How to Fill Form 8995

If you're a taxpayer eligible for the Qualified Business Income (QBI) deduction, you'll need to fill out IRS Form 8995 to claim this deduction on your tax return.

In this article, we’ll provide you with a step-by-step guide to help you accurately fill out Form 8995.

Step-by-Step Guide on Filling Out Form 8995

1. Determine Eligibility: Check if you qualify for the QBI deduction, which is generally available to individuals, estates, and trusts with income from pass-through entities like sole proprietorships, partnerships, LLCs, and S corporations, provided their taxable income is below certain thresholds ($182,100 for single filers and $364,200 for married filing jointly in 2023).
2. Calculate Qualified Business Income (QBI): Your QBI includes the net income from your pass-through business but excludes capital gains, interest income not related to the business, wage income, and foreign income.
3. Download Form 8995: Obtain Form 8995 from the official IRS website or through your tax software provider.
4. Fill in the form fields:
   • Lines 1-4: Enter your business information and calculate your total QBI.
   • Lines 6-10: Report income from Real Estate Investment Trusts (REIT) or Publicly Traded Partnerships (PTP) if applicable.
   • Lines 11-15: Calculate the QBI deduction, considering your total taxable income and net capital gains.
   • Lines 16-17: Determine any carryover loss, which can be used to offset future profits if your net QBI is negative.
5. Loss Carryforward: If your business incurs a loss, it can be carried forward to offset QBI in future years. Losses from one business can offset QBI from other businesses if you own multiple entities.
6. Review and Submit: Ensure all information is accurate before attaching Form 8995 to your tax return and submitting it to the IRS.

If your taxable income exceeds the thresholds for using Form 8995, you may need to use Form 8995-A, which is more complex and includes additional sections and schedules for higher-income individuals.

Submission Deadline and Consequences of Non-Compliance

The filing deadline for IRS Form 8995 is the same as your tax return, generally April 15th. Missing this deadline can result in penalties and interest charges. The "Failure to File" penalty is 5% of the unpaid taxes for each month the return is late, up to a maximum of 25%.

If both "Failure to File" and "Failure to Pay" penalties apply in the same month, the combined penalty remains 5% per month, with the "Failure to File" penalty reduced by the "Failure to Pay" penalty amount. If the return is filed more than 60 days late, a minimum penalty applies, which is the lesser of $485 (for filings after December 31, 2023) or 100% of the unpaid tax.

Filing your return on time and accurately is crucial to avoid these penalties and ensure you claim your Qualified Business Income (QBI) deduction. If you expect to miss the deadline, it's advisable to file for an extension using Form 4868, which extends the filing deadline to October 15th. However, this extension does not extend the time to pay any taxes owed.

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