

A “publicly traded partnership” is any

Form 8805 or for furnishing incorrect

Specific Instructions

partnership whose interests are regularly

information. The maximum penalty is

traded on an established securities

$100,000 for all failures to furnish correct

market (regardless of the number of its

Address

Forms 8805 during a calendar year.

partners). However, it does not include a

When providing a U.S. address on Form

publicly traded partnership treated as a

If the partnership intentionally

8804, 8805, or 8813, include the suite,

corporation under the general rule of

disregards the requirement to report

room, or other unit number after the street

section 7704(a).

correct information, the penalty is

address. If the Post Office does not

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

A publicly traded partnership that has

deliver mail to the street address and the

the aggregate amount of items required to

effectively connected income, gain, or

partnership (or withholding agent) has a

be reported and the $100,000 maximum

loss, generally must withhold tax on

P.O. box, show the box number instead of

penalty does not apply. For more

distributions of that income made to its

the street address.

information, see sections 6722 and 6724.

foreign partners. The rate is 35%. In this

When providing a foreign address on

situation, the partnership uses Form

Late Payment of Tax

Form 8804, 8805, or 8813, enter the

1042, Annual Withholding Tax Return for

The penalty for not paying tax when due

number and street, city, province or state,

U.S. Source Income of Foreign Persons;

is usually

of 1% of the unpaid tax for

and the name of the country. Follow the

Form 1042-S, Foreign Person’s U.S.

each month or part of a month the tax is

foreign country’s practice in placing the

Source Income Subject to Withholding;

unpaid. The penalty cannot exceed 25%

postal code in the address. Do not

and Form 1042-T, Annual Summary and

of the unpaid tax.

abbreviate the country name.

Transmittal of Forms 1042-S, to report

withholding from distributions instead of

Failure To Withhold and Pay

Form 8804

following these instructions. It also must

Over Tax

comply with the regulations under section

Line 4

Any person required to withhold, account

1461 and Regulations section 1.6302-2.

for, and pay over the withholding tax

Figure the partnership’s effectively

However, such a partnership may elect

under section 1446, but who fails to do

connected taxable income using the

instead to pay a withholding tax based on

so, may be subject to a civil penalty under

definition on page 2. Enter the total

effectively connected taxable income

section 6672. The civil penalty is equal to

effectively connected taxable income

allocable to its foreign partners. To do

the amount that should have been

allocable to foreign partners on line 4.

this, the partnership must comply with the

withheld and paid over.

payment and reporting requirements of

Partnership effectively connected

these instructions by the date on which

taxable income on which a foreign partner

Other Penalties

Form 8804 is due for the partnership’s

is exempt from U.S. tax by a treaty or

Penalties can also be imposed for

first tax year. Also, the partnership must

other reciprocal agreement is not

negligence, substantial understatement of

attach a statement to its first Form 8804

allocable to that partner and is exempt

tax, and fraud. See sections 6662 and

indicating that it is a publicly traded

from withholding under section 1446.

6663.

partnership that is electing not to withhold

However, this exemption from section

on distributions. Once made, the election

1446 withholding must be reported on

Treatment of Partners

may be revoked only with IRS consent.

Form 8805. See instructions for line 8b of

A partnership’s payment of section 1446

Form 8805 on page 6.

Tiered Partnerships

withholding tax on effectively connected

Line 6b

taxable income allocable to a foreign

The term “tiered partnership” describes

partner relates to the partner’s U.S.

Enter on line 6b the amount of section

the situation in which a partnership owns

income tax liability for the partner’s tax

1446 tax withheld by the subsidiary

an interest in another partnership. The

year in which the partner is subject to

partnership (see Tiered Partnerships

latter is a “subsidiary partnership.” A

U.S. tax on that income.

above). The amount withheld will be

partnership that directly or indirectly owns

shown on line 10 of the Form 8805 the

Amounts paid by the partnership under

a partnership interest in a subsidiary

partnership receives from the subsidiary

section 1446 on effectively connected

partnership is allowed a credit against its

partnership. If the partnership receives a

taxable income allocable to a partner are

own section 1446 liability for any section

Form 1042-S from a subsidiary PTP, the

allowed to the partner as a credit under

1446 tax paid by the subsidiary

amount withheld will be shown in box 7 of

section 33. The partner may not claim an

partnership for that partnership interest.

the Form 1042-S. (Box 1 of the Form

early refund of withholding tax paid under

A partnership that is a direct or indirect

1042-S will show income code 27.)

section 1446.

partner in a subsidiary partnership and

Line 6c

Amounts paid by a partnership under

that has had section 1446 tax payments

section 1446 for a partner are to be

made on its behalf will receive a copy of

Line 6c applies only to partnerships

treated as distributions made to that

Form 1042-S or Form 8805 from the

treated as foreign persons and subject to

partner on the earliest of the following:

subsidiary partnership. The partnership

withholding under section 1445(a) or

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Instructions for Forms 8804, 8805, and 8813

Instructions For Forms 8804, 8805, And 8813 - 2003 Page 5

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