Form 8845 Form 8845 Indian Employment Credit

Form

8845

Indian Employment Credit

Department of the Treasury
Internal Revenue Service

▶ Attach

to your tax return.

Name(s) shown on return

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OMB No. 1545-1417

Total of qualified wages and qualified employee health insurance costs paid or incurred during the
tax year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Calendar year 1993 qualified wages and qualified employee health insurance costs
(see instructions). If none, enter -0- . . . . . . . . . . . . . . . . . . . . .
Incremental increase. Subtract line 2 from line 1. If zero or less, enter -0- . . . . . . . . .
Multiply line 3 by 20% (.20). See instructions for the adjustment you must make to salaries and
wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indian employment credit from partnerships, S corporations, cooperatives, estates,
and trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add lines 4 and 5. Cooperatives, estates, and trusts, go to line 7. Partnerships and S corporations,
stop here and report this amount on Schedule K. All others, stop here and report this amount on
Form 3800, line 1g . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount allocated to patrons of the cooperative or beneficiaries of the estate or trust (see
instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cooperatives, estates, and trusts, subtract line 7 from line 6. Report this amount on
Form 3800, line 1g . . . . . . . . . . . . . . . . . . . . . . . . . . .

General Instructions
Section references are to the Internal Revenue Code unless otherwise
noted.

What's New
The IRS has created a page on IRS.gov for information about Form 8845
and its instructions at www.irs.gov/form8845. Information about any
future developments affecting Form 8845 (such as legislation enacted
after we release it) will be posted on that page.

Purpose of Form
Employers of American Indians who are qualified employees use Form
8845 to claim the Indian employment credit.
Taxpayers that are not partnerships, S corporations, cooperatives,
estates, or trusts, and whose only source of this credit is from those
pass-through entities, are not required to complete or file this form.
Instead, they can report this credit directly on line 1g of Form 3800.

Definitions
Qualified wages means any wages paid or incurred by an employer for
services performed by an employee while such employee is a qualified
employee (see below). It does not include wages attributable to services
rendered during the 1-year period beginning with the day the employee
starts work for the employer if any portion of such wages is used in
figuring the work opportunity credit on Form 5884. Wages has the same
meaning given in section 51.
Qualified employee health insurance costs means any amount paid
or incurred by an employer for health insurance coverage for an
employee while the employee is a qualified employee. Do not include
amounts paid or incurred for health insurance under a salary reduction
arrangement.
Qualified employee means, for any tax period, any employee who
meets all three of the following tests.
1. The employee is an enrolled member, or the spouse of an enrolled
member, of an Indian tribe. Each tribe determines who qualifies for
enrollment and what documentation, if any, is issued as proof of
enrollment status. Examples of appropriate documentation will vary
from one tribe to another and may include a tribal membership card,
Certified Degree of Indian Blood (CDIB) card, or letter from the tribe or
tribal enrollment office. Employers should retain a copy of the proof of
enrollment status provided by the employee.

For Paperwork Reduction Act Notice, see instructions.

2011

Attachment
Sequence No. 113
Identifying number

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2
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4
5

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8

2. Substantially all the services performed by the employee for the
employer are performed within an Indian reservation (defined on page 2).
3. The employee’s principal residence while performing such services
is on or near the reservation where the services are performed.
However, the employee shall be treated as a qualified employee for
any tax year only if more than 50% of the wages paid or incurred by the
employer to the employee during the tax year are for services performed
in the employer’s trade or business. Each member of a controlled group
must meet this requirement independently. Also, see the instructions for
lines 1 and 2.
The following are not qualified employees.
• Any individual who bears any of the relationships described in sections
152(d)(2)(A) through 152(d)(2)(G) to, or is a dependent described in
section 152(d)(2)(H) of, the employer.
• If the employer is a corporation, any individual who bears any of the
relationships described in sections 152(d)(2)(A) through 152(d)(2)(G) to,
or is a dependent described in section 152(d)(2)(H) of, an individual who
owns (or is considered to own under section 267(c)) more than 50% in
value of the outstanding stock of the corporation.
• If the employer is an estate or trust, any individual who is a grantor,
beneficiary, or fiduciary of the estate or trust (or a dependent, as
described in section 152(d)(2)(H), of that individual), or any individual
who is a relative, as described in sections 152(d)(2)(A) through 152(d)(2)
(G), of the grantor, beneficiary, or fiduciary of the estate or trust.
• If the employer is other than a corporation, estate, or trust, any
individual who owns directly or indirectly more than 50% of the capital
and profits interest, including constructive ownership, in the entity.
• If the employer is a corporation, any person who owns (or is
considered to own under section 318) more than 5% of the outstanding
or voting stock of the employer or, if not a corporate employer, more
than 5% of the capital or profits interest in the employer.
• Any individual who performs services involving the conduct of Class I,
II, or III gaming, as defined in section 4 of the Indian Gaming Regulatory
Act, and any individual performing any services in a building housing
such gaming activity.
Indian tribe means any Indian tribe, band, nation, pueblo, or other
organized group or community, including any Alaska Native village or
regional or village corporation, as defined in, or established under, the
Alaska Native Claims Settlement Act, that is recognized as eligible for
the special programs and services provided by the United States to
Indians because of their status as Indians. See the Federal Register
dated October 1, 2010 (75 FR 60810), for the most recent listing of
federally recognized Indian tribes.
Cat. No. 16146D

Form 8845 (2011)

Page 2

Form 8845 (2011)

Indian reservation means a reservation as defined in section 3(d) of
the Indian Financing Act of 1974 or section 4(10) of the Indian Child
Welfare Act of 1978.

