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Form 8873: Extraterritorial Income Exclusion
IRS Form 8873 is used to calculate the amount of extraterritorial income excluded from gross income for a tax year, and it must be attached to the income tax return.
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IRS Form 8873 - Extraterritorial Income Exclusion
IRS Form 8873 is used to calculate the amount of extraterritorial income excluded from gross income for a tax year, and it must be attached to the income tax return.
Risk Radar
Scan points- 1Do not group sales and leases together in Part II; this violates a specific reporting rule.
- 2Filing without checking box (2) on line 5c if a grouping basis is elected.
- 3Grouping sales and leases together in Part II of Form 8873.
- 4Not attaching the required tabular schedule when electing transaction grouping.
- 5Failing to list deductions allocable to Line 15 or Line 16 on line 19.
Plain English
This form helps taxpayers determine how much foreign income should be taken out of their total taxable earnings. The resulting figure shows the portion of worldwide income that is exempt due to extraterritorial rules. Taxpayers attach this completed Form 8873 to their main income tax return for review.
Submission Date
- Filing date: 2017-09-16 08:03:18
- Preparation window: collect IDs, supporting records, and signatures in advance.
- Final review: verify names, dates, and required fields before submission.
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What this form is for
- Use this form when determining the amount of extraterritorial income (defined below) excluded from gross income for the tax year.
- Do not use it when filing transactions that do not meet the definition of extraterritorial income, or when you are not attaching the form to your income tax return.
- Check Form 8873 itself instead when aggregating all transactions onto a tabular schedule.
Form selector
Use this form or another form?
Claiming ETI exclusion for transactions after 2004
The American Jobs Creation Act of 2004 repealed the general ETI exclusion, but transition rules apply.
✓ Confirm which rule applies to your specific transaction.
Reporting multiple groups of transactions by product line
If you elect grouping (and are not using aggregate reporting), you must report per group on a tabular schedule.
✓ Ensure you check box (2) on line 5c.
Electing to aggregate all transactions onto one schedule
This allows you to file only one Form 8873 while listing multiple aggregated transactions underneath it.
✓ Check box (1)(b) on line 5c.
Deadline or filing window
The grouping redeterminations on Form 8873 are permitted until one year after the later of two dates. These trigger events are: 1. The due date of your timely filed return (including extensions), or 2. Not stated in the official source. Attach this form to your income tax return when filing.
Checklist
What you need before filling it out
Purpose
Amount figured on the form · Instructions p.1
Binding Contract Exception applicability
Contract must be in effect on September 17, 2003, and thereafter · Instructions p.1
Transaction Type (e.g., Lease)
Specific transaction description · Instructions p.1 (Items 1-5)
Aggregate Reporting Election
Check box (1)(b) on line 5c · Instructions p.3
Grouping Election
Check box (2) on line 5c · Instructions p.4
Transition Rule Applicability
Transactions before 2005 or under binding contract meeting requirements · Instructions p.1
Before you submit
- 1Ensure the amount figured on Form 8873 is net of disallowed deductions.
- 2Verify that you have attached this form to your income tax return.
- 3Confirm if you are using aggregate reporting (check box (1)(b) on line 5c).
- 4If aggregating, ensure a supporting statement contains all information for each transaction.
- 5Confirm if you are electing to group transactions by product/line (check box (2) on line 5c).
- 6If grouping is elected, confirm that aggregate reporting is not being used simultaneously.
- 7Verify the date of the binding contract meets the requirements described in Instructions p.1.
How to file this form
- 1Enter your name and identifying number at the top of Form 8873.
- 2Determine if you are reporting transactions individually, aggregating them (check box (1)(b)), or grouping them (check box (2)).
- 3Complete all necessary transaction details on Form 8873 or attach the required tabular schedule(s).
- 4Sign and date Form 8873 before sending it to the IRS.
- 5Keep a copy of the completed Form 8873 for your records.
Known limitations
- 1The foreign economic process requirements do not apply to taxpayers whose foreign trading gross receipts for the tax year are $5 million or less.
- 2For a partnership, S corporation, or other pass-through entity, the $5 million limit applies to both the pass-through entity and its partners, shareholders, or other owners.
- 3If an international boycott is associated with operations in or related to a country, the extraterritorial income exclusion may be reduced (details are in Form 5713).
- 4For filers of Form 1120, the amount on line 26 of the 2017 Form 1120 must be included on Form 8873.
- 5If a taxpayer chooses to aggregate transactions on a tabular schedule, they may file one Form 8873 entering only their name and identifying number at the top and checking box (1)(b) of line 5c.
Field map
Compact field-by-field guide
Entity Info
1 items
Name and taxpayer ID of the entity claiming the credit.
Credit Info
1 items
Type of credit or incentive being claimed.
Calculation
2 items
The base amount used to calculate the credit.
Calculated credit amount after applying formulas and limitations.
Certification
1 items
Detailed breakdown supporting the credit calculation.
Signatures
1 items
Sign and date the form.
Almost done reviewing the fields?
