Note: The Indian employment credit expired on Dec. 31, 2021. Unless reinstated by Congress, it will not be available for tax year 2022 or beyond. These instructions apply to TaxSlayer Pro for tax years 2021 and prior.
Use Form 8845 to claim the Indian employment credit if you paid or incurred qualified wages and/or qualified employee health insurance costs to/for a qualified employee during your tax year.
To access Form 8845 in the desktop program, from the main menu of the tax return (Form 1040), select:
- Credits
- General Business Credit (3800)
- Current Year General Business Credits
- Form 8845
If any portion of a prior year credit claimed on Form 8845 is required to be recaptured (see early termination of an employee below), from the main menu of the tax return (Form 1040), select:
- Other Taxes
- Other Additional Taxes
- Recapture of Other Credits
- Recapture of Indian Employment Credit (8845)
Qualified Wages - Qualified wages means any wages paid or incurred by an employer for services performed by an employee while such employee is a qualified employee (see below). It doesn’t include wages attributable to services rendered during the 1-year period (if applicable, 2-year period if employee is a long-term family assistance recipient under section 51) beginning with the day the employee starts
work for the employer if any portion of such wages is used in figuring the work opportunity credit on Form 5884. Wages has the same meaning given in section 51. See section 45A(b)(1) for details.
Qualified wages do not include:
- Wages paid to or incurred for any employee after December 31, 2020, and before July 1, 2021, if you use the same wages to claim the employee retention credit on an employment tax return such as Form 941;
- Wages paid to or incurred for any employee after March 31, 2021, and before October 1, 2021, if you use the same wages to claim the credit for qualified sick and family leave wages on an employment tax return such as Form 941; and
- Wages paid to or incurred for any employee generally after December 27, 2019, and before April 17, 2021, if you use the same wages to claim the 2020 qualified disaster employee retention credit on Form 5884-A.
Information about any future disaster credits that reduce qualified wages may be posted under "Recent
Developments" at IRS.gov/Form8845.
Qualified Employee Health Insurance Costs - Qualified employee health insurance costs means any
amount paid or incurred by an employer for health insurance coverage for an employee while the employee is a qualified employee. Don’t include amounts paid or incurred for health insurance under a salary reduction agreement.
Early Termination of an Employee - Generally, if the employer terminates a qualified employee
less than 1 year after the date of initial employment, the following rules apply.
- No wages or qualified employee health insurance costs may be taken into account for the tax year the employment is terminated.
- Any credits allowed for prior tax years by reason of wages paid or incurred to that employee must be recaptured. Include the recapture amount on the line for recapture taxes on your income tax return. Also, any carryback or carryover of the credit must be adjusted.
These rules do not apply if:
- The employee voluntarily quits,
- The employee is terminated because of misconduct, or
- The employee becomes disabled. However, if the disability ends during the first year of employment, the employer must offer reemployment to that employee.
An employee isn’t treated as terminated if the corporate employer is acquired by another corporation covered under the rules in section 381(a) and the employee continues to be employed by the acquiring corporation. Nor is a mere change in the form of conducting the trade or business treated as a termination if the employee continues to be employed in such trade or business and the taxpayer retains a substantial interest in such trade or business.
Additional Information:
IRS Instructions for Form 8845