8845 Instructions for Form 8845

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Instructions for Form 8845

Department of the Treasury
Internal Revenue Service

(Rev. January 2022)

Indian Employment Credit
cooperative, estate, or trust. Instead, they can report this
credit directly on Form 3800, General Business Credit.

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

DRAFT AS OF
September 28, 2021
Future Developments

For the latest information about developments related to
Form 8845 and its instructions, such as legislation
enacted after they were published, go to
IRS.gov/Form8845.

What’s New

Credit extension. The Taxpayer Certainty and Disaster
Tax Relief Act of 2020 extended the Indian employment
credit to cover qualified wages and qualified employee
health insurance costs paid or incurred in tax years
beginning in 2021.

Coronavirus-related employee retention credit. You
may claim an employee retention credit on an
employment tax return such as Form 941, Employer's
QUARTERLY Federal Tax Return. Wages paid after
December 31, 2020, and before July 1, 2021, and used to
figure this coronavirus-related employee retention credit
can't also be used to figure a credit on Form 8845. See
Qualified Wages.
Credit for qualified sick and family leave wages. You
may claim a credit for qualified sick and family leave
wages on an employment tax return such as Form 941.
Wages paid after March 31, 2021, and before October 1,
2021, and used to figure that credit, can't also be used to
figure a credit on Form 8845. See Qualified Wages.
Disaster-related employee retention credit. You may
claim a 2020 qualified disaster employee retention credit
on Form 5884-A, Employee Retention Credit for
Employers Affected by Qualified Disasters. Wages used
to figure that disaster-related employee retention credit
can't also be used to figure a credit on Form 8845. See
Qualified Wages.
Employee retention credit. Wages paid after June 30,
2021, and before January 1, 2022, and used to figure the
Indian employment credit can’t also be used to figure a
coronavirus-related employee retention credit.

General Instructions

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
doesn’t include wages attributable to services rendered
during the 1-year period (if applicable, 2-year period if
employee is a long-term family assistance recipient under
section 51) 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. See
section 45A(b)(1) for details.
Qualified wages do not include:

• Wages paid to or incurred for any employee after

December 31, 2020, and before July 1, 2021, if you use
the same wages to claim the employee retention credit on
an employment tax return such as Form 941;
• Wages paid to or incurred for any employee after March
31, 2021, and before October 1, 2021, if you use the
same wages to claim the credit for qualified sick and
family leave wages on an employment tax return such as
Form 941; and
• Wages paid to or incurred for any employee generally
after December 27, 2019, and before April 17, 2021, if you
use the same wages to claim the 2020 qualified disaster
employee retention credit on Form 5884-A.
Information about any future disaster credits that
reduce qualified wages may be posted under "Recent
Developments" at IRS.gov/Form8845.

Qualified Employee Health Insurance
Costs
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. Don’t include amounts paid or
incurred for health insurance under a salary reduction
agreement.

Qualified Employee

Purpose of Form

Use Form 8845 to claim the Indian employment credit if
you paid or incurred qualified wages and/or qualified
employee health insurance costs to/for a qualified
employee during your tax year.
Partnerships, S corporations, cooperatives, estates,
and trusts must file this form to claim the credit. All others
aren’t required to complete or file this form if their only
source for this credit is a partnership, S corporation,

Sep 28, 2021

Qualified Wages

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

Cat. No. 66389C

Indian Reservation

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.

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.

DRAFT AS OF
September 28, 2021
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.

• 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.

The following are not qualified employees.

• If the employer is an individual, any individual who
bears any of the relationships described in section 152(d)
(2)(A) through (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 section 152(d)
(2)(A) through (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 or bears any of the relationships described in section
152(d)(2)(A) through (G) to, or is a dependent described
in section 152(d)(2)(H) of, a grantor, beneficiary, or
fiduciary of the estate or trust.
• If the employer is an entity other than a corporation,
estate, or trust, any individual who bears any of the
relationships described in section 152(d)(2)(A) through
(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% of the capital and profits
interests in the entity.
• A 5% owner: 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. See
section 416(i)(1)(B) for details.
• 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.

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 isn’t 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, figure 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

Indian Tribe

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.

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 February 1, 2019, (84 FR
1200) and subsequent updates, for the most recent listing
of federally recognized Indian tribes.

Line 1

Enter the total qualified wages and qualified employee
health insurance costs paid or incurred for qualified
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Instructions for Form 8845 (Rev. 01-2022)

employees during the tax year. An employee isn’t 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 $50,000.

Partnerships, S corporations, cooperatives, estates,
and trusts report the above credits on line 5. All other filers
figuring a separate credit on earlier lines also report the
above credits on line 5. All others not using earlier lines to
figure a separate credit can report the above credits
directly on Form 3800, Part III, line 1g, and not file Form
8845.

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
isn’t 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 7

DRAFT AS OF
September 28, 2021
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 Form 8845 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 must be allocated to patrons. For
details, see the Instructions for Form 8810.

Line 4

In general, you must reduce your deduction for salaries
and wages by the amount on line 4, even if you can’t take
the full credit this year because of the tax liability limit. If
you capitalized any salaries and wages on which you
figured the credit, reduce the amount capitalized by the
amount attributable to these costs.

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 Form 8845 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.

Line 5

Enter the total Indian employment credits from the
appropriate box of:
• Schedule K-1 (Form 1065), Partner’s Share of Income,
Deductions, Credits, etc., box 15 (code P);
• Schedule K-1 (Form 1120-S), Shareholder’s Share of
Income, Deductions, Credits, etc., box 13 (code P);
• Schedule K-1 (Form 1041), Beneficiary’s Share of
Income, Deductions, Credits, etc., box 13 (code L); or
• Form 1099-PATR, Taxable Distributions Received
From Cooperatives, box 12 (box 11 for 2019; box 10
before 2019), or other notice of credit allocation.

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Instructions for Form 8845 (Rev. 01-2022)

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