Line 9
See If Interest Is To Be Refunded to You on page 2 for where to file Form 8697. Additional interest to be refunded for periods after the due date of the return, if any, will be computed by the IRS and included in your refund. Report the amount on line 9 (or the amount refunded by the IRS if different) as interest income on your income tax return for the tax year in which it is received or accrued.
Line 10
See If You Owe Interest under Filing Instructions on page 1 for how to report this amount on your tax return. Corporations (other than S corporations) may deduct this amount (or the amount computed by the IRS if different) as interest expense for the tax year in which it is paid or incurred. For individuals and other taxpayers, this interest is not deductible.
Part II - Simplified Marginal Impact Method
Part II is used only by pass-through entities required to apply the look-back method at the entity level (see Who Must File on page 1) and taxpayers electing (or with an election in effect) to use the simplified marginal impact method. Under the simplified method, prior year hypothetical underpayments or overpayments in tax are figured using an assumed marginal tax rate, which is generally the highest statutory rate in effect for the prior year under section 1 (for an individual) or section 11 (for a corporation). This method eliminates the need to refigure your tax liability based on actual contract price and actual contract costs each time the look-back method is applied.
To elect the simplified marginal impact method, attach a statement to your timely filed income tax return (determined with extensions) for the first tax year of the election. Indicate on the statement that you are making an election under Regulations section 1.460-6(d) to use the simplified marginal impact method. Once made, the election applies to all applications of the look-back method in the year of the election and all later years, unless the IRS consents to a revocation of the election.
Columns (a), (b), and (c)
Enter at the top of each column the ending month and year for each prior tax year in which you were required to report income from the completed long-term contract.
Note: If there were more than 3 prior tax years, attach additional Forms 8697 as needed. On the additional Forms 8697, enter your name, identifying number, and tax year. Complete lines 1 through 9 (as applicable), but do not enter totals in column (d). Enter totals only in column (d) of the first Form 8697.
Line 1
In each column, show a net increase to income as a positive amount and a net decrease to income as a negative amount.
On an attached schedule:
- Identify each completed long-term contract by contract number, job name, or any other reasonable method used in your records to identify each contract; and
- For each contract, report in columns for each prior year:
- the amount of income previously reported based on estimated contract price and costs and
- the amount of income allocable to each prior year based on actual contract price and costs.
Total the columns for each prior year and show the net adjustment to income from long-term contracts.
An owner of an interest in a pass-through entity is not required to provide the detail listed in (a) and (b) above for prior years. The entity should provide the line 1 amounts with Schedule K-1 or on a separate statement for its tax year in which the contracts are completed or adjusted.
Note: Taxpayers reporting line 1 amounts from more than one Schedule K-1 (or a similar statement) must attach a schedule detailing by entity the net change to income from long-term contracts.
Line 2
Multiply the amount on line 1 by the applicable regular tax rate for each prior year shown in column (a), (b), or (c). The applicable regular tax rate is as follows:
1. Individuals and pass-through entities in which, at all times during the year, more than 50% of the interests in the entity are held by individuals directly or through other pass-through entities:
| a. Tax years beginning before 1987
|
50%
|
| b. Tax years beginning in 1987
|
38.5%
|
| c. Tax years beginning in 1988, 1989, or 1990
|
28%
|
| d. Tax years beginning in 1991 or 1992
|
31%
|
| e. Tax years beginning in 1993 through 2000
|
39.6%
|
| f. Tax years beginning in 2001
|
39.1%
|
| g. Tax years beginning in 2002 or 2003
|
38.6%
|
| h. Tax years beginning in 2004 or 2005
|
37.6%
|
| i. Tax years beginning in 2006 or later
|
35.0%
|
2. Corporations (other than S corporations) and pass-through entities not included in 1 above:
| a. Tax years ending before July 1, 1987
|
46%
|
| b. For tax years beginning before July 1, 1987, that include July 1, 1987, the rate is 34% plus the following:
|
|
Number of days
| c. Tax years beginning after June 30, 1987, and ending before 1993
|
34%
|
| d. For tax years beginning before 1993 that include January 1, 1993, the rate is 34% plus the following:
|
|
Number of days
| e. Tax years beginning after 1992
|
35%
|
Line 3
See the instructions for Part II, line 1, on this page and complete line 3 in the same manner, using only income and deductions allowed for alternative minimum tax (AMT) purposes.
