OMB No. 1545-1417 Form 8845 Indian Employment Credit

Department of the Treasury

Internal Revenue Service © Attach to your tax return.

Attachment

Sequence No. 113

Name(s) as shown on return Identifying number

1 Total of qualified wages and qualified employee health insurance costs paid or incurred during

the tax year 1

Calendar year 1993 qualified wages and qualified employee health insurance costs

(see instructions). If none, enter -0-

2

2

Indian employment credits from partnerships, S corporations, cooperatives, estates, 

and trusts

5

5

Add lines 4 and 5. Cooperatives, estates, and trusts, go to line 7; partnerships and S corporations, 

report this amount on Schedule K; all others, report this amount on the applicable line on Form 

3800 (e.g., line 1i of the 2006 Form 3800)

6

6

3

4

3 Incremental increase. Subtract line 2 from line 1

4 Multiply line 3 by 20% (.20) (see instructions for the adjustment you must make for salaries 

and wages)

Amount allocated to patrons of the cooperative or beneficiaries of the estate or trust 

(see instructions)

7

Cooperatives, estates and trusts. Subtract line 7 from line 6. Report the credit on the

applicable line of Form 3800 (e.g., line 1i of the 2006 Form 3800)

8

7

8

(Rev. December 2006)

Qualified employee health insurance costs means any amount

paid or incurred by an employer for health insurance coverage for an

employee while the employee is a qualified employee. Do not include

amounts paid or incurred for health insurance under a salary

reduction arrangement.

Qualified employee means, for any tax period, any employee who

meets all three of the following tests.

1. The employee is an enrolled member, or the spouse of an

enrolled member, of an Indian tribe. Each tribe determines who

qualifies for enrollment and what documentation, if any, is issued as

proof of enrollment status. Examples of appropriate documentation

will vary from one tribe to another and may include a tribal

membership card, Certified Degree of Indian Blood (CDIB) card, or

letter from the tribe or tribal enrollment office. Employers should

retain a copy of the proof of enrollment status provided by the

employee.

2. Substantially all the services performed by the employee for the

employer are performed within an Indian reservation (defined on

page 2).

3. The employee’s principal residence while performing such

services is on or near the reservation where the services are

performed.

However, the employee shall be treated as a qualified employee

for any tax year only if more than 50% of the wages paid or incurred

by the employer to the employee during the tax year are for services

performed in the employer’s trade or business. Each member of a

controlled group must meet this requirement independently. Also,

see the instructions for lines 1 and 2.

The following are not qualified employees.

● Any individual who bears any of the relationships described in

sections 152(d)(2)(A) through 152(d)(2)(G) to, or is a dependent

described in section 152(d)(2)(H) of, the employer.

● If the employer is other than a corporation, estate, or trust, any

individual who owns directly or indirectly more than 50% of the

capital and profits interest, including constructive ownership, in the

entity.

● If the employer is an estate or trust, any individual who is a

grantor, beneficiary, or fiduciary of the estate or trust (or a

dependent, as described in section 152(d)(2)(H), of that individual), or

any individual who is a relative, as described in sections 152(d)(2)(A)

through 152(d)(2)(G), of the grantor, beneficiary, or fiduciary of the

estate or trust.

● If the employer is a corporation, any person who owns (or is

considered to own under section 318) more than 5% of the

outstanding or voting stock of the employer or, if not a corporate

employer, more than 5% of the capital or profits interest in the

employer.

● If the employer is a corporation, any individual who bears any of

the relationships described in sections 152(d)(2)(A) through

152(d)(2)(G) to, or is a dependent described in section 152(d)(2)(H) of,

an individual who owns (or is considered to own under section

267(c)) more than 50% in value of the outstanding stock of the

corporation.

General Instructions

Section references are to the Internal Revenue Code unless

otherwise noted.

Purpose of Form

Employers of American Indians who are qualified employees use

Form 8845 to claim the Indian employment credit.

Definitions

Qualified wages means any wages paid or incurred by an employer

for services performed by an employee while such employee is a

qualified employee (see below). It does not include wages

attributable to services rendered during the 1-year period beginning

with the day the employee starts work for the employer if any portion

of such wages is used in figuring the work opportunity credit on

Form 5884. Wages has the same meaning given in section 51.

● The tax liability limit is no longer figured on this form; instead, it

must be figured on Form 3800, General Business Credit.

● Taxpayers that are not partnerships, S corporations, cooperatives,

estates, or trusts, and whose only source of this credit is from those

pass-through entities, are not required to complete or file this form.

Instead, they can report this credit directly on line 1i of Form 3800.

● The IRS will revise this December 2006 version of the form only

when necessary. Continue to use this version for tax years beginning

after 2005 until a new revision is issued.

What’s New

● Any individual who performs services involving the conduct of

Class I, II, or III gaming, as defined in section 4 of the Indian Gaming

Regulatory Act, and any individual performing any services in a

building housing such gaming activity.

