IRS Form 8804 – Annual Return for Partnership Withholding Tax (Section 1446)

IRS Form 8804 – In the complex world of U.S. tax compliance, partnerships with foreign partners must navigate specific withholding requirements to avoid penalties. IRS Form 8804, known as the Annual Return for Partnership Withholding Tax under Section 1446, plays a crucial role in reporting and paying taxes on effectively connected taxable income (ECTI) allocated to non-U.S. partners. This guide covers everything you need to know about Form 8804, including filing requirements, due dates, and recent updates for the 2025 tax year. Whether you’re a tax professional or a partnership manager, understanding this form ensures smooth compliance with IRS rules.

What Is IRS Form 8804?

IRS Form 8804 is an annual tax return used by partnerships to report their total liability for withholding tax under Internal Revenue Code Section 1446. This section requires partnerships engaged in a U.S. trade or business to withhold tax on ECTI allocable to foreign partners, even if no distributions are made. The form serves as both a summary of the partnership’s withholding obligations and a transmittal document for attached Forms 8805, which detail each foreign partner’s share of ECTI and withheld taxes.

ECTI generally includes income from U.S. sources connected to the partnership’s business activities, minus allowable deductions. Partnerships calculate withholding at rates of 21% for corporate foreign partners and 37% for non-corporate ones, with adjustments for specific gain types like 28% rate gains (28%), unrecaptured Section 1250 gains (25%), and adjusted net capital gains (20%). Reductions can apply for state and local taxes (up to 90% of amounts withheld on the partner’s behalf) or certified partner-level items submitted via Form 8804-C.

The form is structured into parts covering partnership details, withholding agent information, ECTI calculations, tax liability, payments, and overpayments or refunds. It must be filed regardless of whether the partnership had ECTI, as long as there are foreign partners with allocable effectively connected gross income.

Who Must File Form 8804?

Any partnership—domestic or foreign—with ECTI allocable to foreign partners (non-U.S. persons, including individuals, corporations, trusts, or estates) must file Form 8804. This includes limited liability companies (LLCs) treated as partnerships for tax purposes. Publicly traded partnerships (PTPs) follow modified rules, withholding only on distributions and reporting via Forms 1042 and 1042-S instead.

Filing is required even if:

  • No withholding tax is due (e.g., due to reductions or credits).
  • No distributions were made to foreign partners.
  • The partnership relies on certifications from foreign partners via Form 8804-C.

Exceptions apply if the partnership is treated as a corporation under Section 7704(a). Tiered partnerships (where one partnership owns interest in another) must coordinate withholding, crediting amounts paid by lower-tier entities. Foreign partners are identified using Forms W-8 or W-9; without proper documentation, presume foreign status.

Purpose of Form 8804 and Section 1446 Withholding

The primary purpose of Form 8804 is to ensure that foreign partners pay U.S. tax on their share of partnership income connected to U.S. business activities. Section 1446 withholding acts as a prepayment mechanism, similar to estimated taxes, to collect revenue from non-residents who might otherwise avoid U.S. taxation.

Key objectives include:

  • Reporting total Section 1446 tax liability.
  • Transmitting Forms 8805 for each foreign partner, allowing them to claim credits on their U.S. tax returns (e.g., Form 1040-NR or 1120-F).
  • Accounting for installment payments made during the year via Form 8813.
  • Handling overpayments, which can be refunded, credited to the next year, or allocated to partners.

This system prevents underreporting and ensures compliance with U.S. tax treaties, where applicable exemptions or reduced rates may apply.

How to Complete and File Form 8804?

