Interest Charge on DISC-Related Deferred Tax Liability, Form 8404

Form 8404, also known as "Interest Charge on DISC-Related Deferred Tax Liability," is used by shareholders of Interest Charge Domestic International Sales Corporations (IC-DISCs) to calculate and report interest owed on their deferred tax liability.

Who Needs to File Form 8404?

  • You are a shareholder of an IC-DISC (or former IC-DISC).
  • Your IC-DISC reports deferred DISC income on line 10, Part III of Schedule K (Form 1120-IC-DISC).
  • Including this income would increase your taxable income for the tax year.

Key Points About Form 8404:

  • Purpose: Calculate and report interest on your DISC-related deferred tax liability, as mandated by Section 995(f) of the Internal Revenue Code.
  • Due Date: Same as your federal income tax return, generally April 15th for individuals and corporations (excluding extensions).
  • Where to File: Department of the Treasury, Internal Revenue Service, Cincinnati, OH 45999.

How to fill the Form 8404?

Step 1: Enter your name, address, and other identifying information.

Step 2: Provide your IC-DISC's tax year end.

Step 3: Enter the deferred DISC income reported by your IC-DISC.

Step 4: On Line 8, enter the appropriate base period T-bill rate factor.

Step 5: Multiply the deferred DISC income by the rate factor and enter the result on Line 9. This is your interest charge.

Step 6: Sign and date the form.

Important deadlines for Form 8404:

Filing: File Form 8404 by the due date of your federal income tax return (excluding extensions) for the year that ends with or includes the IC-DISC's tax year end.

Payment: Pay the interest charge shown on Line 9 by the date your federal income tax for the year is due. This is generally April 15th for individuals and corporations.