Line 4
Multiply the amount on line 3 by the applicable AMT rate, which is as follows:
1. Individuals and pass-through entities in which, at all times during the year, more than 50% of the interests in the entity are held by individuals directly or through other pass-through entities:
| a. Tax years beginning in 1987 through 1990
|
21%
|
| b. Tax years beginning in 1991 or 1992
|
24%
|
| c. Tax years beginning in 1993 or later
|
28%
|
| 2. Corporations (other than S corporations) and pass-through entities not included in 1 above
|
20%
|
Line 5
If both lines 2 and 4 are negative, enter whichever amount is greater. Treat both numbers as positive when making this comparison, but enter the amount as a negative number. (If the amount on one line is negative, but the amount on the other line is positive, enter the positive amount.)
Lines 8 and 9
For the increase (or decrease) in tax for each prior year, interest due or to be refunded must be computed at the applicable interest rate and compounded on a daily basis from the due date (not including extensions) of the return for the prior year until the earlier of:
- The due date (not including extensions) of the return for the filing year or
- The date the return for the filing year is filed and any income tax due for that year has been fully paid.
See Applicable Interest Rates in the instructions for Part I, lines 7 and 8, on page 3.
Line 10
See the instructions for Part I, line 9, on page 3.
Line 11
See the instructions for Part I, line 10, on this page.
Table 1 Interest Rates for All Taxpayers, for periods
Through 1994
| From |
Through |
Rate |
Table |
Page |
| - |
6/30/86 |
10% |
25 |
579 |
| 7/1/86 |
12/31/86 |
9% |
23 |
577 |
| 1/1/87 |
9/30/87 |
8% |
21 |
575 |
| 10/1/87 |
12/31/87 |
9% |
23 |
577 |
| 1/1/88 |
3/31/88 |
10% |
73 |
627 |
| 4/1/88 |
9/30/88 |
9% |
71 |
625 |
| 10/1/88 |
12/31/88 |
10% |
73 |
627 |
| 1/1/89 |
3/31/89 |
10% |
25 |
579 |
| 4/1/89 |
9/30/89 |
11% |
27 |
581 |
| 10/1/89 |
3/31/91 |
10% |
25 |
579 |
| 4/1/91 |
12/31/91 |
9% |
23 |
577 |
| 1/1/92 |
3/31/92 |
8% |
69 |
623 |
| 4/1/92 |
9/30/92 |
7% |
67 |
621 |
| 10/1/92 |
12/31/92 |
6% |
65 |
619 |
| 1/1/93 |
6/30/94 |
6% |
17 |
571 |
| 7/1/94 |
9/30/94 |
7% |
19 |
573 |
| 10/1/94 |
12/31/94 |
8% |
21 |
575 |
Table 2 Interest Rates for Taxpayers Other Than Corporations,
for Periods After 1994
| From |
Through |
Rate |
Table |
Page |
| 1/1/95 |
3/31/95 |
8% |
21 |
575 |
| 4/1/95 |
6/30/95 |
9% |
23 |
577 |
| 7/1/95 |
12/31/95 |
8% |
21 |
575 |
| 1/1/96 |
3/31/96 |
8% |
69 |
623 |
| 4/1/96 |
6/30/96 |
7% |
67 |
621 |
| 7/1/96 |
12/31/96 |
8% |
69 |
623 |
| 1/1/97 |
3/31/98 |
8% |
21 |
575 |
| 4/1/98 |
3/31/99 |
7% |
19 |
573 |
| 4/1/99 |
12/31/99 |
8% |
21 |
575 |
| 1/1/00 |
3/31/00 |
8% |
69 |
623 |
| 4/1/00 |
12/31/00 |
9% |
71 |
625 |
| 1/1/01 |
3/31/01 |
9% |
23 |
577 |
| 4/1/01 |
6/30/01 |
8% |
21 |
575 |
| 7/1/01 |
12/31/01 |
7% |
19 |
573 |
| 1/1/02 |
12/31/02 |
6% |
17 |
571 |
| 1/1/03 |
3/31/03 |
5% |
15 |
569 |
Table 3 Interest Rates for Corporate Increases or
Decreases in Tax of $10,000 or Less for Periods After 1994
| From |
Through |
Rate |
Table |
Page |
| 1/1/95 |
3/31/95 |
8% |
21 |
575 |
| 4/1/95 |
6/30/95 |
9% |
23 |
577 |
| 7/1/95 |
12/31/95 |
8% |
21 |
575 |
| 1/1/96 |
3/31/96 |
8% |
69 |
623 |
| 4/1/96 |
6/30/96 |
7% |
67 |
621 |
| 7/1/96 |
12/31/96 |
8% |
69 |
623 |
| 1/1/97 |
3/31/98 |
8% |
21 |
575 |
| 4/1/98 |
12/31/98 |
7% |
19 |
573 |
| 1/1/99 |
3/31/99 |
6% |
17 |
571 |
| 4/1/99 |
12/31/99 |
7% |
19 |
573 |
| 1/1/00 |
3/31/00 |
7% |
67 |
621 |
| 4/1/00 |
12/31/00 |
8% |
69 |
623 |
| 1/1/01 |
3/31/01 |
8% |
21 |
575 |
| 4/1/01 |
