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What is a Form 8752 & Why Do I Need To File It?

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"Form 8752 - Required Payment or Refund Under Section 7519" is certainly not the clearest form title.

Simply:

The IRS asks Fiscal Year, S Corporations, and Partnerships to file a Form 8752. The IRS then holds in an escrow-like account an estimate of you would have paid if you operated on a calendar year end. Essentially its like a security deposit that a landlord may require from a tenant.

However, since it is "in escrow" you receive a portion of the funds back if your profit decreases from year to year, and your receive the funds back in total if there is a tax loss or the business is dissolved. 

For instance, If your profit does not change from year to year, you will not need to make a payment after your first year. Watch what happens with the following example of a September-Year-End company, that closes after its 9th year:

 

Deferral Period      
25% Taxable Profit 8752 Payment or Refund 8752 'Escrow' Account
First Year $100,000.00 $9,000.00 $0.00
Second Year $100,000.00 $0.00 $9,000.00
Third Year $100,000.00 $0.00 $9,000.00
Fourth Year $200,000.00 $9,000.00 $9,000.00
Fifth Year $0.00 -$18,000.00 $18,000.00
Sixth Year $200,000.00 $18,000.00 $0.00
Seventh Year $300,000.00 $9,000.00 $18,000.00
Eighth Year $500,000.00 $18,000.00 $27,000.00
Ninth Year $500,000.00 $0.00 $45,000.00
Escrow Refunded $0.00 -$45,000.00 $45,000.00

 

Note, the negative values of the "8752 Payment or Refund" column are refunds, the positive are payments.