Form 8845 Indian Employment Credit

Form

8845

Department of the Treasury
Internal Revenue Service

Indian Employment Credit
▶ Information

▶ Attach to your tax return.
about Form 8845 and its instructions is at www.irs.gov/form8845.

Name(s) shown on return

1
2
3
4
5
6

7
8

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 Indian employment credit has been extended. The credit is available for
qualified wages and health insurance costs paid or incurred in tax years 2012 and
2013.

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 1year 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 agreement.
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.
2. Substantially all the services performed by the employee for the employer are
performed within an Indian reservation (defined below).
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.

2012

Attachment
Sequence No. 113
Identifying number

1
2
3
4
5

6
7
8

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.
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

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Form 8845 (2012)

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Form 8845 (2012)
• 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 year. 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 qualied 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 8582-CR, 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.