Installment Payments of Section 1446 Tax for Partnerships

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Instructions for Form 8804-W

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2009

Department of the Treasury
Internal Revenue Service

Instructions for Form
8804-W
Section references are to the Internal
Revenue Code unless otherwise noted.

What’s New
• Final regulations were issued under

section 1.1446-6. These final regulations
address special rules to reduce a
partnership’s section 1446 tax with
respect to a foreign partner’s allocable
share of effectively connected taxable
income.
• Effective July 29, 2008, Form 8804-C,
Certificate of Partner-Level Items to
Reduce Section 1446 Withholding, is the
sole method for foreign partners to certify
partner-level items.
• The instructions for lines 1, 22, and 32
have been modified to reflect the
reduction for state and local taxes
permitted under Regulations section
1.1446-6(c)(1)(iii).

General Instructions
Who Must Make Estimated
Section 1446 Tax
Payments
Partnerships generally must make
installment payments of estimated section
1446 tax if they expect the aggregate tax
on the effectively connected taxable
income (ECTI) that is allocable to all
foreign partners to be $500 or more.

When To Make Estimated
Section 1446 Tax
Payments
The installments are due by the 15th day
of the 4th, 6th, 9th, and 12th months of
the partnership’s tax year. If any date falls
on a Saturday, Sunday, or legal holiday,
the installment is due on the next regular
business day.

Underpayment of
Estimated Section 1446
Tax
A partnership that does not make
estimated section 1446 tax payments
when due may be subject to an
underpayment penalty for the period of
underpayment. See Schedule A (Form
8804) for details.

How To Make Estimated
Section 1446 Tax
Payments
A partnership that is required to make an
installment payment of section 1446 tax
must file Form 8813, Partnership
Withholding Tax Payment Voucher
(Section 1446). Furthermore, the
partnership is generally required to notify
each foreign partner of the section 1446
tax paid on the partner’s behalf within 10
days of the installment payment due date.
See Regulations section 1.1446-3(d) and
the Instructions for Forms 8804, 8805,
and 8813 for more information.

Refiguring Estimated
Section 1446 Tax
If, after the partnership figures and makes
an installment payment of estimated
section 1446 tax, it finds that its section
1446 tax liability for the year will be more
or less than originally estimated, it may
have to refigure its required installments.
If earlier installments were underpaid, the
partnership may owe a penalty for
underpayment of estimated tax. An
immediate catch-up payment should be
made to reduce the amount of any
penalty resulting from the underpayment
of any earlier installments, whether
caused by a change in estimate, failure to
make a payment, or a mistake.

Specific Instructions
Part I—Determination of
Installment Payments
Complete Form 8804-W for each
installment payment of section 1446 tax
based on the information available at the
time of the installment payment.

Lines 1 through 6—Current
Year Safe Harbor
Lines 1a, 1e, 1i, and 1m. To determine
the foreign partner’s allocable share of
ECTI, see Effectively Connected Taxable
Income in the Instructions for Forms
8804, 8805, and 8813. With respect to
lines 1e, 1i, and 1m, enter the specified
types of ECTI if such partner would be
entitled to use a preferential rate on such
income or gain (see Regulations section
1.1446-3(a)(2)).
If the partnership has net ordinary loss,
net short-term capital loss, or net 28%
rate loss, each net loss should be netted
against the appropriate categories of
Cat. No. 51675X

