General Instructions

Purpose of Form

Partnerships that have effectively connected taxable income (ECTI) allocable to foreign partners use Schedule A (Form 8804) to determine:

  • Whether they are subject to the penalty for underpayment of estimated tax and, if so,

  • The amount of the underpayment penalty.

Who Must File

Generally, the partnership does not have to file this schedule because the IRS will figure the amount of the penalty and notify the partnership of any amount due. However, even if the partnership does not owe a penalty, complete and attach this schedule to the partnership's Form 8804 if the Part II, line 1 amount on page 1 is $500 or more and any of the following apply.

  1. The adjusted seasonal installment method is used.

  2. The annualized income installment method is used.

Who Must Pay the Underpayment Penalty

Generally, a partnership is subject to the penalty if it did not timely pay in installments at least the smaller of:

  1. The tax shown on line 5f of its 2015 Form 8804; or

  2. The total section 1446 tax that would have been due for 2014, without regard to reductions for certified foreign partner-level items, on the ECTI allocable to foreign partners for 2014, provided that (1) this amount is at least 50% of the sum of the amounts shown on lines 4d, 4h, 4l, 4p, and 4t of its 2015 Form 8804; and (2) the tax year was for a full 12 months. See the instructions for line 2 below for more details.

In these instructions, “Form 8804” generally refers to the partnership's original Form 8804. However, an amended Form 8804 is considered the original Form 8804 if the amended Form 8804 is filed by the due date (including extensions) of the original Form 8804.

Also, for purposes of determining a required installment, if an amended Form 8804 is filed for the prior tax year, then “prior tax year” includes the amended Form 8804, but only if the amended Form 8804 is filed before the applicable installment due date.

The penalty is figured separately for each installment due date. Therefore, the partnership may owe a penalty for an earlier due date even if it paid enough tax later to make up the underpayment. This is true even if the partnership is due a refund when its return is filed. However, the partnership may be able to reduce or eliminate the penalty by using the annualized income installment method or the adjusted seasonal installment method. See the instructions for Parts IV and V for details.

Exception to the Penalty

A partnership will not have to pay a penalty if the tax shown on line 5f of its 2015 Form 8804 is less than $500.

How To Use Schedule A

Complete this schedule as follows.

  • Check one or both of the boxes in Part I that apply. If the partnership checks a box in Part I, attach Schedule A (Form 8804) to Form 8804. Be sure to check the box on Form 8804, line 8.

  • If Part II, line 1 is $500 or more, complete the rest of page 1 to determine the underpayment for any of the installment due dates.

  • If there is an underpayment on line 12 (column (a), (b), (c), or (d)), go to Part VII to figure the penalty.

  • Complete Parts IV through VI as appropriate if the partnership uses the adjusted seasonal installment method and/or the annualized income installment method.

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