Form 8845

Department of the Treasury 

Internal Revenue Service 

Indian Employment Credit

▶ Attach to your tax return.

OMB No. 1545-1417

2011

Attachment 

Sequence No. 113

Name(s) shown on return Identifying number

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

tax year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2 Calendar year 1993 qualified wages and qualified employee health insurance costs 

(see instructions). If none, enter -0- . . . . . . . . . . . . . . . . . . . . . 2

3 Incremental increase. Subtract line 2 from line 1. If zero or less, enter -0- . . . . . . . . . 3

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

wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

5 Indian employment credit from partnerships, S corporations, cooperatives, estates, 

and trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

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

stop here and report this amount on Schedule K. All others, stop here and report this amount on 

Form 3800, line 1g . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

7 Amount allocated to patrons of the cooperative or beneficiaries of the estate or trust (see 

instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

8 Cooperatives, estates, and trusts, subtract line 7 from line 6. Report this amount on 

Form 3800, line 1g . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

General Instructions

Section references are to the Internal Revenue Code unless otherwise 

noted.

What's New

The IRS has created a page on IRS.gov for information about Form 8845 

and its instructions at www.irs.gov/form8845. Information about any 

future developments affecting Form 8845 (such as legislation enacted 

after we release it) will be posted on that page.

Purpose of Form

Employers of American Indians who are qualified employees use Form 

8845 to claim the Indian employment 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 1g of Form 3800.

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.

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 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.

• 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 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 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.

• 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 October 1, 2010 (75 FR 60810), for the most recent listing of 

federally recognized Indian tribes.

For Paperwork Reduction Act Notice, see instructions. Cat. No. 16146D Form 8845 (2011)
Form 8845 (2011) 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.

These rules do not apply if:

• 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.

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.

Member of Controlled Group or Business Under 

Common Control

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.

Specific Instructions

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

following rules apply for lines 1 and 2.

• 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.

• 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.

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 

$45,000.

Line 2

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.

Line 4

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 7

Cooperatives. 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.

If the cooperative is subject to the passive activity rules, include on 

line 5 any Indian employment credit from passive activities disallowed 

for prior years and carried forward to this year. Complete Form 8810, 

Corporate Passive Activity Loss and Credit Limitations, to determine the 

allowed credit that can be allocated to patrons. For details, see the 

Instructions for Form 8810.

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.

If the estate or trust is subject to the passive activity rules, include on 

line 5 any Indian employment credit from passive activities disallowed 

for prior years and carried forward to this year. Complete Form 8582-

CR, Passive Activity Credit Limitations, to determine the allowed credit 

that must be allocated between the estate or trust and the beneficiaries. 

For details, see the instructions for Form 8582-CR.

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.

You are not required to provide the information requested on a form 

that is subject to the Paperwork Reduction Act unless the form displays 

a valid OMB control number. Books or records relating to a form or its 

instructions must be retained as long as their contents may become 

material in the administration of any Internal Revenue law. Generally, tax 

returns and return information are confidential, as required by section 

6103.

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.

Recordkeeping . . . . . . . . . . . . 2 hr., 23 min.

Learning about the law 

or the form . . . . . . . . . . . . . 1 hr., 23 min.

Preparing and sending 

the form to the IRS . . . . . . . . . . . 1 hr., 29 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.