FORM 8865
If you are a US person who has an interest in a foreign partnership, you may be required to file Form 8865. This form reports information about the foreign partnership, its partners, and its activities.
It is important to note that to qualify as a foreign partnership, at least one partner must have unlimited liability. As such, limited partnerships, or those in which all partners are protected would fall under foreign corporation rules, rather than foreign partnership rules.
What is Form 8865?
This tax form is used to report information about a foreign partnership in which a US person has an interest. The form is used to report the income, deductions, and credits of the partnership, as well as the identities of the partners and their share of the partnership’s income.
Who needs to file?
There are two groups of taxpayers who need to file Form 8865 – those who require filing on a transactional basis, and those who are required to file on an annual basis.
Transactional basis filers would only be including the Form in the tax years:
- They exceed 10% ownership
- They go below 10% ownership
- They contribute over $100K to the partnership in the year
Annual basis taxpayers must include Form 8865 every year in which US-owned interest exceeds 50%. If a single US individual exceeds 50% ownership, he or she is required to file while the minority owners are exempt from the annual reporting. Even if exempt, the minority owners may still have transactional reporting requirements, which would necessitate filing Form 8865.
What information needs to be reported on Form 8865?
This form requires a variety of information about the foreign partnership and its partners, including:
- The name, address, and taxpayer identification number (TIN) of the foreign partnership
- The type of entity of the foreign partnership
- The tax year of the foreign partnership
- The US tax classification of the foreign partnership
- The names, addresses, and TINs of the partners in the foreign partnership
- The percentage of each partner’s interest in the partnership
- The share of the partnership’s income, deductions, and credits that each partner is allocated
- Any contributions or distributions made by the partners during the tax year
The form is filed as an attachment to the US person’s tax return. The form must be filed by the due date of the tax return, including extensions. The form can be filed electronically or by mail.
What is the deadline for filing?
Form 8865 is an informational form that is attached to the annual tax return for the taxpayer. As such, it follows the filing deadline for the annual tax return. For example – if the taxpayer is an individual who files Form 1040 on a calendar year basis, and who has a filing deadline of 15 October, the deadline for Form 8865 will also be 15 October.
Unfortunately, the requirement to file Form 8865 is independent of the annual tax return requirement. As such, if the taxpayer triggers an annual Form 8865 requirement, but not an annual tax return requirement, we will still suggest a tax return be submitted to facilitate the submission of Form 8865.
The penalty for failure to file Form 8865 starts at $10,000 per form, per year.
Filing Form 8865 can be a complex process, but it is important to ensure that you comply with US tax laws and regulations. By understanding the reporting requirements for foreign partnerships and how to complete Form 8865, you can avoid potential penalties and ensure that your tax obligations are met. If you have any questions or concerns about filing Form 8865, it is recommended that you consult with a tax professional at Zisman US Tax Services who can provide guidance and assistance.
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