Last Updated : January 14, 2009
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8844

Form 8844

Empowerment Zone And Renewal Community Employment Credit


PURPOSE OF THE FORM :

Use Form 8844 to claim the empowerment zone and renewal community employment (EZRCE) credit. For tax years that include December 31, 2006 the credit is :

  • 20% of the employer's qualified wages (up to $15000) paid or incurred during the calender year 2007 on behalf of qualified empowerment zone employees plus
  • 15% of the employer's qualified wages (up to $10000) paid or incurred during the calender year 2007 on behalf of Qualified renewal community employees.

For defination fo Qualified renewal community employee and Qualified Empowerment zone and wages , refer the instruction PDF.

PART - I CURRENT YEAR CREDIT:

Line 1:
Enter on this line the total Qualified wages paid during the year 2007. The credit must be figured using only the wages that were paid or incurred in the calender year that ended with or within your tax year.

Qualified Empowerment Zone Wages:
These are Qualified wages paid or incurred by an employer for services performed by an employee while the employee is a qualified empowerment zone employee.THe maximum wages that may be taken into account for each employee is limited to $15000. The $15000 amount for any employee is reduced by the amount of wages paid or incurred during the calender year on behalf of that employee that are used in figuring:

  • The work opportunity credit (form 5884).
  • The welfare -to- work credit (form 8861).

Qualified Renewal Community Wages:
These are Qualified wages paid or incurred by an employer for services performed by an employee while the employee is a qualified renewal community employee.The maximum wages that may be taken into account for each employee is limited to $10000. The $10000 amount for any employee is reduced by the amount of wages paid or incurred during the calender year on behalf of that employee that are used in figuring:

  • The work opportunity credit (form 5884).
  • The welfare -to- work credit (form 8861).

Line 2:
The program adds line 1a and line 1b and enters the result on this line.
In general the taxpayer must reduce his deduction for salaries and wages and certain educational and training costs by the line 2 credit amount. The tapyer must make this reduction even if he cannot take full credit this year because of the tax liability limit. If the taxpayer capitalised the costs on which he figured the credit, reduce the amount of the credit attributable to these costs.

Line 3:
The amount on this line comes from schedule K-1P/S and schedule K-1ET line named Employment zone and Renewal community development credit.

Line 4:
The program adds line 2 and line 3 and enters the result on this line.

Line 5:
Enter on line 5 the amount of empowerment zone and renewal community development credit that is included on line 4 from passive activities.
Generally a Passive activity is a trade or business in which the taxpayer did not materially participate . Rental activities are generally considered as passive activities, whether or not you materially participate .

Line 6:
The program subtracts line 5 from line 4 and enters the result on this line.

Line 7:
Enter the passive activity credit allowed for the 2007 EZRCE cedit from FOrm 8582CR or Form 8810

Line 8:
Enter the carryforward of empowerment zone credit allowed for 2007.

Line 10:
The program adds lines 6 through 9 and enter the result on this line.

Line 11 and line 12:
These lines are not applicable to Individuals.


PART - II ALLOWABLE CREDIT

Line 13:
The amount on this line comes from FORM 1040 line 44 (tax) or FORM 1040NR line 41(tax).

Line 14:
The amount on this line comes from FORM 6251 line 35 ( Alternative minimum tax).

Line 15:
The program adds line 13 and line 14 and enters the result on this line.

Line 16a:
The amount on this line comes from FORM 1040 :
total of line 47 (child and dependent care benefits), line 48 ( credit for elderly and disabled) , line 49 (education credtis), Line 50 (residential energy credits) , line 52 (child tax credit) , line 53 ( Retirement savings contribution credit) , line 54 ( form 8396 line 13) , (form 8859 line 13) , (form 8839 line 18) .
OR from FORM 1040NR:
total of line 44 (child & dependent care benefits) , line 45 (residential energy credits) , line 47 (child tax credit) , line 48 (retirement savings contribution credit) , line 49 ( form 8396 line 13) , (form 8859 line 13) , (form 8839 line 18) .

Line 16b:
The amount on this line comes from FORM 1040 line 51 (foreign tax credit) or FORM 1040NR line 46(foreign tax credit).

Line 16c:
The amount on this line comes from Form 8834 line 20 (qualified electric vehicle credit).

Line 16d:
The amount on this line comes from Form 8910 line 18 (Alternative Motor vehicle credit).

Line 16e:
The amount on this line comes from Form 8911 line 19 (Non business Alternative Fuel vehicle refueling property credit).

Line 16f:
The program adds line 16a through line 16e and enters the result here.

Line 17:
The program subtracts line 16f from line 15 and enters the result on this line. If the result is negative then it is set as zero.

Line 18:
The program subtracts line 16f from line 13 and enters the result on this line. If the result is negative then it is set as zero.

Line 19:
The amount on this line comes from FORM 6251 line 33 (tentative Minimum tax).
Although you may not owe Alternative Minimum tax , you must still foigure the tentative minimum tax to figure your allowable credit.

Line 20:
The program calculates the amount on line 18 in excess of $25000 and enters 25% of such amount on this line.

Line 21:
The program calculates 75% of the amount on line 19 and enters on this line.

Line 22:
The program sets higher / maximum of line 20 or line 21 on this line.

Line 23:
The program subtracts line 22 from line 17 and enters the result on this line. If the result is negative then it is set as zero.

Line 24:
Theamount on this line comes from FORM 3800 line 19 (general business credit).

Line 25:
The program subtracts line 24 from line 23 and enters the result on this line. If the result is negative then it is set as zero.

Line 26:
The program enters the lower of line 12 or line 25 here and reports this amount on FORM 1040 line 55 or FORM 1040NR line 50.
If you cannot use all of the credit because of the tax liability limit , carry the unused credit back 1 year then forward up to 20 years.
To carry back an unused credit, file an amended income tax return ( FORM 1040X ) for the prior tax year or an application for tentative refund.

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