income and gain to determine the
amounts of income and gain to be
entered on lines 1e, 1i, and 1m,
respectively. See section 1(h) and Notice
97-59, 1997-45 I.R.B. 7, for rules for
netting gains and losses.
Lines 1b, 1f, 1j, and 1n. Enter the
reduction amounts for state and local
taxes under Regulations section
1.1446-6(c)(1)(iii). See Reductions for
State and Local Taxes in the Instructions
for Forms 8804, 8805, and 8813 for
additional information. The netting rules
under section 1(h) and Notice 97-59 must
be considered in determining the category
of income the reduction amounts offset.
Lines 1c, 1g, 1k, and 1o. Enter the
reduction amounts resulting from certified
partner-level items received from foreign
partners using Form 8804-C. See
Certification of Deductions and Losses in
the Instructions for Forms 8804, 8805,
and 8813 for additional information. The
netting rules under section 1(h) and
Notice 97-59 must be considered in
determining the category of income the
reduction amounts offset.
Line 6. Add lines 2 through 5.
Alternative tax for foreign corporate
partners with qualified timber gain. In
the case of a foreign corporate partner, if
taxable income expected for the year (line
1a) includes both a net capital gain and
qualified timber gain, an alternative
maximum 15% capital gains tax may
apply to the qualified timber gain. For this
purpose, a qualified timber gain means
the net gains described in sections 631(a)
and (b), determined by taking into
account only trees held more than 15
years. Only qualified timber gains for the
period that begins after May 22, 2008,
and before May 23, 2009, are eligible for
the alternative tax.
With respect to a foreign corporate
partner with both a net capital gain and a
qualified timber gain, enter on line 6 the
smaller of the alternative tax or the
amount on line 2. Use Form 1120-W, Part
II to compute the alternative tax. For
these purposes, the following
modifications must be made to Form
1120-W, Part II:
• On lines 30, 32, and 35, substitute “the
amount shown on Form 8804-W, line 1d”
for “Part I, line 1.”
• On line 33, enter the product of line 32
times 35%.
As mentioned above, the Form
1120-W, Part II, line 37 result (computed
with the modifications noted above) is
compared to Form 8804-W, line 2, and

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Instructions for Form 8804-W

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the smaller of these two amounts is
entered on Form 8804-W, line 6.

Line 7—Prior Year Safe Harbor
Enter the total section 1446 tax that would
have been due for 2008 on ECTI
allocable to foreign partners for 2008,
without any reductions for state and local
taxes under Regulations section
1.1446-6(c)(1)(iii) or certified partner-level
items. With respect to the partnership’s
first installment payment, if the 2008 Form
8804 has not yet been filed, an estimate
is acceptable. However, if the partnership
later determines that this estimate is
incorrect, see Refiguring Estimated
Section 1446 Tax on page 1.
Complete line 7 only if all of the
following apply:
• The prior tax year consisted of 12
months,
• The partnership timely files (including
extensions) a U.S. return of partnership
income (e.g., Form 1065) for the prior
year, and
• The amount of ECTI for the prior tax
year is not less than 50% of the ECTI
expected for the current tax year.
Furthermore, the Form 8804 on which the
current year ECTI will be reported must
be timely filed.
If any of the above does not apply,
skip line 7 and enter the amount from line
6 on line 8.
If the partnership qualifies to use the
prior year safe harbor and chooses that
method, it must use that method to pay
each of its installments during the tax
year. Furthermore, for each installment
payment, the average of that installment
and prior installments during the tax year
must be at least 25% of the amount that
satisfies the partnership’s section 1446
tax liability under the prior year safe
harbor. If the partnership does not satisfy
both of these requirements, it will not
qualify for the prior year safe harbor when
determining any penalty due on Schedule
A (Form 8804).
If the partnership begins using the
prior year safe harbor method and it
determines later in the tax year (based
upon the standard option annualization
method described later in these
instructions) that it will not meet the 50%
of ECTI requirement described in the last
bulleted item above, it may make all
subsequent installment payments using
the standard option annualization method
and it will not be subject to the penalty
determined on Schedule A (Form 8804).
This change in method must be disclosed
in a statement attached to the Form 8804
the partnership files for the current tax
year and the statement must include
enough information to allow the IRS to
determine whether the change was
appropriate.
If the partnership begins using the
prior year safe harbor method and
switches to the current year safe harbor
(because the partnership does not qualify
for the relief described in the previous
paragraph (i.e., using the standard option
annualization method) or the partnership
chooses not to continue using it), in order
to avoid an underpayment penalty with

respect to the current installment
payment, the partnership must pay the
sum of (a) the current installment
payment based on the current year safe
harbor, plus (b) the sum of the amount by
which the current year safe harbor
exceeds the prior year safe harbor
amount paid in for each prior installment
period during which it qualified for the
prior year safe harbor.

