form 8881 for S-Corp 1120-S

Forum|Forum|2 years ago
December 25, 2023
2 replies
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Hi, I have S-Corp and want to file 8881 I do not understand what line 6 and 7 say:

7- Credit for small employer pension plan startup costs from partnerships and S corporations
8 -Add lines 5, 6g, and 7. Partnerships and S corporations, report this amount on Schedule K. All others,
report this amount on Form 3800, Part III, line 1j

I would like someone help me to figure out when line 7 has an amount and where it comes from?

Also, the cost of set-up will be deducted from the retirement contribution on line 17 of 1120-S if so, do I add this cost to the amount of contribution?

Marry Christmas

I am hoping someone can help me!

Best answer by Rick19744

Merry Christmas. Providing exceptional customer service never rests. 😎

This is a confusing and somewhat difficult form to complete.

Essentially you will need to complete lines 1 through 5.
You need to read the actual form language to determine what to include in line 6
- No highly compensated employee contributions
- No contributions to employees that exceeded $1,000
- I would imagine in most cases, line 6 is zero and this will carry down to line 6g
Line 7 is most likely zero as well since this would be amounts that are coming from an S corp or partnership; which I doubt is applicable to you
At the end of the day, in running my simple hypothetical, with $5,000 on line 5 (40 employees), I also end up with $5,000 on line 8; since any contribution exceeded the $1,000 to my hypothetical employees.
This amount then carries to the Schedule K, then the K-1 Box 13 code P; using the 2022 K-1 instructions since the 2023 instructions have not been released, however, I doubt they change for this issue.
- You will need to make sure that you add a good description so the recipient of the K-1 knows what the credit is so they can input it correctly for their tax return.
Finally, remember you need to reduce your expense for any of the pension start-up costs by the amount of the credit; can't take both the full deduction AND the credit.
Now back to polishing that new Lamborghini my wife gave me.

Anonymous_

Employee

Merry Christmas.

I will page Champ @Rick19744 for this. Check back for a response later or tomorrow.

Rick19744Answer

Employee

Merry Christmas. Providing exceptional customer service never rests. 😎

This is a confusing and somewhat difficult form to complete.

Essentially you will need to complete lines 1 through 5.
You need to read the actual form language to determine what to include in line 6
- No highly compensated employee contributions
- No contributions to employees that exceeded $1,000
- I would imagine in most cases, line 6 is zero and this will carry down to line 6g
Line 7 is most likely zero as well since this would be amounts that are coming from an S corp or partnership; which I doubt is applicable to you
At the end of the day, in running my simple hypothetical, with $5,000 on line 5 (40 employees), I also end up with $5,000 on line 8; since any contribution exceeded the $1,000 to my hypothetical employees.
This amount then carries to the Schedule K, then the K-1 Box 13 code P; using the 2022 K-1 instructions since the 2023 instructions have not been released, however, I doubt they change for this issue.
- You will need to make sure that you add a good description so the recipient of the K-1 knows what the credit is so they can input it correctly for their tax return.
Finally, remember you need to reduce your expense for any of the pension start-up costs by the amount of the credit; can't take both the full deduction AND the credit.
Now back to polishing that new Lamborghini my wife gave me.

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.

Sam HopiAuthor

Hope you enjoy Lamborghini and thanks for your response.

As you said : Line 7 is most likely zero as well since this would be amounts that are coming from an S Corp or partnership; this is my main question.

My tax form is 1120-S and should file 8881, but this line says : Credit for small employer pension plan startup costs from partnerships and S corporations.

I want to file S-Corp, 1120-S, and line 1 to 5 are about this credit for my S-Corp, so what is line 7 then?

Who knows what is this and when and how or in what case does it have an amount? An example would be greatly perfect.

And I see code C on box 16 on K-1 has same amount of code P on box 13 of K-1! Am I right? Is this as nondeductible Code C ( The nondeductible expenses paid or incurred by the corporation aren't deductible on your tax return. Generally, you must decrease the basis of your stock by this amount)

Why this cost is nondeductible on K-1?

Anonymous_

Employee

@Sam Hopi wrote:
.....so what is line 7 then?

In the instructions:

Qualified startup costs. Qualified startup costs are expenses paid or incurred in connection with (a) establishing or administering an eligible employer plan, or (b) the retirement related education of employees about the plan.