Are you looking to acquire a business or sell your own? Then you need to know about form 8594 or the Asset Acquisition Statement. It’s a document used by the Internal Revenue Service (IRS) to report the purchase price allocation in a business sale.
With that in mind, let this post guide you through how to create form 8594, learn tips on how to avoid common mistakes, and discover the best practices we know for accomplishing this form.
How to Create Form 8594: Step-by-Step Guide
1. Determine the purchase price allocation
The purchase price allocation is the total amount paid for the business and allocated to the assets purchased. The distribution of the purchase price is critical information because it affects the buyer and seller’s tax liability.
To that end, working with your accountant or tax professional to determine the appropriate allocation would be best.
2. Identify the assets for acquisition
You need to identify the assets set for acquisition in the transaction. These could include tangible assets like inventory, equipment, and real estate. They could also involve intangible assets like patents, trademarks, and goodwill. Make sure to include all purchases in the transaction.
3. Complete Form 8594
Once you have determined the purchase price allocation and identified the assets in question, you can complete form 8594. The form consists of four parts, which we’ll cover in the next section.
Standard Elements Of a Form 8594
Part 1: Asset acquisition statement
This part of the form reports the sale of assets in a business transaction. You will need to provide information about the buyer and seller, the date of the deal, and the total purchase price.
Part 2: Allocation of Purchase Price
This portion of the document allocates the purchase price to the assets for the acquisition. You will need to provide the fair market value of each asset, the total purchase price given to each asset, and the method used to determine the fair market value.
Part 3: Elections
You use this section to make certain tax elections. You may need to consult with your tax professional to determine which elections to make. A qualified accountant can help you simplify the form and decide what information to put in each component.
Part 4: Seller information
This form component aims to provide information about the seller, including their taxpayer identification number (TIN). You must provide detailed and accurate information to get a successful outcome.
Best Practices For How to Write IRS form 8594
Accuracy is critical when completing Form 8594. That said, it’s essential to follow these best practices when creating an asset acquisition statement:
1. Consult with your accountant or tax professional
As mentioned, consulting with your accountant or tax professional can help you determine the appropriate purchase price allocation and asset identification. They can also guide you on the tax elections you must make in the form’s third part.
2. Double-check all calculations
Check all calculations carefully to ensure you accurately allocate each asset’s purchase price. Simple calculation mistakes can lead to inaccurate reporting of the sale of assets, which can have significant tax implications.
3. Complete all parts of the form
Ensure you complete all parts of form 8594, including the elections in Part 3 if applicable. Failure to complete any part of the form can result in the document’s rejection or the imposition of various penalties.
4. Use the correct TINs
Using the correct TINs for both the buyer and seller is paramount to completing the form accurately. Using incorrect TINs can lead to processing delays and other inconveniences.
5. Submit the form on time
Submit your form 8594 to the IRS by the deadline to avoid potential penalties. You must submit this document with the tax return for the year of the sale, and late filing can result in fines or other penalties.
Using Fill For Drafting Form 8594
A business acquisition can be complex and time-consuming. Fortunately, Fill is here to simplify your tax forms. Fill is an eSignature app that lets you easily create, edit, and sign documents online. With Fill, you can complete Form 8594 quickly and accurately with a customizable template. Plus, you can sign the document electronically and save it as a PDF.
Fill also stores all your documents in the cloud, making accessing and managing your files easy—no matter your device. And with robust security features such as 256-bit encryption and signer ID verification, Fill is the trusted eSignature platform trusted by thousands of businesses worldwide.
Don’t wait—beat the deadline and get started for free to make your tax form 8594 creation easy with Fill.