Line 8
Enter the smaller of line 6 or line 7.
However, if, for any installment payment,
line 6 is smaller than line 7 and you enter
that smaller line 6 amount on line 8, you
will not qualify for the prior year safe
harbor when determining any penalty due
on Schedule A (Form 8804) (see the line
7 instructions above). Therefore, in that
case, for any subsequent installment
payment during the tax year, do not use
the line 7 amount.

Line 9—Installment Due Dates
Calendar-year taxpayers. Enter
4-15-2009, 6-15-2009, 9-15-2009, and
12-15-2009, respectively, in columns (a)
through (d).
Fiscal-year taxpayers. Enter the 15th
day of the 4th, 6th, 9th, and 12th months
of the partnership’s tax year in columns
(a) through (d). If the regular due date
falls on a Saturday, Sunday, or legal
holiday, enter the next business day.

Line 10
Enter 25% of line 8 in columns (a)
through (d) unless the partnership uses
the annualized income installment
method or the adjusted seasonal
installment method.
Annualized income installment method
and/or adjusted seasonal installment
method. If the partnership’s ECTI is
expected to vary during the year because,
for example, it operates its business on a
seasonal basis, it may be able to lower
the amount of one or more required
installments by using the annualized
income installment method and/or the
adjusted seasonal installment method.
For example, a ski shop, which receives
most of its income during the winter
months, may be able to benefit from using
one or both of these methods in figuring
one or more of its required installments.
To use one or both of these methods,
complete Part II and/or Part III of the
form. If those Parts are used for any
payment date, those Parts must be used
for all subsequent payment due dates. To
arrive at the amount of each required
installment, Part IV automatically selects
the smallest of (a) the annualized income
installment (if applicable), (b) the adjusted
seasonal installment (if applicable), or (c)
the current year safe harbor (increased by
any recapture of a reduction in a required
installment under section 6655(e)(1)(B)).

Line 11
Include on line 11 any 2008 overpayment
that the partnership chose to credit
against its 2009 tax. The overpayment is
credited against unpaid required
installments in the order in which the
installments are required to be paid.

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Also include on line 11 any:

• Section 1446 tax withheld and paid by

another partnership because the
partnership preparing this Form 8804-W
was a partner in that partnership during
the tax year. See the instructions for Form
8804, line 6b, in the Instructions for
Forms 8804, 8805, and 8813.
• Section 1445(a) or 1445(e)(1) tax
withheld from or paid by the partnership
filing this Form 8804-W during the tax
year for a disposition of a U.S. real
property interest. See the instructions for
Form 8804, line 6c, in the Instructions for
Forms 8804, 8805, and 8813.
The partnership generally enters these
amounts in the column that corresponds
to the installment period for which these
amounts were paid or withheld. However,
if the partnership learns about the
payments or withholding in a subsequent
installment period, the partnership may
claim them in that period.

Parts II Through IV
If only the adjusted seasonal installment
method (Part II) is used, complete Parts II
and IV. If only the annualized income
installment method (Part III) is used,
complete Parts III and IV. If both methods
are used, complete all three parts. Enter
in each column on line 10 the amounts
from the corresponding column of line 42.
Do not figure any required
installment until after the end of
CAUTION the month preceding the due date
for that installment.
Extraordinary items. Generally, under
the annualized income installment
method, extraordinary items must be
taken into account after annualizing the
effectively connected taxable income for
the annualization period. Similar rules
apply in determining effectively connected
taxable income under the adjusted
seasonal installment method. An
extraordinary item includes:
• Any item identified in Regulations
section 1.1502-76(b)(2)(ii)(C)(1), (2), (3),
(4), (7), and (8);
• A section 481(a) adjustment; and
• Net gain or loss from the disposition of
25% or more of the fair market value of
the partnership’s business assets during
the tax year.
These extraordinary items must be
accounted for in the appropriate
annualization period. However, a section
481(a) adjustment (unless the partnership
makes the alternative choice under
Regulations section 1.6655-2(f)(3)(ii)(C))
is treated as an extraordinary item
occurring on the first day of the tax year in
which the item is taken into account in
determining effectively connected taxable
income.
For more information regarding
extraordinary items, see Regulations
section 1.6655-2(f)(3)(ii) and the
examples in Regulations section
1.6655-2(f)(3)(vii). Also see Regulations
section 1.6655-3(d)(3).
De minimis rule. Extraordinary items
identified above resulting from a particular
transaction that total less than $1 million
(other than a section 481(a) adjustment)

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Instructions for Form 8804-W

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may be annualized using the general
rules of Regulations section 1.6655-2(f),
or, if the partnership chooses, may be
taken into account after annualizing the
effectively connected taxable income for
the annualization period.