Filing Form 8804 involves gathering partnership records, foreign partner details, and ECTI allocations. Here’s a step-by-step overview:

  1. Gather Information: Collect EINs, addresses, and certifications (e.g., Forms W-8BEN, 8804-C). Calculate ECTI per partner using partnership agreements under Section 704.
  2. Fill Out the Form:
    • Part I: Enter partnership name, EIN, address, and check the box if books are kept outside the U.S.
    • Part II: Provide withholding agent details (often the partnership itself).
    • Part III: Report foreign partner counts, ECTI by category (lines 4a–4t), reductions, and gross tax liability (lines 5a–5f). Include payments and credits (line 6), penalties (line 8 if Schedule A applies), and calculate balance due or overpayment.
    • Attach Forms 8805 (one per foreign partner) and 8804-C where used.
  3. Make Installment Payments: Use Form 8813 for quarterly payments (15th day of 4th, 6th, 9th, and 12th months). Estimate using Form 8804-W worksheet.
  4. File Electronically or by Mail: Form 8804 cannot be e-filed with Form 1065; file separately on paper or via supported methods for extensions (Form 7004). Mail to the IRS address listed in the instructions.

For detailed calculations, use Schedule A (Form 8804) if underpayment penalties apply for insufficient installments.

Due Dates for Filing Form 8804

For calendar-year partnerships, Form 8804 is due by March 15 (or the 15th day of the 3rd month after the tax year ends). If books are kept outside the U.S. and Puerto Rico, the deadline extends to the 15th day of the 6th month. Installment payments via Form 8813 are due quarterly during the tax year.

Extensions: Use Form 7004 for a 6-month extension to file (not pay). Pay any estimated balance with the extension to avoid penalties.

Penalties for Late Filing or Non-Compliance

Failing to file or pay on time can result in significant penalties:

  • Late Filing: 5% of unpaid tax per month (up to 25%); minimum penalties apply if over 60 days late (inflation-adjusted annually).
  • Late Payment: 0.5% per month (up to 25%).
  • Failure to Withhold: Up to 100% of the amount under Section 6672.
  • Incorrect Forms 8805: Penalties under Sections 6721 and 6722 (up to inflation-adjusted amounts; reduced for corrections or small businesses).

Reasonable cause can waive penalties. Interest accrues on unpaid amounts at rates set by Section 6621.

Key Changes for the 2025 Tax Year

For tax years beginning in 2025, use the revised December 2025 version of Form 8804. Updates include:

  • Expanded direct deposit options (new lines 14b–14d for routing/account details).
  • Removal of fixed penalty thresholds; now annually adjusted for inflation (check IRS.gov/InflationAdjustment).
  • Continuous-use forms for 2025 and later, with no major rate changes but emphasis on accurate ECTI reporting.
  • Form 8805: Issued to each foreign partner; reports their ECTI share and tax withheld. Attach to Form 8804.
  • Form 8813: For quarterly installment payments.
  • Form 8804-C: Certificate from foreign partners for reductions based on deductions/losses.
  • Form 8804-W: Worksheet for estimating installments.
  • Schedule A (Form 8804): Penalty calculation for underpaid installments.

How to Download the IRS Form 8804 PDF?

The latest Form 8804 PDF is available directly from the IRS website. Download it here: https://www.irs.gov/pub/irs-pdf/f8804.pdf. For instructions, visit https://www.irs.gov/instructions/i8804.

Frequently Asked Questions About Form 8804

Do I need to file Form 8804 if my partnership has no ECTI?

Yes, if you have foreign partners with allocable effectively connected gross income, filing is required even without ECTI or withholding.

Can foreign partners claim a refund for overwithheld taxes?

Yes, by attaching Form 8805 to their U.S. tax return and claiming the credit.

What if a foreign partner doesn’t have a U.S. TIN?

The partnership must still withhold and file, but notify the partner to obtain an ITIN, SSN, or EIN.

How does Section 1446 interact with Section 1445?

For domestic partnerships, Section 1446 compliance satisfies Section 1445 requirements for U.S. real property interests.

For more details, consult a tax advisor or visit IRS.gov. Staying compliant with Form 8804 protects your partnership from costly penalties and ensures accurate tax reporting for foreign investments.