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IRS releases draft net investment income tax form

BY SALLY P. SCHREIBER, J.D.

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On Wednesday, the IRS released a draft of Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, a new dual-purpose form that will be used by individuals and trusts and estates to compute the new 3.8% tax and then to report the tax on Forms 1040, U.S. Individual Income Tax Return, and 1041, U.S. Income Tax Return for Estates and Trusts. At the end of July, the IRS requested comments on the form, but did not release a draft version until now.

Starting this year, Sec. 1411(a)(1) imposes a tax equal to 3.8% of the lesser of an individual’s net investment income for the tax year or the excess (if any) of the individual’s modified adjusted gross income for the tax year over a threshold amount. The threshold amounts are $250,000 for married taxpayers filing jointly and surviving spouses, $125,000 for married taxpayers filing separately, and $200,000 for other taxpayers. The tax also applies to estates and trusts, with different threshold amounts.

On Form 8960, taxpayers will calculate total investment income and total deductions and modifications (such as investment interest expense and state taxes) to arrive at net investment income. The form provides separate tax calculations for individuals and for trusts and estates. Individuals will report the net investment income tax on line 60 of Form 1040; trusts and estates will report it on Schedule G, line 4, of Form 1041.

Now that the draft form (which is one page) has been released, taxpayers and practitioners can examine it and address the following areas the IRS has requested comments on by Sept. 27:

  • Whether the information collected on Form 8960 is necessary for the IRS to perform its functions properly, including whether it has practical utility;
  • How accurate the IRS’s estimate is of the burden on taxpayers to comply with the information requested on the form (36 minutes per respondent);
  • How to improve the quality, utility, and clarity of the information to be collected;
  • Ways to minimize the burden on respondents, including using automated collection methods and other forms of information technology; and
  • Estimates of how much it will cost to start up and operate systems or services to provide information required by the form.


—Sally P. Schreiber (sschreiber@aicpa.org) is a JofA senior editor.