Part II—Adjusted Seasonal
Installment Method
Note. Part II does not reflect the lower
preferential rates permitted under
Regulations section 1.1446-3(a)(2).
These were omitted because, for most
taxpayers, the income reported in Part II
will be predominantly (or exclusively)
ordinary income. If the partnership wishes
to consider lower preferential rates for
Part II (and if the requirements outlined in
the Note in the line 30 instructions are
met), it must attach a schedule which
appropriately expands lines 14 and 21
through 24 to show the applicable special
types of income or gain and the
applicable percentages (see, for example,
lines 32 and 33 of this schedule).
Complete this part only if the
partnership’s base period percentage for
any 6 consecutive months of the tax year
equals or exceeds 70%. Figure the base
period percentage using the 6-month
period in which the partnership normally
receives the largest part of its ECTI. The
base period percentage for any period of
6 consecutive months is the average of
the three percentages figured by dividing
the ECTI for the corresponding
6-consecutive-month period in each of the
3 preceding tax years by the ECTI for
each of their respective tax years.
Example. An amusement park with a
calendar year as its tax year receives the
largest part of its ECTI during a 6-month
period, May through October. To compute
its base period percentage for this
6-month period, the amusement park
figures its ECTI for each May – October
period in 2006, 2007, and 2008. It then
divides the ECTI for each May – October
period by the total ECTI for that particular
tax year. The resulting percentages are
69% (.69) for May – October 2006, 74%
(.74) for May – October 2007, and 67%
(.67) for May – October 2008. Because the
average of 69%, 74%, and 67% is 70%,
the base period percentage for May
through October 2009 is 70%. Therefore,
the amusement park qualifies for the
adjusted seasonal installment method.

Line 14
If the partnership has certain
extraordinary items, special rules apply.
Do not include on line 14 the de minimis
extraordinary items that the partnership
chooses to include on line 21b. See
Extraordinary items on page 2.

Line 21b
If the partnership has certain
extraordinary items of $1 million or more
from a transaction, or a section 481(a)
adjustment, special rules apply. Include
these amounts on line 21b for the
appropriate period. Also, include on line
21b the de minimis extraordinary items
that the partnership chooses to exclude

from line 14. See Extraordinary items on
page 2.

Line 22
Enter the reduction to the line 21c amount
for state and local taxes under
Regulations section 1.1446-6(c)(1)(iii) and
for valid certificates received from the
foreign partner under Regulations section
1.1446-6. See Certification of Deductions
and Losses in the Instructions for Forms
8804, 8805, and 8813 for additional
information.

Part III—Annualized
Income Installment Method
Line 29—Annualization Periods
Enter in the space on line 29, columns (a)
through (d), respectively, the
annualization periods that the partnership
is using, based on the options listed
below. For example, if the partnership
elects Option 1, enter on line 29 the
annualization periods 2, 4, 7, and 10, in
columns (a) through (d), respectively.
Use Option 1 or Option 2 only if
the partnership elected to use one
CAUTION of these options by filing Form
8842, Election To Use Different
Annualization Periods for Corporate
Estimated Tax, on or before the due date
of the first required installment payment.
Once made, the election is irrevocable for
the particular tax year.

