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8990 schedule a Form: What You Should Know

If you have a business carried on by a partnership, and you determine that your partnership must file with the Internal Revenue Service Form 8990, the amount of your partnership business interest expense will be the total amount of all your partnership business interest expense in the immediately preceding year. This also applies to your partner's business.  Instructions are found in Screen 62, Limitation on Business Interest Expense, under the section relating to Section 163. You do not have to follow all instructions, however.  The instructions for Line 43 provide the amount of Form 8990 you must file. It is the amount of business interest expense incurred by the partnership for the tax year with the limitation date. You must report the amount on Line 43 of Form 8990. The instructions for Line 44 provide the amount of the partnership business interest deduction on line 891 of Form 8990. If the partnership business interest deduction is greater than the business interest expense deduction, you must report both amounts on line 44.  Instructions for line 42 provide the amount of business interest expense deductible by each person during the preceding tax year. The total deduction, in the amount shown, is the business interest expense for the taxable year. If you have an LLC, then it is line 4 of the next line, then line 4 of the next line, and so on, for every partner on Form 8990. If you are also not a partner, and you report the LLC item separately from the partnership item, you should enter this information on line 42. Instructions for line 4-4 appear as a separate line. Instructions for line 42 do not cover the following situations. If the LLC does not have enough assets to cover the LLC interest deduction, the LLC has no liability. If the partnership does not file a Form 8990 due to IRS delays, the IRS does not charge the partnership for the time. If the partnership fails to apply for reimbursement for the LLC interest deduction for the preceding year, no reimbursement is available. The IRS may impose a penalty of up to 25% of the amount of interest that may have been deducted from the partnership as a penalty for late filing. However, if the excess liability is covered in previous years or by a secured debt that is fully repaid, these are all good reasons for filing the Form 8990. The IRS also accepts an excuse that the LLC cannot cover the entire amount of interest deduction as it is limited by IRC § 162(j) and that the remaining business income is subject to a trust tax under IRC § 791.

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