Instructions for Filling Out Form 8990

This document offers a comprehensive guide to completing IRS Form 8990, "Limitation on Business Interest Expense Under Section 163(j)," including general and specific instructions, special rules, and worksheets. It helps taxpayers calculate their deductible business interest expense and carryforward amounts.

In this article, we'll provide information on Form 8990 and a step-by-step guide on how to fill it out, keeping it straight to the point.

What is Form 8990?

Form 8990, titled "Limitation on Business Interest Expense Under Section 163(j)," is used by taxpayers to calculate their deductible business interest expense and the amount to carry forward to the next year, in accordance with the limitations set by Section 163(j) of the Internal Revenue Code. The primary purpose of this form is to help taxpayers determine the allowable business interest expense deduction for the tax year and the amount of any disallowed business interest expense that can be carried forward to future years. This is in line with the limitations on business interest expense deductions introduced by the Tax Cuts and Jobs Act (TCJA) under Section 163(j).

Who Must File Form 8990?

Taxpayers who need to file Form 8990 include individuals, corporations, partnerships, and S corporations with business interest expense, disallowed business interest expense carryforwards, or current year or prior year excess business interest expense. Pass-through entities allocating excess taxable income or excess business interest income to their owners must also file Form 8990, regardless of whether they have any interest expense. Additionally, regulated investment companies paying section 163(j) interest dividends and U.S. shareholders of applicable controlled foreign corporations (CFCs) with business interest expense, disallowed business interest expense carryforward, or part of a CFC group must file Form 8990. For a CFC group, an additional Form 8990 must be filed to report the combined limitations of all CFC group members.

Form 8990 Tax Filing Deadlines and Due Dates

• Generally, the due date for Form 8990 aligns with the due date of the tax return to which it is attached.
• For specific due dates, taxpayers should refer to the instructions for their particular tax return or consult the IRS website or a tax professional.

Form 8990 Late Payment Penalty

The late payment penalty for Form 8990 is not explicitly mentioned in the instructions. Generally, penalties related to late filing or payment are associated with the main tax return to which Form 8990 would be attached, rather than Form 8990 itself. For accurate penalty information, it would be necessary to refer to the instructions for the specific tax return being filed (e.g., Form 1040 for individuals, Form 1120 for corporations) or to consult the IRS website or a tax professional.

Step-by-Step Instructions for Form 8990

Step by Step Instructions for Filling Out Form 8990:

1. Introduction and Future Developments: Check the IRS website for the latest information about developments related to Form 8990 and its instructions.
2. General Instructions:
   • Purpose of Form: Use Form 8990 to figure the amount of business interest expense you can deduct and the amount to carry forward to the next year.
   • Computation of Section 163(j) Limitation: The business interest expense deduction allowed for the tax year is limited to the sum of business interest income, 30% of the adjusted taxable income (ATI), and floor plan financing interest expense.
   • Carryforward of Disallowed Business Interest: Any business interest expense not allowed as a deduction is carried forward to the following year.
   • Who Must File: Generally, taxpayers with business interest expense, a disallowed business interest expense carryforward, or current year or prior year excess business interest expense must file Form 8990.
3. Specific Instructions:
   • Part I - Computation of Allowable Business Interest Expense: Complete this part to determine your allowable business interest expense deduction.
   • Section I - Business Interest Expense (Lines 1 Through 5): Enter current year business interest expense, disallowed business interest expense carryforwards from prior years, and floor plan financing interest expense.
   • Section II - Adjusted Taxable Income (Lines 6 Through 22): Calculate your adjusted taxable income by adding or subtracting specific items from your tentative taxable income.
   • Section III - Business Interest Income (Lines 23 Through 25): Enter your current year business interest income.
   • Section IV - 163(j) Limitation Calculations (Lines 26 Through 31): Calculate the limitation on business interest expense based on ATI and business interest income.
4. Part II - Partnership Pass-Through Items: Complete this part if you are a partnership subject to the section 163(j) limitation.
5. Part III - S Corporation Pass-Through Items: Complete this part if you are an S corporation subject to the section 163(j) limitation.
6. Schedules A and B: Summarize partner's or shareholder's section 163(j) excess items.
7. Worksheets: Use the provided worksheets to determine each partner's deductible business interest expense and section 163(j) excess items, as well as to make a stand-alone applicable CFC/CFC group safe harbor election.
8. Notices: Review the Paperwork Reduction Act Notice and other relevant information.

This summary provides an overview of the instructions for filling out Form 8990. For detailed guidance, including specific calculations and exceptions, refer to the full instructions on the IRS website.

How to Submit Form 8990

To submit Form 8990, first determine if you are required to file based on your business interest expense, disallowed business interest expense carryforward, or current year or prior year excess business interest expense. If required, use the form to calculate the amount of business interest expense you can deduct and the amount to carry forward to the next year. Complete the form according to the specific instructions provided, which include filling out parts I through III and Schedules A and B if applicable. Finally, attach the completed Form 8990 to your tax return and submit it by the tax return's due date.

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