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1st
2nd
3rd
4th
Installment Installment Installment Installment
Standard
Option

3

3

6

9

Option 1

2

4

7

10

Option 2

3

5

8

11

Line 30—Foreign Partner’s
Allocable Share of ECTI
Enter on lines 30a through 30d the
foreign partner’s allocable share of ECTI
for the months entered for each
annualization period in columns (a)
through (d) on line 29. To determine the
foreign partner’s allocable share of ECTI,
see Effectively Connected Taxable
Income in the Instructions for Forms
8804, 8805, and 8813.
If the partnership has certain
extraordinary items, special rules apply.
Do not include on line 30a, 30b, 30c, or
30d the de minimis extraordinary items
that the partnership chooses to include on
line 32a, 32e, 32i, or 32m, respectively.
See Extraordinary items on page 2.
Note. With respect to lines 30b through
30d, enter the specified types of ECTI if
(a) such partner would be entitled to use
a preferential rate on such income or gain
(see Regulations section 1.1446-3(a)(2))
and (b) the partnership has sufficient
documentation to meet the requirements
of Regulations section 1.1446-3(a)(2)(ii).
If the partnership has net ordinary loss,
net short-term capital loss, or net 28%
rate loss, each net loss should be netted
against the appropriate categories of
income and gain to determine the
amounts of income and gain to be

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entered on lines 30e, 30i, and 30m,
respectively. See section 1(h) and Notice
97-59, 1997-45 I.R.B. 7, for rules for
netting gains and losses.

Line 31—Annualization
Amounts
Enter the annualization amounts for the
option used on line 29. For example, if the
partnership elects Option 1, enter on line
31 the annualization amounts 6, 3,
1.71429, and 1.2, in columns (a) through
(d), respectively.
1st
2nd
3rd
4th
Installment Installment Installment Installment
Standard
Option

4

4

2

Option 1

6

3

1.71429

1.2

Option 2

4

2.4

1.5

1.09091

1.33333

Lines 32a, 32e, 32i, and 32m
If the partnership has certain
extraordinary items that total $1 million or
more from a particular transaction, or a
section 481(a) adjustment, special rules
apply. Include these amounts on line 32a,
32e, 32i, or 32m, depending upon the
type of income against which the item
applies, for the appropriate period. Also
include on line 32a, 32e, 32i, or 32m the
de minimis extraordinary items that the
partnership chooses to exclude from line
30a, 30b, 30c, or 30d, respectively. See
Extraordinary items on page 2.

Lines 32b, 32f, 32j, and 32n
Enter the reduction amounts for state and
local taxes under Regulations section
1.1446-6(c)(1)(iii). See Reductions for
State and Local Taxes in the Instructions
for Forms 8804, 8805, and 8813 for
additional information. The netting rules
under section 1(h) and Notice 97-59 must
be considered in determining the category
of income the reduction amounts offset.

Lines 32c, 32g, 32k, and 32o
Enter the reduction amounts resulting
from certified partner-level items received
from foreign partners using Form 8804-C.
See Certification of Deductions and
Losses in the Instructions for Forms 8804,
8805, and 8813 for additional information.
The netting rules under section 1(h) and
Notice 97-59 must be considered in
determining the category of income the
reduction amounts offset.

Part IV—Required
Installments Under Part II
and/or Part III
Line 37
Before completing line 37 in columns (b)
through (d), complete lines 38 through 42
in each of the preceding columns. For
example, complete lines 38 through 42 in
column (a) before completing line 37 in
column (b).

Line 42—Required Installments
For each installment, enter the smaller of
line 38 or line 41 on line 42. Also enter
the result on line 10.

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Instructions for Form 8804-W

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Paperwork Reduction Act Notice. Your use of this form is optional. It is provided to aid the partnership in determining its tax
liability.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the
form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their
contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are
confidential, as required by section 6103.
The time needed to complete this form will vary depending on individual circumstances. The estimated average time is:
Form

Recordkeeping

Learning about the law or the form
47 min.

Preparing the form

8804-W, Part I

8 hr., 7 min.

57 min.

8804-W, Part II

21 hr., 16 min.

6 min.

27 min.

8804-W, Part III

21 hr., 3 min.

6 min.

27 min.

8804-W, Part IV

5 hr., 58 min.

6 min.

12 min.

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be
happy to hear from you. You can write to the Internal Revenue Service, Tax Products Coordinating Committee,
SE:W:CAR:MP:T:T:SP, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Do not send the tax form to this office.
Instead, keep the form for your records.

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