IRS Form 8916-A

What Is IRS Form 8916-A?

The IRS formulated the 8916-A form to streamline the accounting process for taxpayers and prevent any confusion over calculating profit and taxable income. Utilizing the Section 263A method allows businesses to include indirect and direct costs in their inventory, which were previously not permitted. The changes in the tax law allow companies to increase their deduction proportion through the cost of goods sold. 

When and why to file form 8916-A?

Form 8916-A should be completed and filed by corporations who file Schedule M-3 of Form 1120, 1120-L, 1120-PC, or 1120S. It's essential for corporations when their total consolidated assets and income of all included domestic and foreign corporations are at least $50 million.

How to Fill Out Form 8916 A

For those wondering about filling out this form template, the process is relatively straightforward. The form is divided into sections, each requiring specific information about the business. Here is a small guideline to help you:

1. Begin by locating the section labeled "Name of common parent", now type in the exact name of the parent company as it is registered. Be mindful of the proper use of capital letters and punctuation.
2. Move on to the "Employer Identification Number", which is typically a 9-digit number assigned to businesses for tax filing purposes. Enter this number without any hyphens or dashes.
3. In the section marked "Name of Subsidiary", type in the name of the subsidiary company. Make sure that the spelling and formatting match the company's official records.
4. Proceed to the "Employer Identification Number" section for the subsidiary. Enter this number without any hyphens or dashes, as you did for the parent company.
5. Switch to Part I, titled "Cost of Goods Sold". Carefully fill up details such as beginning inventory, purchases during the year, cost of labor, additional section 263A costs, other costs, and ending inventory.
6. In the "Cost of Goods Sold" section, ensure the arithmetic accuracy of all entries. Double-check all numbers and computations to prevent any inaccuracies.
7. Jump to Part II, labeled "Interest Income". Here, you need to mention the details relating to any kind of interest received or accrued during the year. This includes interest on federal income tax overpayment, tax-exempt interest, and other interest income.
8. Now, focus on Part III, with the title "Interest Expense". In this section, enter the details of any interests paid or accrued during the year. This could be interest paid on underpayment of federal income tax or mortgage interest, among other things.
9. Finally, recheck all the information filled in. Ensure the accuracy of the figures and the correctness of the data provided as you cross-verify with your original documents and data sources. After confirming the data, you may download, print or share the form.  

Who should fill out form 8916 A?

It's essential to note that not every business needs to submit Form 8916-A. Corporations primarily use it, but if you're a sole proprietor or a self-employed individual, you might not need to use this form. Consider seeking advice from a tax professional if you aren't sure whether you need to fill out this form.