CCH Axcess Tax

8865 Automation Using 1065 Calculation

Within a partnership return, you can now create an 8865 automatically using the Form 1065 calculation. Information input or calculated for Form 1065, pages 1 through 5, Schedules K-1, and certain other forms such as Forms 4797, 4562, 8825, and Schedule F, can optionally be used to produce Form 8865 and its related forms and schedules. This is referred to as an “automated 8865.”

To create an automated 8865, select code 2, 3, or 4 on General worksheet > Return Options section > line 20 titled Print options 1065, 1065-B, and 8865 . Please note code 2, 8865 stand alone could be used when the Federal 1065 is not intended to be filed out of this return, but just 1065 level calculation is to be used to generate 8865.

There could be multiple 8865s in the 1065 return one will be automated as noted above. You can still create additional 8865s in the usual manner through Foreign > 8865 worksheet . The 8865 generated in this manner will be referred to as non-automated 8865.

Since automation uses 1065 calculation, any existing 1065 level functionality, such as Excel® import, special allocation, or existing 1065 Federal level input scheme, will also work for 8865 automation. For example if a user imports through Excel® for special allocation, GL data for accounting information, gain and loss data import, depreciation data import, partnership data, and then prepares automated 8865 by selecting code 2, 3, or 4 on General > Section- Return Options section > line 20 titled Print options 1065, 1065-B, and 8865 , all of the imported information will be incorporated into 8865.

For the automated 8865, additional input may be added, The automated 8865 will have an entity no. 99. This is done for matching purposes. You could add some data (any schedules that do not exist such as Schedule A-1 ) or override automation by entering entity no. 99 in Foreign > 8865 Worksheet > U.S Filer Information section > line 7 titled Form 8865 number. The same is true for 8865 level K-1. If overrides are needed, enter the relevant partner number and 8865 number as "99."

If you are a Category 3 filer, you need to indicate this as additional information. Include additional input for Schedule O. Likewise, for a Category 4 filer, check that category and complete the information for Schedule P. If Schedule N (Form 8865) is required, the transaction's information needs to be added.

If only part of the Form 1065 amounts are to be carried to the automated 8865, use the “8865 automation percentage – override” on 8865 Worksheet under Foreign > Section - U.S Filer Information > line 8 titled 8865 Automation Percentage. If only 10% of the various amounts should carry to the Form 8865, you would enter “.10.”

In general, you can override most forms and lines. For white paper statement supporting information, CCH Axcess will add an occurrence when you enter entity "99" as described above. Other exception to dollar overrides are Sch D, Foreign Tax worksheets, 4797, 4562, 8825, Sch F, and 3468. If every item needs to be an override, create another standalone 8865, change the numbers at teh 1065 level, and link it to the existing return through cross over input.

Most of the 1065 level supporting statements will have a corresponding 8865 level supporting statement. We have recognized that users may have government view hard overrides at the 1065 level. We may create a single occurrence of an 8865 level supporting statement with a generic description so that numbers still foot.

Unless overridden on the Foreign > 8865 Worksheet > U.S Filer Information section, the automated 8865 is assumed to be for a Category 1 filer. Both Category 1 and Category 2 filers, by default, receive all the Schedule K-1s produced for the Form 1065. In order to generate 8865 level K-1 only for certain partners, use Partners > Partner Information worksheet > Other Payments / Printing Percentage Overrides section > line 15 titled Produce 8865. This input is done on a partner by partner basis, such as for a specific partner.

In order to remove an 8865 K-1 created in this manner, remove the X in the box noted above. There is also a global option to suppress all 8865 level K-1s. This is under the same location as the Federal K-1 suppress option on Partners > General Options Worksheet > Schedule K-1 Print Options Section > line 1, select Suppress 8865 K-1 as a choice.

Example: Creating Automated (Stand Alone 8865) and Crossover 8865: 8865 created out of partnership system and to be filed with a 1040:.

This is how a typical 8865 in this manner can be set up, assuming the partnership PEF001B is to be set up so that an 8865 from this return is created using an automated 8865 calculation. Then this 8865, along with 8865 level K1 for one such partner, is sent to their 1040 return. Here are the steps for this example:

Within the partnership return PEF001B, go to General > Return Options section > line 20 titled Print options 1065, 1065-B, and 8865, select code 2 for automated 8865 calc.

Select the partner for whom the 8865 level automated K1 is to be created. For an individual it can be a taxpayer with code "T" or spouse with code "S" for 1040 purposes.

In our example, assuming it is partner 1, go to Partners > Partner information worksheet > Other Options section > line 15 , please note this selection is made per partner for the respective partner.

By default, we assume for an individual that the 8865 is for the taxpayer. I this is not the case, in order to put code "S," or to add any other additional information, such as a schedule to be added for 8865, calculate the return and then go to Foreign > 8865 worksheet > U.S filer Information section > line 7 titled Form 8865 number, and make a choice to flag this K-1 for spouse. Select code S for spouse under line 9 titled TS code . If you need to add any schedules for 8865 not created through automated calculation, you can add those using existing 8865 level input. The entity no. 99 would match those schedules and attach those with the automated 8865.

Now, open an existing 1040 return in which this 8865 is to be brought in, or setup a new one. If you are e-filing, preferably the 1040 should qualify for e-filing before bringing 8865. That would make it easier to see if there are any additional 8865 level diagnostics that are created.

Depending on whether 8865 was flagged for T (default) or S, the name, address, and social security number of T/S in 1040 will be the same as in the source 8865 K-1 from partnership return.

In order to link these returns, go to Foreign > 8865 worksheet > 8865 Automated Feature section, and type the name of the filer on first line under 8865 Client name. No client ID would be allowed on first line, since this line corresponds to the return you are already in. In order to drill down to the partnership return, double-click on any column of the second line. Bn the next screen that would displays, double-click on line 2, 8865 name or line 3, Client ID to select the partnership return in our example.

If you are e-filing, calculate the 1040 return and look at your e-file diagnostics. If there is any 8865 level diagnostic, use the return group tab. This is a way to navigate back and forth to returns linked together without having to open the return through client ID. Click on the partnership return to open that return and clear any 8865 level e-file diagnostics generated out of that return, and go back to the 1040 from same return group tab.

After all diagnostics are cleared and you have validated that all of the 8865 level forms are present, look at the 8865 page 1, filer information. Since the 8865 was flagged for spouse, the social security number that prints should be for the spouse. This is what the spouse flag is used for.