form 8881
Answers
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It looks like FreeTaxUSA does not support Form 8881. You can view a list of forms supported by going to the following link and clicking on the + sign next to "Federal forms we file" to confirm that Form 8881 is not listed.
https://www.freetaxusa.com/forms
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This sucks. So we cant use FreeTaxUSA?
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Hello,
We currently do not support form 8881 like ChipGirl said. If you need to file this form with your tax return, you will not be able to use our services this year.
We are always adding more forms each year, so we may support it in the future.
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Hi @kiarab - Thanks for the glimmer of hope for adding 8881 support in the future. Can you share if this is in the works? I recently discovered FreeTaxUSA and have been evangelizing to friends and family, but I'm opening a Solo 401k this year and would hate to have to switch.
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Hi holden,
I am very sorry, but I don't believe support for Form 8881 is currently in the works. I have suggested to the developers that we look into adding this for the future, but I cannot make any promises. If we end up supporting it in the future, it would likely become available in a later tax year.
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Thanks for the follow-up. Disappointed, but at least my expectations are calibrated. Cheers!
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I searched the forum to find this very issue.
I very much wish FreeTaxUSA would support Form 8881 (Credit for Small Employer Pension Plan Startup Costs, Auto-Enrollment, and Military Spouse Participation) for 2025 taxes. It's a very simple one-page form and all the information from it flows onto Form 3800. You already support Form 3800. So it seems like it would be easy to implement this.
Personally, I'll need to use Part II of Form 8881 for the Small Employer Auto-Enrollment Credit on both 2025 and 2026 taxes. I literally just need to enter $500 on one line on that form and that's it. Yet this is the single thing I need that FreeTaxUSA doesn't support that's preventing me from using you. I used FreeTaxUSA to file taxes before I needed to fill out this form. And I will likely file with FreeTaxUSA again after I no longer need to use this form (since I only claim this credit for 3 years). But if only you could implement support for this one simple form, I'd love to use you guys for 2025 and 2026 taxes.
Is there any chance, seeing several people now asking for it, that you might add this support. Thank you!
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Hello IP27,
Thank you for following up on this forum thread. I did a little digging and I have some good news.
In the 2025 software will support Form 8881 which is the credit for small employer pension plans, credit for pension plan auto enrollment, and military spouse participation credit. To access the new screens you must enter pension or pension start-up expenses on the business expenses page.
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Thank you for your reply. I was excited to hear that FreeTaxUSA will support Form 8881 for 2025 taxes. But then I realized there may be a problem. I'd like to clarify.
Many of us are sole proprietors with a Solo 401(k) plan that includes an automatic enrollment (auto-enrollment) feature, thus entitling us to a $500 auto-enrollment credit for 3 years. This is claimed on Part II of Form 8881. We do not have any employees since we are sole proprietors so there is no actual pension plan or startup costs, which would be claimed on Part I of Form 8881. We leave Part I of Form 8881 blank. All we need is to put $500 on line 9 of Part II of Form 8881 and have it then flow onto Form 3800.
I'm concerned because you said we need to enter pension or pension start-up expenses on the business expenses page. But we have none of those. We aren't claiming pension or startup-expenses on Part I of Form 8881 at all. We're only claiming the auto-enrollment credit on Part II.
Can you please look into whether those of us only using Part II of Form 8881, who have no pension or startup expenses to enter, will be able to claim that $500 credit. If not, can that be fixed so we can use it? It's literally just one number on one line of the form for us.
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Hi Ip27,
Thank you for clarifying your needs. I am checking on that and will have an answer soon. Thank you for your patience.
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Hi Ip27,
I am following up with you. We will be supporting the entire form 8881, meaning all parts will be supported. You may review the 2025 software sometime in late October or early November to see if it fits your needs.
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Thank you. But when you say you support the entire form, I'm not sure if that answers the question. The question is will you support those who only fill out Part II but not any other part? You said earlier "To access the new screens you must enter pension or pension start-up expenses on the business expenses page." So if we have no pension or start-up expenses, how would we access the screens so as to claim the auto-enrollment credit? I will try to take a look at this in late October or early November. But it would be great if you guys could test out this use case where someone is a sole proprietor with no employees, no pension expenses, no startup-expenses, and needs to claim the $500 auto-enrollment on Part II of Form 8881.
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Hi Ip27,
Thank you for your reply back. We will look into this a little more to see what we will actually be supporting. I do recommend you try the 2025 version of the software as soon as it is released, so you can make the best software choice for your needs.
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Hi Ip27,
Update: We are looking into this issue more deeply. When we have an answer, we will post an update. As I mentioned before, we currently require that you have "Pension / Profit-Sharing Plans" expenses on your Schedule C to access the page to take the credit on Part II, Form 8881. However, we are looking into this and will make changes as needed to the software.
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Thank all of you for diligently looking into this. I don't know why but there seems to be a pattern of tax software companies not realizing that a Solo 401(k) for a sole proprietor can also have an auto-enrollment feature and qualify for the auto-enrollment credit. So they keep making it so that the auto-enrollment credit screens require going through the pension and startup expense screens which don't apply to the sole proprietor in this situation. With TurboTax, they have Forms mode so even though they have not built this correctly, you can just manually go into Form 8881 and put the $500 on the line in Part II as necessary and then that information will go onto Form 3800 from there. But FreeTaxUSA has no way to bypass this if it isn't built in correctly.
It's true that many typical Solo 401(k) plans do not have this feature. But several companies out there do offer Solo 401(k) plans with this feature built in. If FreeTaxUSA would correctly support this use case, it would probably attract some people from other software that isn't handling it correctly or is requiring them to use more advanced skills to manually enter it. I would definitely love to use FreeTaxUSA again if this was offered.
I will try to test this out when it's available. But in the meantime I'll check back here for updates. Thank you!
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