Early Termination of Employee
Generally, if the employer terminates a qualified employee less than 1
year after the date of initial employment, the following rules apply.
• No wages or qualified employee health insurance costs may be taken
into account for the tax year the employment is terminated.
• Any credits allowed for prior tax years by reason of wages paid or
incurred to that employee must be recaptured. Include the recapture
amount on the line for recapture taxes on your income tax return. Also,
any carryback or carryover of the credit must be adjusted.
These rules do not apply if:
• The employee voluntarily quits,
• The employee is terminated because of misconduct, or
• The employee becomes disabled. However, if the disability ends
during the first year of employment, the employer must offer
reemployment to that employee.
An employee is not treated as terminated if the corporate employer is
acquired by another corporation covered under the rules in section
381(a) and the employee continues to be employed by the acquiring
corporation. Nor is a mere change in the form of conducting the trade or
business treated as a termination if the employee continues to be
employed in such trade or business and the taxpayer retains a
substantial interest in such trade or business.

Member of Controlled Group or Business Under
Common Control
For purposes of figuring the credit, all members of a controlled group of
corporations (as defined in section 52(a)) and all members of a group of
businesses under common control (as defined in section 52(b)), are
treated as a single employer. As a member, compute your credit based
on your proportionate share of qualified wages and qualified employee
health insurance costs giving rise to the group’s Indian employment
credit. Enter your share of the credit on line 4. Attach a statement
showing how your share of the credit was figured, and write “See
Attached” next to the entry space for line 4.

Specific Instructions
Figure the credit for your trade or business on lines 1 through 4. The
following rules apply for lines 1 and 2.
• The total amount of qualified wages and qualified employee health
insurance costs for each qualified employee for any tax year is limited to
$20,000.
• For a short tax year, multiply the wages limit by the number of days in
the short tax year and divide the result by 365.

Line 1
Enter the total qualified wages and qualified employee health insurance
costs paid or incurred for qualified employees during the tax years. An
employee is not a qualified employee if the total amount of wages paid
or incurred by the employer to the employee during the tax year
(whether or not for services within an Indian reservation) exceeds
$45,000.

Line 2
Enter the total qualified wages and qualified employee health insurance
costs paid or incurred by the employer (or predecessor) for qualified
employees during calendar year 1993 (as if section 45A had been in
effect during 1993). If none, enter zero. For this purpose, an employee is
not a qualified employee if the total amount of wages paid or incurred by
the employer to the employee during calendar year 1993 (whether or not
for services within an Indian reservation) exceeds $30,000.

Line 4
Generally, you must reduce the deductions on your return for salaries
and wages and health insurance costs by the credit on line 4, even if
you cannot take the full credit this year because of the tax liability limit.
If you capitalized any costs on which you figured the credit, reduce the
amount capitalized by the credit attributable to these costs.

Line 7
Cooperatives. A cooperative described in section 1381(a) must allocate
to its patrons the credit in excess of its tax liability limit. Therefore, to
figure the unused amount of the credit allocated to patrons, the
cooperative must first figure its tax liability. While any excess is
allocated to patrons, any credit recapture applies as if the cooperative
had claimed the entire credit.
If the cooperative is subject to the passive activity rules, include on
line 5 any Indian employment credit from passive activities disallowed
for prior years and carried forward to this year. Complete Form 8810,
Corporate Passive Activity Loss and Credit Limitations, to determine the
allowed credit that can be allocated to patrons. For details, see the
Instructions for Form 8810.
Estates and trusts. Allocate the Indian employment credit on line 6
between the estate or trust and the beneficiaries in the same proportion
as income was allocated and enter the beneficiaries' share on line 7.
If the estate or trust is subject to the passive activity rules, include on
line 5 any Indian employment credit from passive activities disallowed
for prior years and carried forward to this year. Complete Form 8582CR, Passive Activity Credit Limitations, to determine the allowed credit
that must be allocated between the estate or trust and the beneficiaries.
For details, see the instructions for Form 8582-CR.
Paperwork Reduction Act Notice. We ask for the information on this
form to carry out the Internal Revenue laws of the United States. You
are required to give us the information. We need it to ensure that you are
complying with these laws and to allow us to figure and collect the right
amount of tax.
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 and file this form will vary depending on
individual circumstances. The estimated burden for individual taxpayers
filing this form is approved under OMB control number 1545-0074 and
is included in the estimates shown in the instructions for their individual
income tax return. The estimated burden for all other taxpayers who file
this form is shown below.
Recordkeeping

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2 hr., 23 min.

Learning about the law
or the form
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1 hr., 23 min.

Preparing and sending
the form to the IRS . .

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1 hr., 29 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. See the instructions for the tax return with
which this form is filed.