OMB No. 1545-1417

Form 8845 Indian Employment Credit

Department of the Treasury

Internal Revenue Service © Attach to your return.

Attachment

Sequence No. 113

Name(s) as shown on return Identifying number

Current Year Credit

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

If you are a— Then enter total of current year Indian employment credit(s) from—

Schedule K-1 (Form 1120S), lines 12d, 12e, or 13

Schedule K-1 (Form 1065), lines 12c, 12d, or 13

Schedule K-1 (Form 1041), line 14

Written statement from cooperative

a Shareholder

b Partner

c Beneficiary

d Patron

Indian employment

credits from

flow-through entities

5

5

Total current year credit. Add lines 4 and 5. (S corporations, partnerships, estates, trusts, and

cooperatives, see instructions.)

6

6

Form 8845 (1998)

Part I

%

Cat. No. 16146D

3

4

3 Incremental increase. Subtract line 2 from line 1

4 Current year credit. Multiply line 3 by 20% (.20) (see instructions)

For Paperwork Reduction Act Notice, see page 4.

Tax Liability Limit (See Who Must File Form 3800 to find out if you complete Part II or file Form 3800.)

● Individuals. Enter amount from Form 1040, line 40

● Corporations. Enter amount from Form 1120, Schedule J, line 3 (or Form 1120-A, Part I, line 1) 7

● Other filers. Enter regular tax before credits from your return

8a Credit for child and dependent care expenses (Form 2441, line 9) 8a

b Credit for the elderly or the disabled (Schedule R (Form 1040), line 20) 8b

8e

Foreign tax credit

e

8f f

Possessions tax credit (Form 5735, line 17 or 27)

g 8g

h 8h

Credit for fuel from a nonconventional source

i

Qualified electric vehicle credit (Form 8834, line 19)

Add lines 8a through 8k 8l

9 Net regular tax. Subtract line 8l from line 7 9

10 Alternative minimum tax:

● Individuals. Enter amount from Form 6251, line 28

● Corporations. Enter amount from Form 4626, line 15 10

● Estates and trusts. Enter amount from Form 1041, Schedule I, line 39

12 Tentative minimum tax (see instructions):

● Individuals. Enter amount from Form 6251, line 26

12

● Corporations. Enter amount from Form 4626, line 13

● Estates and trusts. Enter amount from Form 1041,

Schedule I, line 37

13 If line 9 is more than $25,000, enter 25% (.25) of the excess (see

instructions)

15 Subtract line 14 from line 11. If zero or less, enter -0- 15

16 Indian employment credit allowed for current year. Enter the smaller of line 6 or line 15 here

and on Form 1040, line 47; Form 1120, Schedule J, line 4d; Form 1120-A, Part I, line 2a;

Form 1041, Schedule G, line 2c; or the applicable line of your return 16

Part II

%

%

Mortgage interest credit (Form 8396, line 11)

d 8d

7 Regular tax before credits:

11 Net income tax. Add lines 9 and 10 11

14 Enter the greater of line 12 or line 13 14

%

13

Adoption credit (Form 8839, line 14)

c 8c

8i

District of Columbia first-time homebuyer credit (Form 8859, line 11)

j

1998

8j

8k

Education credits (Form 8863, line 18)

Child tax credit (Form 1040, line 43)

l

k
Form 8845 (1998) Page 3

Qualified employee health insurance costs means any

amount paid or incurred by an employer for health insurance

to the extent such amount is attributable to coverage

provided to any employee while such employee is a qualified

employee. No amount paid or incurred for health insurance

under a salary reduction arrangement may be included.

Qualified employee means, for any tax period, any

employee of an employer if the employee meets all the

following tests:

1. The employee is an enrolled member of an Indian tribe

or the spouse of an enrolled member of an Indian tribe. The

tribe keeps the enrollment list.

2. Substantially all the services performed during that

period by the employee for the employer are performed

within an Indian reservation (defined below).

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 of the employer only if more than

50% of the wages paid or incurred by the employer to the

employee during the year are for services performed in the

employer’s trade or business. Each member of a controlled

group must meet this requirement independently.

The following are not qualified employees:

● Any individual who bears any of the relationships

described in sections 152(a)(1) through 152(a)(8) to, or is a

dependent described in section 152(a)(9) of, 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.

● 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(a)(9), of that

individual), or any individual who is a relative, as described in

sections 152(a)(1) through 152(a)(8), of the grantor,

beneficiary, or fiduciary of the estate or trust.

● 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.

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 23, 1997 (62 FR 55270), for the most recent

listing of federally recognized Indian tribes.

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:

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

any of the relationships described in section 152(a)(1)

through 152(a)(8) to, or is a dependent described in section

152(a)(9) 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.

1. No wages or qualified employee health insurance costs

may be taken into account for the tax year the employment

is terminated, and

2. Any credits allowed for prior tax years by reason of

wages paid or incurred by the employer to that employee

must be recaptured. Report the amount on the line for

recapture taxes on the income tax return and write “45A” to

the left of the entry. Also, any carryback or carryover of the

credit is adjusted.

