How can I/do I need to file form 8997?

[woodward-apart]

I currently hold QOZ investments; in prior years when I contributed, I've had to manually edit and paper file due to Turbo Tax's lack of built-in support to do deferrals.

This year, I've made no changes to my investments, but Form 8997 suggests I'm supposed to file that form to report my existing holdings.   I wouldn't care, except Turbotax doesn't support this form, which means I'd presumably need to paper file (?)

If I e-file as is, what happens if I just don't file Form 8997?  Will the IRS just rely on my past filing of Form 8997 or will something bad happen?

[npierson7 · Accepted solution]

Form 8997, Initial and Annual Statement of Qualified Opportunity Fund  Investments is a new form. You can file your tax return without that, however according the new IRS rule all taxpayers who holds a QOF investment during the tax year must file Form 8997, even if they did not dispose of any QOF investments. It is unclear if there any penalties for not filing the form.

[CuppaTea]

Hi @npierson7 

I have a similar situation to @woodward-apart ; I need to file form 8997 again; it doesn’t affect my taxable income this year. Can I e-file the return and just file form 8997 by mail?

[campfred]

I was worried about not being able to file Form 8997 which is clearly called for by the IRS.  Until I found the following IRS link and read bullet point #4 that I've highlighted in bold underlined italics below.

So I have my Form 8997 made out and ready to submit when and if the IRS requests it.  Until then - Thanks for NOTHING Turbo Tax. 

https://www.irs.gov/newsroom/what-taxpayers-should-[product key removed]ing-a-tax-return

IRS Tax Tip 2018-118, August 1, 2018

Taxpayers who discover they made a mistake on their tax returns after filing can file an amended tax return to correct it. This includes things like changing the filing status, and correcting income, credits or deductions.

Here are some tips for taxpayers who need to amend a tax return.

• Complete and mail the paper Form 1040-X, Amended U.S. Individual Income Tax Return. Taxpayers must file an amended return on paper whether they filed the original return on paper or electronically. Filers should mail the Form 1040-X to the address listed in the form’s instructions PDF. However, taxpayers filing Form 1040-X in response to a notice received from the IRS, should mail it to the address shown on the notice.
• If taxpayers used other IRS forms or schedules to make changes, they should attach those schedules to their Form 1040-X.
• Taxpayers should not amend a tax return to correct math errors; the IRS will make the math corrections for the taxpayers.
• Taxpayers should also not amend if they forgot to include a required form or schedule. The IRS will mail a request about the missing item.
• Anyone amending tax returns for more than one year will need a separate 1040X for each tax year. They should mail each tax year’s Form 1040-X in separate envelopes.
• Taxpayers should wait for the refund from their original tax return before filing an amended return. They can cash the refund check from the original return before receiving any additional refund.
• Taxpayers filing an amended return because they owe more tax should file Form 1040-X and pay the tax as soon as possible. This will limit interest and penalty charges.
• Generally, to claim a refund, taxpayers must file a Form 1040-X within three years from the date they timely filed their original tax return or within two years from the date the person pays the tax – usually April 15 – whichever is later.
• Taxpayers can track the status of an amended return three weeks after mailing using “Where’s My Amended Return?” Processing can take up to 16 weeks.

[CuppaTea]

Thank you @campfred ! That's the best answer I've seen. 

[user322]

@campfred, can you please tell us how your filing without Form 8997 went last year, and if the IRS asked for it.  I am in the same situation now and would like to do the same.  Thank you.

[DianeW777]

You could choose to file your tax return through e-file and then send Form 8997 to the IRS later.  This way the form will be on file with them and should be placed with your tax return when they reconcile them. If you choose this method then delete the form from your return before e-file.

The instructions are here:  Who Must File,

An eligible taxpayer holding a QOF investment at any point during the tax year must file Form 8997 with the taxpayer's timely filed federal income tax return (including extensions). An eligible taxpayer is a person that is required to report the recognition of gains during the tax year under federal income tax accounting principles. If you are not otherwise required to file a return, but you are an eligible taxpayer who held a QOF investment at any point during the tax year, attach Form 8997 to an appropriate return, such as Form 1040- NR or Form 1120-F, with your name, address, and identification number.