Fillable formOpen in Editor->The current edition is Revision September 2017, which instructs users to use the December 2010 revision of Form 8873. The instructions note that these revisions are due to a required change regarding the OMB control number.
What changed or needs a fresh check
- Edition date — confirm the instructions reference Revision September 2017.
- Revision instruction — confirm you are using the December 2010 revision of Form 8873.
- Tax Year — confirm the tax year for which the extraterritorial income is being excluded.
- Filer Identification — confirm your name and identifying number are entered at the top of the form.
Quick Facts
Downloads
After you file
- 1Keep a copy of the completed IRS Form 8873.
- 2Attach the form to the income tax return being filed.
- 3If an examination occurs, the taxpayer may agree to extend the statute of limitations for assessment by 1 year upon notification from the IRS.
- 4When aggregating transactions, attach a tabular schedule to the partially completed Form 8873 reporting all information as if a separate form were filed for each aggregate transaction group.
Sources
- SRCInstructions p.1 — Use this form to figure the amount of extraterritorial income excluded from gross income for the tax year.
- SRCInstructions p.2 — The foreign economic process requirements do not apply to taxpayers whose foreign trading gross receipts for the tax year are $5 million or less.
- SRCInstructions p.3 — If aggregating transactions, check box (1)(b) of line 5c on Form 8873.
- SRCInstructions p.4 — On line 19, column (a), enter deductions allocable to the amount reported on line 15.
- SRCInstructions p.4 — On line 19, column (b), enter deductions directly allocable to the amount reported on line 16.
- SRCInstructions p.4 — To maximize exclusion when using marginal costing, enter the greatest of lines 33, 36, 38, or 44 on line 45.
- SRCInstructions p.4 — If required to file Form 5713 due to international boycott, enter the amount from Schedule C (Form 5713), line 6c, on Form 8873, line 50.
- SRCInstructions p.4 — For filers of Form 1120, include the amount on the “Other deductions” line of Form 1120 (line 26 of the 2017 Form 1120) on Form 8873.
Common confusion points
Should I report my general and administrative expenses on line 19?
The source says not to include them on line 19, column (b) — why must they be listed somewhere else?
They are excluded from the direct allocable amount for line 16.
→ Attach a statement listing these amounts with Form 8873.
What is the difference between reporting transactions normally versus using a tabular schedule?
The source mentions both methods — which one should I use?
The choice depends on preference, but if you aggregate, check box (1)(b) of line 5c.
→ Review Instructions for Form 8873 (Rev. 9-2017) -3-.
How do I calculate the final exclusion amount when using marginal costing?
Marginal costing only uses direct production costs — so, what should I enter on line 45?
Enter the greatest of lines 33, 36, 38, or 44 instead of the amount on line 42.
→ Ensure this calculation maximizes the combined exclusion for you and related persons.
Do all related people count toward the $5 million limit?
Yes, all related persons are treated as one taxpayer, meaning only one $5 million limit applies to all of them.
Workflow map
Related forms and next steps
Before
Current
After
Often used with
⚠ If something goes wrong
- Taxpayers may file a separate Form 8873 for each group of transactions if their foreign trading gross receipts are $5 million or less.
Questions about IRS Form 8873
What is IRS Form 8873 used for?
This form helps taxpayers determine how much foreign income should be taken out of their total taxable earnings. The resulting figure shows the portion of worldwide income that is exempt due to extraterritorial rules. Taxpayers attach this completed Form 8873 to their main income tax return for review.
Who must file IRS Form 8873?
A taxpayer must file IRS Form 8873, which calculates the amount of extraterritorial income excluded from gross income for the tax year.
What information does IRS Form 8873 require?
The form collects information regarding elections (Part I), details about foreign trade income calculations (Part IV), and allows for specialized reporting like marginal costing in Part III. Line 50 specifically tracks potential reductions due to international boycotts.
When is IRS Form 8873 due?
The instructions do not specify a filing deadline, but the grouping redeterminations are permitted until one year after the later of: 1. The due date of your timely filed return (including extensions), or 2. Not stated in the official source.
Where do I file IRS Form 8873?
The form must be attached to the income tax return it relates to for filing. Specific service center routing is not detailed, but the instructions confirm the need to attach Form 8873 to your tax return.
How do I complete IRS Form 8873?
First, a taxpayer must determine if they are electing to exclude a portion of gross receipts (Line 1) or applying exclusions to certain FSC transactions (Line 2). If grouping is elected, one Form 8873 must be completed with name/ID at the top, and an attached tabular schedule must report all groups. Finally, the form must be signed before sending.
What happens if IRS Form 8873 is filed incorrectly?
Failure to correctly complete or attach Form 8873 means the calculated amount of extraterritorial income exclusion may be incorrect on the main tax return. The form itself is net of disallowed deductions, so errors affect the final reported taxable income.
The source says not to include them on line 19, column (b) — why must they be listed somewhere else?
They are excluded from the direct allocable amount for line 16. Attach a statement listing these amounts with Form 8873.
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