General Instructions

Section references are to the Internal Revenue Code unless

otherwise noted.

In most cases, the credit is 20% of the excess of an

employer’s current year qualified wages and qualified

employee health insurance costs over the sum of the

corresponding amounts paid or incurred during calendar year

1993 by the employer (or predecessor). For purposes of the

credit, the total amount of qualified wages and costs may

not exceed $20,000 for each employee.

Purpose of Form

Employers of American Indians who are qualified employees

(see Definitions) 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 as given in section 51.

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.

Specific Instructions

Figure the current year credit for your trade or business on

lines 1 through 4. Skip lines 1 through 4 if you are claiming

only a credit that was allocated to you from a flow-through

entity. The following rules apply to lines 1 and 2:

● An employee is not a qualified employee if the total

amount of wages paid or incurred by the employer to the

employee (whether or not for services within an Indian

reservation) exceeds the amount determined at an annual

rate of $30,000. This wage limit may be adjusted for inflation

for tax years beginning after 1999.

Part I

● The employee voluntarily quits.

● The employee is terminated because of misconduct.

● The employee becomes disabled. However, if the disability

ends before the end of the first year of employment, the

employer must offer reemployment to the former employee.

These rules do not apply if:
Form 8845 (1998) Page 4

● Members of a controlled group of corporations and

businesses under common control are treated as a single

employer in determining the credit.

Line 1. Enter the total qualified wages and qualified

employee health insurance costs paid or incurred for

qualified employees during the tax year.

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 a short tax year, multiply the amount determined

above by a fraction, the numerator of which is the number of

days in the short tax year and the denominator of which is

365. Enter the result on line 2.

Line 4. In most cases, you must reduce the deductions on

your return for salaries and wages and health insurance

costs by the line 4 credit amount. This reduction must be

made 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 depreciable basis

by the amount of the credit attributable to these costs.

Line 6. If you have a credit from a passive activity, stop here

and go to Form 3800.

S corporations and partnerships. Allocate the line 6 credit

among the shareholders or partners. Attach Form 8845 to

Form 1120S or 1065 and show the credit for each

shareholder or partner on Schedule K-1. Electing large

partnerships, include this credit in “general credits.”

Estates and trusts. The line 6 credit is allocated between

the estate or trust and the beneficiaries in proportion to the

income allocable to each. On the dotted line to the left of the

amount on line 6, the estate or trust should enter its part of

the total Indian employment credit. Label it “1041 PORTION”

and use this amount in Part II (or on Form 3800, if required)

to figure the credit to claim on Form 1041.

Cooperatives. Most tax-exempt organizations cannot take

the Indian employment credit, but a cooperative described in

section 1381(a) takes the Indian employment credit to the

extent it has tax liability. Any excess is shared among its

patrons. But any credit recapture under item 2 of Early

Termination of Employee applies as if the cooperative had

claimed the entire credit and had not shared it among its

patrons.

Line 13. See section 38(c)(3) for special rules that apply to

married couples filing separate returns, controlled corporate

groups, regulated investment companies, real estate

investment trusts, and estates and trusts.

Line 16. If you cannot use all of the credit because of the tax

liability limit (line 15 is smaller than line 6), carry the excess

credit back 1 year and then forward for 20 years. See the

separate Instructions for Form 3800 for details.

● The aggregate amount of qualified wages and qualified

employee health insurance costs for each qualified employee

for any tax year is limited to $20,000.

Who Must File Form 3800

The general business credit consists of the following

credits:

The empowerment zone employment credit, while a

component of the general business credit, is figured

separately on Form 8844 and is never carried to Form 3800.

● Investment (Form 3468),

● Work opportunity (Form 5884),

● Alcohol used as fuel (Form 6478),

● Research (Form 6765),

● Low-income housing (Form 8586),

● Enhanced oil recovery (Form 8830),

● Disabled access (Form 8826),

● Renewable electricity production (Form 8835),

● Indian employment (Form 8845),

● Employer social security and Medicare taxes paid on

certain employee tips (Form 8846),

● Contributions to selected community development

corporations (Form 8847), and

● Trans-Alaska pipeline liability fund.

Part II

● Orphan drug (Form 8820),

Recordkeeping 7 hr., 10 min.

Learning about the law

or the form 1 hr., 47 min.

Preparing and sending

the form to the IRS 1 hr., 59 min.

The time needed to complete and file this form will vary

depending on individual circumstances. The estimated

average time is:

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.

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.

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.

● Welfare-to-work (Form 8861),

● More than one of the credits included in the general

business credit listed below,

● A carryback or carryforward of any of the credits,

● A credit from a passive activity, or

● General credits from an electing large partnership

(Schedule K-1 (Form 1065-B)).

Complete Form 3800, General Business Credit, instead of

completing Part II of Form 8845, to figure the tax liability limit

for the credit if for this year you have:

Line 12. Although you may not owe alternative minimum tax

(AMT), you generally must still compute the tentative

minimum tax (TMT) to figure your credit. For a small

corporation exempt from the AMT under section 55(e), enter

zero. Otherwise, enter the TMT that was figured on the

appropriate AMT form or schedule.