1. You can choose to amend your return later after the original return is processed. Form 1040-X will be available February 24th.  There will be an option to select Amend/Change your return once it has been filed. 
   1. You won't change the numbers, but you will send the 1040-X, page 1 & 2 along with your Form 8997.  This is an easy process and takes care of the required reporting.
2. You can try the following as an option and it should be connected to your tax return (the IRS does not show this form as one of the selections to send after e-file acknowledgement but you can try it).
   • If you are e-filing your tax return, then mail your Form 8997 along with Form 8453 to the following address within three days after the IRS accepts your tax return: 

Internal Revenue Service

Attn: Shipping and Receiving, 0254 

Receipt and Control Branch 

Austin, TX 73344-0254

If you need a blank Form 8453, you can download this pdf, enter your address information and write in Form 8997 (this form is really just a cover sheet). 

@user322

[Edited: 01/23/2022 | 1:16p PST]

[user322]

@DianeW777, thank you for your information.  If I understand you correctly, you are suggesting filing the cover page Form 8453 and check the box for Form 8949, but I really need to attach Form 8997, not Form 8949.  Because Form 8997 is not an option to check on Form 8453 and the instructions of Form 8453 specifically state not use it if the form needed to be attached is not listed, what would you recommend?  Here is the text from the instructions:

Don’t attach any form or document that isn’t
shown on Form 8453 next to the checkboxes. If
you are required to mail in any documentation
not listed on Form 8453, you can’t file the tax
return electronically.

Thank you.

[DaveF1006]

At this time, since Turbo Tax does not support 8997, I would download form 8997 here and prepare it manually. You will need to print and mail your return along with form 8997 as it cannot be electronically filed.

[user322]

@DaveF1006, were you able to read @DianeW777's suggestion to e-file without Form 8997 and then mail the cover page Form 8453 and Form 8997?  Is this a possible solution that will allow me to e-file?  If not, can I e-file without Form 8997, and if the IRS asks for it, then mail it, as @campfred wrote?  I am trying to avoid having to file by mail. Thank you.

[DaveF1006]

Yes I did read Diane's suggestion but that is not an option in this case since Turbo Tax does not support 8997. As far as not reporting, according to the 8997 instructions, under who must file, it clearly states  "An eligible taxpayer holding a QOF investment at any point during the tax year must file Form 8997 with the taxpayer's timely filed federal income tax return (including extensions)." 

When you read the section the Purpose of the Form, it states The Tax Cuts and Jobs Act (TCJA), section 13823, added section 1400Z-1 to provide for the designation of certain census tracts as qualified opportunity zones (QOZs) and added section 1400Z-2 to provide certain benefits for investments in these QOZs through investment in qualified opportunity funds (QOFs). Taxpayers that invest in QOZ property through a QOF can defer the recognition of certain gains." I guess the question stems from the fact if you are deferring recognition of certain gains or are you declaring all of your gains as income.  

At this point, this is more of a legal interpretation and a decision you must make on whether or not to report it.  This is your call to make but I suggest reporting it just to avoid any repercussions that this may cause. I have given you the source document to base your decision and the choice is up to you.

[mike4121212]

Why hasnt this form been added yet?   Its obvious people need it.   I just spent hours doing my taxes on turbo tax and now realize I cant use Turbotax because I cant file 8997.  I need to defer capital gains and there is no way to do it either, with or without the form.  Really disappointed, good thing you dont have to pay until you file.

[HeatherPLO]

In this public forum, we are provided with form availability information, but not an explanation as to why the form is not available until that date.  For additional information, it would be necessary to contact customer support.  To do this, please see this Help Article to get in touch with us.  

[niko11]

Yeah, it's ridiculous. I'm buying TaxSlayer next year

[mike4121212]

How are you handling it this year?  I havent decided yet.  I might just use turbo tax to calculate what I need to pay and pay and send in an extension since I need one anyways and then redo it all using tax slayer or another software between now and extension deadline.