Instructions for Filling Out Form 8974

This document offers a comprehensive guide on completing Form 8974, which is used to determine the qualified small business payroll tax credit for increasing research activities that can be claimed on Forms 941, 943, or 944. It includes filing requirements, calculation methods, and specific instructions for each line of the form.

In this article, we'll provide information on Form 8974 and a step-by-step guide on how to fill it out, keeping it straight to the point.

What is Form 8974?

Form 8974 is a document used by businesses to determine the amount of the qualified small business payroll tax credit for increasing research activities that can be claimed on Forms 941, 943, or 944. The purpose of this form is to allow businesses to claim this credit against their payroll taxes, which must be elected on an original income tax return that is timely filed (including extensions) using Form 6765. Key components of Form 8974 include business information, the calendar year, the quarter for which the form is being filed, and specific instructions for each part of the form.

Who Must File Form 8974?

Businesses that have elected to claim the qualified small business payroll tax credit for increasing research activities against their payroll taxes need to file Form 8974. This election must be made on an original income tax return that is timely filed (including extensions) using Form 6765. If the income tax return with the election on Form 6765 hasn't been filed, Form 8974 cannot be filed, and the payroll tax credit cannot be claimed against payroll taxes on Forms 941, 943, or 944.

Form 8974 Tax Filing Deadlines and Due Dates

• Form 8974 must be filed and attached to Form 941, 943, or 944 if an election was made on the income tax return to claim the qualified small business payroll tax credit for increasing research activities against payroll taxes.
• The payroll tax credit must be elected on an original income tax return that is timely filed (including extensions).
• The election is made on Form 6765.
• If the income tax return making the election has not been filed, Form 8974 cannot be filed and the qualified small business payroll tax credit for increasing research activities cannot be claimed against payroll taxes on Form 941, 943, or 944.

Form 8974 Late Payment Penalty

There is not a specific late payment penalty amount for Form 8974, however it's important to consult the IRS or a tax professional for guidance on potential penalties associated with late filing or payment related to this form.

Step-by-Step Instructions for Form 8974

The step-by-step instructions for filling out Form 8974 are as follows:

1. Enter your employer identification number (EIN) and name at the top of Form 8974.
2. Check a box to indicate on which form you'll take the credit from Part 2, line 12 or, if applicable, line 17.
3. Enter the ending date of your income tax period in column (a) of Part 1.
4. Indicate which income tax return you filed that elected a qualified small business payroll tax credit on Form 6765 in column (b) of Part 1.
5. Enter the date that you filed your income tax return in column (c) of Part 1.
6. If the EIN used on Form 8974 isn’t the same as the EIN used on Form 6765, enter the EIN that was used on Form 6765 in column (d) of Part 1.
7. Enter the amount from Form 6765, line 44 in column (e) of Part 1.
8. Enter the amount of the credit from column (e) that was taken in a previous period or previous periods in column (f) of Part 1.
9. Subtract column (f) from column (e) and enter the result in column (g) of Part 1.
10. Enter the amount from Part 1, line 6, column (g) on line 7.
11. Enter the amount from Form 941, line 5a, column 2; Form 943, line 3; or Form 944, line 4a, column 2 on line 8.
12. Enter the amount from Form 941, line 5b, column 2; or Form 944, line 4b, column 2 on line 9.
13. Add lines 8 and 9. Enter the result on line 10.
14. Multiply line 10 by 50% (0.50) and enter the result on line 11.
15. Subtract line 12 from line 7. Enter the result on line 13.
16. Enter the amount from Form 941, line 5c, column 2; Form 943, line 5; or Form 944, line 4c, column 2 on line 14.
17. Multiply line 14 by 50% (0.50) and enter the result on line 15.
18. Enter the smaller of line 13 or 15 on line 16.
19. Add lines 12 and 16. Also, enter this amount on Form 941, line 11a; Form 943, line 12a; or Form 944, line 8a. This is the total qualified small business payroll tax credit for increasing research activities.

How to Submit Form 8974

To submit Form 8974, first fill out your business information at the top of the form, then complete Part 1 with details about your income tax return for each tax year. In Part 2, calculate the amount of credit you can claim for the current period. Finally, attach the completed Form 8974 to Form 941, 943, or 944 when filing. Important details to include are your EIN, business name, ending date of your income tax period, type of income tax return, date you filed your income tax return, amount of credit from each tax year, total amount of social security tax and Medicare tax on wages, and any adjustments if applicable.

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