Tax season can be stressful, especially when the IRS disallows certain refundable tax credits you previously claimed. Fortunately, the IRS offers a lifeline through Forms 8862, 8995, and 8995-A. This informative guide by Syed Professional Services demystifies these forms, Form 8995 explaining their purposes, eligibility requirements, and how our team can assist you in utilizing them effectively.
Understanding the Forms: Restoring Access to Refundable Tax Credits
The IRS uses three primary forms to help taxpayers reclaim previously disallowed refundable credits:
- Form 8862, Information To Claim Certain Credits After Disallowance: This form allows you to reclaim specific refundable credits the IRS previously disallowed on your tax return. These credits can include:
- Earned Income Tax Credit (EITC)
- Child Tax Credit (CTC) and Additional Child Tax Credit (ACTC)
- Credit for Other Dependents (ODC)
- American Opportunity Tax Credit (AOTC)
- Form 8995, Qualified Business Income Deduction: This form helps sole proprietors, partners, LLC members, and S corporation shareholders claim the Qualified Business Income Deduction (QBI). This deduction allows eligible taxpayers to deduct up to 20% of their qualified business income, reducing their taxable income.
- Form 8995-A, Qualified Business Income Deduction (for Taxable Income Over $182,100): This form is an alternative to Form 8995 used by taxpayers whose taxable income exceeds a specific threshold (adjusted annually). It involves additional calculations to determine the allowable QBI deduction.
Why Use These Forms? When the IRS Disallows Your Credits/Deduction
The IRS might disallow your claimed credits or deductions for various reasons, including:
- Math or Clerical Errors: Simple miscalculations or typos in your tax return.
- Missing or Incorrect Documentation: Not providing the necessary documentation to support your claim.
- Ineligibility Issues: Not meeting the specific eligibility requirements for a particular credit or deduction.
Eligibility for Using the Forms: Meeting the Requirements
To utilize these forms effectively, you must meet specific criteria:
- Form 8862: The IRS must have previously disallowed the specific refundable credit you’re trying to reclaim. You must also demonstrably meet the eligibility requirements for the credit.
- Form 8995/8995-A: You must own and operate a qualified business (sole proprietorship, partnership, LLC, or S corporation) and meet the specific income thresholds for using each form.
Understanding Key Sections of Each Form
Here’s a breakdown of some critical sections for each form:
- Form 8862:
- Part I: Taxpayer Information – Fill in your contact and tax return information.
- Part II: Specific Credit(s) Claimed – Indicate the specific credit(s) you’re reclaiming.
- Part III: Explanation for Disallowance – Briefly explain why you believe the IRS disallowed your credit claim. Be factual and concise.
- Part IV: Documentation – List the documentation you’re attaching to support your claim for the credit(s).
- Part V: Qualifying Child Information (for CTC/ACTC/ODC) – Provide details about your qualifying child(ren) (applicable for specific credits).
- Form 8995/8995-A:
- Part I: Taxpayer Information – Fill in your primary contact and tax return details.
- Form 8995: Lines 1-4 detail your business income/loss and any net business loss carryforward.
- Form 8995-A: Requires completing separate schedules (A, B, and C) to calculate qualified business income and potential deduction limitations.
- Both forms have sections for taxable income calculations and determining the final QBI deduction amount.
Syed Professional Services: Your Trusted Partner for Navigating Tax Forms
While Forms 8862, 8995, and 8995-A can be valuable tools, navigating tax law and credit/deduction eligibility can be complex. Syed Professional Services can provide expert assistance with these forms, including:
- Reviewing Your Tax Situation: We can analyze your tax return and identify any potential discrepancies that led to credit disallowance or deduction ineligibility.
- Determining Eligibility: We can help determine if you meet the requirements to reclaim specific credits or claim the QBI deduction using the appropriate form.
