NY Form 8404 2024-2025

NY Form 8404: What You Should Know

As a result, they must pay interest on that liability. The Internal Revenue Service (IRS) adopted Regulations section 1.874-4 to control the interest charges on the DISC deferred tax. This form, Form 8404, explains which individuals and corporations must pay interest on DISC-related deferred tax liabilities and what payment methods may be available to individuals and corporations. The purpose of this letter is to provide guidelines and other information to assist taxpayers in determining what payment methods may be available to them when dealing with interest on DISC-related deferred tax liabilities. IRS Circular 230 provides the regulations that are necessary for Form 8404 to be effective. These regulations require individuals and corporations to use Form 8404 if they are the payee of a DISC-related deferred tax liability and must pay interest directly to individuals or corporations that are entitled to the income as its holder or payer. In addition to using Form 8404, individuals and corporations are generally responsible for paying interest on all DISC-related deferred tax liabilities where the interest payment method for any one of the following reasons is unavailable: The interest expense is not included in the income of the income tax return for which you are completing Form 8404 and the IRS does not consider the interest to be a deductible interest expense; The interest expense includes all amounts paid or accrued, but only a portion is deductible interest under Regulations section 1.874-4, or you could not deduct any actual interest on the DISC-proceeds if the DISC-proceeds were distributed to you on a distribution date (i.e., you could not deduct “interest expense” on a DISC-proceeds before the distribution in which the interest was accrued); The interest expense is more than 10% of the DISC-proceeds in the year for which the interest was accrued, unless the amount exceeds 20% of the DISC-proceeds; The interest expense was deductible (on Form 3565 or other similar return) for the tax year for which the amount is being paid at the end of the tax year from the DISC-related deferred tax liability, regardless of whether the tax year ended before, on, or after the tax year for which the DISC-proceeds are being paid. In addition, a corporation (or other entity treated as a corporation) that has paid a DISC-related tax liability under Regulations section 1.874-4 is not required to use Form 8404 for this purpose.

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