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How to generate Form 8990

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Intuit

How to generate Form 8990

This article will help you enter information for Form 8990 Limitation on Business Interest Expense Under Section 163(j) in a partnership, S-corporate, corporate, individual, or exempt organization return. 

This form isn’t supported in the fiduciary module (Form 1041), but can be prepared separately and attached to the return as a PDF.

When is Form 8990 required?

Generally, your client must file an 8990 if:

  • They have business interest expense,
  • They have a disallowed business interest expense carryforward,
  • They have current or prior year excess business interest expense, or
  • They’re a passthrough entity.

Your client may qualify for an exclusion from filing Form 8990 if they’re considered a small business taxpayer. Small business taxpayers are those not classified as a tax shelter who meet the gross receipts test for the prior three years.

Review the Form 8990 instructions for details on the gross receipts test and other exclusions for excepted businesses. Note that passthrough entities not subject to the 163(j) limitations may need to provide their owners with information required to complete their own Form 8990, even though the passthrough isn’t required to file the form.

Click on your tax type below to view instructions on generating the form or a worksheet to provide to passthrough owners.

The program will try to determine whether 8990 is required based on your entries on Screen 5, Other Information (Schedule B), in the Gross Receipts for the 3 Tax Years Preceding the Current Tax Year subsection. A critical diagnostic will appear if these entries indicate the form is required, but it’s not generated with the return.

To generate Form 8990 because the partnership is required to file:

  1. Go to Screen 72, Limitation on Business Interest Expense (8990).
  2. Check the box labeled Partnership is subject to the section 163(j) limitation.
  3. If desired, check Automatically complete Form 8990, Part I, and calculate allowed/disallowed interest amounts on return.
  4. Check the box for any applicable elections.
  5. Leave the Partnership is Not Subject to Section 163(j) Limitation subsection blank.
  6. Complete the applicable entries. If you checked the box to automatically complete part I of the form, all fields with an asterisk can be left blank. The program will calculate these amounts.

The limitation calculated on Form 8990 will automatically be applied to interest amounts that flow to the return if you had the program automatically calculate for you. A worksheet will print detailing the Interest Expense Before and After Section 163(j) Limitation for each activity.

If you chose to apply the limitation manually:

You must go to each activity’s input screen and indicate the allowed amount of business interest expense. For example, to limit the interest expense reported on Form 1065, line 15:

  1. Go to Screen 13, Deductions.
  2. Enter the amount in Allowed amount, if limited on Form 8990 (override, if program is calculating).

This input is available on other activities such as Farm Income and Expenses, Rental Real Estate, and Passthrough K-1s. 

If the partnership isn’t required to file, but a partner may be:

  1. Go to Screen 72, Limitation on Business Interest Expense (8990).
  2. Leave the Subject to Section 163(j) Limitation subsection blank. 
  3. Scroll down to the Partnership is Not Subject to Section 163(j) Limitation subsection.
  4. Check the box labeled Partners could be subject to section 163(j) limitation
  5. If desired, check Carry amounts from the return to Form 8990 Worksheet.
  6. Complete the applicable entries. If you checked the box to carry amounts from the return to the worksheet, all fields with an asterisk can be left blank. The program will calculate these amounts.

A worksheet version of Form 8990 will generate, but won’t be filed with the return. Each partner’s share of business interest income and expense will be reported on a statement for Schedule K-1, box 20. If necessary, you can specially allocate these amounts on screen 29.

The program will try to determine whether 8990 is required based on your entries on Screen 3.1, Miscellaneous Information, in the Business Interest Expense section. A critical diagnostic will appear if these entries indicate the form is required, but it’s not generated with the return.

To generate Form 8990 because the S corporation is required to file:

  1. Go to Screen 80, Limitation on Business Interest Expense (8990).
  2. Check the box labeled S corporation is subject to the section 163(j) limitation.
  3. If desired, check Automatically complete Form 8990, Part I, and calculate allowed/disallowed interest amounts on return.
  4. Check the box for any applicable elections.
  5. Leave the S corporation is Not Subject to Section 163(j) Limitation subsection blank.
  6. Complete the applicable entries. If you checked the box to automatically complete part I of the form, all fields with an asterisk can be left blank. The program will calculate these amounts.

The limitation calculated on Form 8990 will automatically be applied to interest amounts that flow to the return if you had the program automatically calculate for you. A worksheet will print detailing the Interest Expense Before and After Section 163(j) Limitation for each activity.

If you chose to apply the limitation manually:

You must go to each activity’s input screen and indicate the allowed amount of business interest expense. For example, to limit the interest expense reported on Form 1120S, line 13:

  1. Go to Screen 15, Deductions.
  2. Enter the amount in Allowed amount, if limited on Form 8990 (override, if program is calculating).

This input is available on other activities such as Farm Income and Expenses, Rental Real Estate, and Passthrough K-1s. 

