Filing Instructions for IRS Form 8613

Form 8613, Return of Excise Tax on Undistributed Income of Regulated Investment Companies, is a tax form used to report and pay a 4% excise tax on undistributed income. This requirement, established under Internal Revenue Code Section 4982, is designed to discourage the deferral of income distribution to shareholders. The form is a standard part of tax compliance for entities structured as Regulated Investment Companies (RICs), which include mutual funds and exchange-traded funds (ETFs).

Calculating the Required Distribution

The foundation of the Form 8613 calculation is determining the “required distribution” for the calendar year. This figure is the sum of two distinct components. The first part of the calculation is 98% of the RIC’s ordinary income for the full calendar year. This income is figured on a calendar year basis even if the fund uses a different fiscal year.

The second component involves the RIC’s capital gains. The rule requires the inclusion of 98.2% of the RIC’s capital gain net income. This income is measured for the one-year period that concludes on October 31 of the calendar year, not December 31.

For RICs whose tax year ends in November or December, a special election is available. This election allows the company to use its own fiscal year-end instead of the standard October 31 date for measuring its capital gain net income. The election is made by checking a specific box on Form 8613 and must be filed by the form’s due date for the year the election is to take effect.

Completing the Form 8613 Calculation

Part I of Form 8613 is designated for reporting the required distribution. Here, the two components calculated previously are entered on separate lines. The form then directs the filer to sum these amounts to arrive at the total required distribution for the year.

Part II of the form calculates the undistributed income, which is the basis for the excise tax. This is accomplished by subtracting the total dividends paid out during the calendar year from the required distribution amount calculated in Part I.

The final step, Part III, determines the excise tax owed. The calculation is the undistributed income from Part II multiplied by a flat rate of 4%. This product is the total excise tax due for the calendar year.

Filing and Payment Procedures

The deadline for filing Form 8613 is March 15 of the year following the calendar year for which the tax was calculated. This due date applies to all RICs required to file, regardless of their individual fiscal year-ends.

If a RIC cannot meet the March 15 filing deadline, it can request an automatic six-month extension. This is done by filing Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns. This extension applies only to the filing of Form 8613. It does not grant an extension for the payment of the tax itself; the estimated tax liability must still be paid by the original March 15 due date to avoid late payment penalties.

Form 8613 should be filed with the same Internal Revenue Service Center where the fund files its primary income tax return, such as Form 1120-RIC. The payment of the excise tax must be made electronically. The required method for this is the Electronic Federal Tax Payment System (EFTPS).