Indian tribe means any Indian tribe, band, nation, pueblo, or other

organized group or community, including any Alaska Native village or

regional or village corporation, as defined in, or established under,

the Alaska Native Claims Settlement Act, that is recognized as

eligible for the special programs and services provided by the United

States to Indians because of their status as Indians. See the Federal

Register dated July 12, 2002 (67 FR 46328), for the most recent

listing of federally recognized Indian tribes.
Form 8845 (Rev. 12-2006) Page 2

Indian reservation means a reservation as defined in section 3(d)

of the Indian Financing Act of 1974 or section 4(10) of the Indian

Child Welfare Act of 1978.

Early Termination of Employee

Generally, if the employer terminates a qualified employee less than

1 year after the date of initial employment, the following rules apply.

● No wages or qualified employee health insurance costs may be

taken into account for the tax year the employment is terminated.

● Any credits allowed for prior tax years by reason of wages paid or

incurred to that employee must be recaptured. Include the recapture

amount on the line for recapture taxes on your income tax return.

Also, any carryback or carryover of the credit must be adjusted.

An employee is not treated as terminated if the corporate

employer is acquired by another corporation covered under the rules

in section 381(a) and the employee continues to be employed by the

acquiring corporation. Nor is a mere change in the form of

conducting the trade or business treated as a termination if the

employee continues to be employed in such trade or business and

the taxpayer retains a substantial interest in such trade or business.

● The employee voluntarily quits,

● The employee is terminated because of misconduct, or

● The employee becomes disabled. However, if the disability ends

during the first year of employment, the employer must offer

reemployment to that employee.

These rules do not apply if:

Line 2

Line 4

Line 7

Estates and trusts. Allocate the Indian employment credit on line 6

between the estate or trust and the beneficiaries in the same

proportion as income was allocated and enter the beneficiaries share

on line 7.

Enter the total qualified wages and qualified employee health

insurance costs paid or incurred by the employer (or predecessor)

for qualified employees during calendar year 1993 (as if section 45A

had been in effect during 1993). If none, enter zero. For this purpose,

an employee is not a qualified employee if the total amount of wages

paid or incurred by the employer to the employee during calendar

year 1993 (whether or not for services within an Indian reservation)

exceeds $30,000.

Generally, you must reduce the deductions on your return for

salaries and wages and health insurance costs by the credit on line

4, even if you cannot take the full credit this year because of the tax

liability limit. If you capitalized any costs on which you figured the

credit, reduce the amount capitalized by the credit attributable to

these costs.

Line 1

Enter the total qualified wages and qualified employee health

insurance costs paid or incurred for qualified employees during the

tax years. An employee is not a qualified employee if the total

amount of wages paid or incurred by the employer to the employee

during the tax year (whether or not for services within an Indian

reservation) exceeds $40,000.

● For a short tax year, multiply the wages limit by the number of

days in the short tax year and divide the result by 365.

Cooperative. A cooperative described in section 1381(a) must

allocate to its patrons the credit in excess of its tax liability limit.

Therefore, to figure the unused amount of the credit allocated to

patrons, the cooperative must first figure its tax liability. While any

excess is allocated to patrons, any credit recapture applies as if the

cooperative had claimed the entire credit.

● The total amount of qualified wages and qualified employee health

insurance costs for each qualified employee for any tax year is

limited to $20,000.

Specific Instructions

Figure the credit for your trade or business on lines 1 through 4. The

following rules apply for lines 1 and 2.

For purposes of figuring the credit, all members of a controlled

group of corporations (as defined in section 52(a)) and all members

of a group of businesses under common control (as defined in

section 52(b)), are treated as a single employer. As a member,

compute your credit based on your proportionate share of qualified

wages and qualified employee health insurance costs giving rise to

the group’s Indian employment credit. Enter your share of the credit

on line 4. Attach a statement showing how your share of the credit

was figured, and write “See Attached” next to the entry space for

line 4.

Paperwork Reduction Act Notice. We ask for the information on this

form to carry out the Internal Revenue laws of the United States. You

are required to give us the information. We need it to ensure that you

are complying with these laws and to allow us to figure and collect the

right amount of tax.

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Generally, tax returns and return information are confidential, as

required by section 6103.

Recordkeeping 5 hr., 44 min.

Learning about the law

or the form 1 hr., 35 min.

Preparing and sending

the form to the IRS 1 hr., 45 min.

If you have comments concerning the accuracy of these time

estimates or suggestions for making this form simpler, we would be

happy to hear from you. See the instructions for the tax return with

which this form is filed.

The time needed to complete and file this form will vary depending

on individual circumstances. The estimated burden for individual

taxpayers filing this form is approved under OMB control number

1545-0074 and is included in the estimates shown in the instructions

for their individual income tax return. The estimated burden for all

other taxpayers who file this form is shown below.

Member of Controlled Group or Business

Under Common Control