6/30/01 |
7% |
19 |
573 |
| 7/1/01 |
12/31/01 |
6% |
17 |
571 |
| 1/1/02 |
12/31/02 |
5% |
15 |
569 |
| 1/1/03 |
3/31/03 |
4% |
13 |
567 |
Table 4 Interest Rates for Corporate Increases or
Decreases in Tax Exceeding $10,000 for Periods After 1994
| From |
Through |
Rate |
Table |
Page |
| 1/1/95 |
3/31/95 |
6.5% |
18 |
572 |
| 4/1/95 |
6/30/95 |
7.5% |
20 |
574 |
| 7/1/95 |
12/31/95 |
6.5% |
18 |
572 |
| 1/1/96 |
3/31/96 |
6.5% |
66 |
620 |
| 4/1/96 |
6/30/96 |
5.5% |
64 |
618 |
| 7/1/96 |
12/31/96 |
6.5% |
66 |
620 |
| 1/1/97 |
3/31/98 |
6.5% |
18 |
572 |
| 4/1/98 |
12/31/98 |
5.5% |
16 |
570 |
| 1/1/99 |
3/31/99 |
4.5% |
14 |
568 |
| 4/1/99 |
12/31/99 |
5.5% |
16 |
570 |
| 1/1/00 |
3/31/00 |
5.5% |
64 |
618 |
| 4/1/00 |
12/31/00 |
6.5% |
66 |
620 |
| 1/1/01 |
3/31/01 |
6.5% |
18 |
572 |
| 4/1/01 |
6/30/01 |
5.5% |
16 |
570 |
| 7/1/01 |
12/31/01 |
4.5% |
14 |
568 |
| 1/1/02 |
12/31/02 |
3.5% |
12 |
566 |
| 1/1/03 |
3/31/03 |
2.5% |
10 |
564 |
Privacy Act and Paperwork Reduction Act Notice.
The Privacy Act of 1974 and Paperwork Reduction Act of 1980 say that when we ask you for information we must tell you our legal right to ask for it, why we are asking for it, and how it will be used. We must also tell you what could happen if we do not receive it and whether your response is voluntary or mandatory under the law.
Section 460 provides special rules for computing interest under the look-back method for completed long-term contracts. Section 6001 and its regulations say that you must file a return or statement with us for any tax you are liable for. Your response is mandatory under this section and its regulations. Section 6109 and its regulations say that you must show your identifying number (social security number or employer identification number) on what you file. This is so we know who you are and can process your return and other papers.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by section 6103.
We ask for the information on this form to carry out the Internal Revenue laws of the United States. We need this information to ensure that you are complying with these laws and to figure and collect or refund the correct amount of interest.
We may give the information to the Department of Justice and to other Federal agencies, as provided by law. We may give it to cities, states, the District of Columbia, and U.S. commonwealths or possessions to carry out their tax laws. We may give it to foreign governments because of tax treaties they have with the United States. We may also disclose this information to Federal and state agencies to enforce Federal nontax criminal laws and to combat terrorism.
If you do not file Form 8697, do not provide the information we ask for, or provide fraudulent information, you may forfeit any refund of interest otherwise owed to you, be charged penalties, or be subject to criminal prosecution.
The time needed to complete and file this form will vary
depending on individual circumstances. The estimated average
time is:
| Recordkeeping |
| Part I |
8 hr.,36 min. |
| Part II |
9 hr., 19 min. |
| Learning about the law
or the form |
| Part I |
2 hr., 22 min. |
| Part II |
2 hr., 5 min. |
| Preparing, copying, assembling,
and sending the form to the IRS |
| Part I |
2 hr., 37 min. |
| Part II |
2 hr., 19 min. |
If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be happy to hear from you. You can write to the Tax Forms Committee, Western Area Distribution Center, Rancho Cordova, CA 95743-0001. Do not send the tax form to this address. Instead, see Filing Instructions on page 1.
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