If the S-corporation isn’t required to file, but a shareholder may be:

  1. Go to Screen 80, Limitation on Business Interest Expense (8990).
  2. Leave the Subject to Section 163(j) Limitation subsection blank. 
  3. Scroll down to the S corporation is Not Subject to Section 163(j) Limitation subsection.
  4. Check the box labeled Shareholders could be subject to section 163(j) limitation
  5. If desired, check Carry amounts from the return to Form 8990 Worksheet.
  6. Complete the applicable entries. If you checked the box to carry amounts from the return to the worksheet, all fields with an asterisk can be left blank. The program will calculate these amounts.

A worksheet version of Form 8990 will generate, but won’t be filed with the return. 

Each shareholder’s portion of business interest income, adjusted taxable income, and expense will be reported on a statement for Schedule K-1, box 17. 

If necessary, you can override the amount reported to each shareholder on Screen 33, Schedule K-1 Overrides, under Other Information, using the Not Subject to Section 163(J) Limitations fields.

The program will try to determine whether 8990 is required based on your entries on Screen 4.1, Miscellaneous Information, in the Business Interest Expense section, as well as your entries for the prior three years’ gross receipts in Screen 32, Base Erosion Tax (8991). A critical diagnostic will appear if these entries indicate the form is required, but it’s not generated with the return.

  1. Go to Screen 87, Limitation on Business Interest Expense (8990).
  2. Check the box labeled Corporation is subject to the section 163(j) limitation.
  3. If desired, check Automatically complete Form 8990, Part I, and calculate allowed/disallowed interest amounts on return.
  4. Check the box for any applicable elections.
  5. Complete the applicable entries. If you checked the box to automatically complete part I of the form, all fields with an asterisk can be left blank. The program will calculate these amounts.

The limitation calculated on Form 8990 will automatically be applied to interest amounts that flow to the return if you had the program automatically calculate for you. A worksheet will print detailing the Interest Expense Before and After Section 163(j) Limitation for each activity.

If you chose to apply the limitation manually:

You must go to each activity’s input screen and indicate the allowed amount of business interest expense. For example, to limit the interest expense reported on Form 1120, line 5:

  1. Go to Screen 20, Deductions.
  2. Enter the amount in Allowed amount, if limited on Form 8990 (override, if program is calculating).

This input is available on other activities such as Farm Activities, Rental/Other Passive Activities, and Passthrough K-1s. 

First, if the individual has any excess business interest from a partnership or S corporation K-1, make the appropriate entries on Screen 20, Passthrough K-1’s. These will be used to complete Form 8990 Schedule A and Schedule B. 

To enter excess business interest from a partnership:

  1. Go to Screen 20, Passthrough K-1’s.
  2. Scroll down to the Line 20 - Other section.
  3. Enter the amounts from the K-1 in (20AE) Excess taxable income and (20AF) Excess business interest income.

Carryovers from prior years should be entered under Basis Carryovers in the Excess business interest expense field.

To enter excess business interest from an S corporation:

  1. Go to Screen 20, Passthrough K-1’s.
  2. Scroll down to the Line 17 - Other Information section.
  3. Enter the amounts from the K-1 in (17AA) Excess taxable income and (17AB) Excess business interest income.

Next, trigger Form 8990 and review K-1 entries:

  1. Go to Screen 88, Limitation on Business Interest Expense (8990).
  2. Check the box labeled Individual subject to section 163(j) limitation (review the gross receipts test in Form 8990 instructions each year).
  3. Go to the Forms tab and review the portions of the 8990 that are generated from your K-1 entries for accuracy.
  4. Return to screen 88 and check the box for any applicable elections.
  5. Complete all other applicable entries on this screen.

Amounts entered for Form 8890 won’t affect any other part of the tax return. If any of the taxpayer’s business interest expense is disallowed (Form 8990, line 31), then the allowable business interest expense deduction reported on line 30 must be manually allocated to each source in proportion to the amount of business interest expense from that source. 

You must manually reduce your entries for interest expenses on the applicable activity’s input screen, and attach an itemized schedule showing the amount and line item on the tax return where business interest expense is being deducted. You can enter this at the bottom of the 8990 screen.

  1. Go to Screen 92, Limitation on Business Interest Expense (8990).
  2. Check the box for Organization subject to section 163(j) limitation (review the gross receipts test in Form 8990 instructions each year).
  3. Check the box for any applicable elections.
  4. Complete all other applicable entries on this screen.

Amounts entered for Form 8990 won’t affect any other part of the tax return. If any of the organization’s business interest expense is disallowed (Form 8990, line 31), then the allowable business interest expense deduction reported on line 30 must be manually allocated to each source in proportion to the amount of business interest expense from that source. 

You must manually reduce your entries for interest expenses on the applicable activity’s input screen, and attach an itemized schedule showing the amount and line item on the tax return where business interest expense is being deducted. You can enter this at the bottom of the 8990 screen.

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