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Demystifying the Form 5471 Part 9. Schedule G

Demystifying the Form 5471 Part 9. Schedule G

Tax Law
By Anthony Diosdi Schedule G is designed to disclose a broad range of transactions of a controlled foreign corporation (“CFC”). This is the ninth of a series of articles designed to provide a basic overview of the Internal Revenue Service (“IRS”) Form 5471. This article is designed to supplement the IRS’ instructions to Schedule G of IRS Form 5471. This article will go line by line through Schedule G of Form 5471.Who Must Complete Schedule GForm 5471 and appropriate accompanying schedules must be completed and filed by the following categories of persons:Category 1 FilerU.S. persons who are officers, directors or ten percent or greater shareholders in a CFC. Category 1 includes U.S. shareholders of a Section 965 “specified foreign corporation” at any tax year of the foreign corporation, and who…
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Tax Deadlines for 2020

Tax Deadlines for 2020

tax planning
If you thought that filing taxes in 2019 was a confusing process, the situation is not much simpler in 2020. With the COVID-19 pandemic sweeping through the U.S. and the world in the early months of the year, the Internal Revenue Service (IRS) has made adjustments to filing deadlines. The following is an overview of tax deadlines in 2020. Filing Date Extended First and foremost, the IRS has extended the standard tax filing date from April 15 to July 15, 2020. This means you do not have to file your federal returns until July, and you will not be charged interest on payments until after July 15. This can help many people who might owe taxes but are facing financial hardship due to temporary job loss or a decline in…
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As Per the “People First Initiative,” the IRS will Suspend Most Audits and the Collection of Most Back Tax Liabilities

As Per the “People First Initiative,” the IRS will Suspend Most Audits and the Collection of Most Back Tax Liabilities

Uncategorized
By Anthony Diosdi On March 18th, the Internal Revenue Service (“IRS”) promulgated Notice 2020-17 entitled “Relief for Taxpayers Affected by Ongoing Coronavirus Disease 2019 Pandemic.” The notice provided for an extension of time to pay federal income taxes originally due April 15, 2020 until July 15, 2020. This relief applied only to individual tax amounts up to $1,000,000, regardless of filing status or up to $10,000,000 for each consolidated group or each C corporation that does not file a consolidated tax return. On March 20th, Treasury Secretary Mnuchin announced on Twitter that the deadline to file tax returns has been extended to July 15th.  On March 25th, the IRS unveiled a new “People First Initiative.” This initiative was enacted by the IRS in an effort to “at least temporarily ease…
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Demystifying the Form 5471 Part 8. Schedule M

Demystifying the Form 5471 Part 8. Schedule M

Tax Law
By Anthony Diosdi Schedule M is designed to measure intercompany payments. Schedule M requires the majority U.S. owner to provide information on transactions between the CFC and its shareholders or other related persons. This is the eighth of a series of articles designed to provide a basic overview of the Internal Revenue Service (“IRS”) Form 5471. This article is designed to supplement the IRS’ instructions to Schedule M of IRS Form 5471. This article will go column by column and line by line through the attachment to Form 5471.Who Must Complete Schedule MForm 5471 and appropriate accompanying schedules must be completed and filed by the following categories of persons:Category 1 FilerU.S. persons who are officers, directors or ten percent or greater shareholders in a CFC. Category 1 includes U.S. shareholders…
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Do Shareholders of Dormant Foreign Corporations Still Need to File a Form 5471?

Do Shareholders of Dormant Foreign Corporations Still Need to File a Form 5471?

Tax Law
By Anthony Diosdi U.S. persons with certain interests in controlled foreign corporations (“CFCs”) must disclose their interests on Form 5471. Sometimes, CFCs temporarily stop conducting business and as a result, the CFC’s U.S. shareholders assume that it is not necessary to file an IRS Form 5471. This is an incorrect assumption and can result in serious penalty assessments by the IRS. Even if a CFC is dormant, the U.S. shareholders must still file a Form 5471. The good news is shareholders of a dormant CFC can qualify for minimal Form 5471 reporting requirements. Revenue Procedure 92-70 discusses the circumstances when a CFC shareholder qualifies for minimal Form 5471 reporting requirements.Per Revenue Procedure 92-70, there are eight conditions that must be met in order for a foreign corporation to be considered…
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The IRS Delays the Filing Deadline from April 15th to July 15th

The IRS Delays the Filing Deadline from April 15th to July 15th

tax planning
By Anthony Diosdi Treasury Secretary Steve Mnuchin made the following announcement on Twitter “At @realDonaldTrump’s direction, we are moving Tax Day from April 15 to July 15. All taxpayers and businesses will have this additional time to file and make payments without interest or penalties.” This means that in addition to providing taxpayers with additional time to pay their 2019 income tax liabilities, the IRS has extended the 2019 filing deadline from April 15th to July 15th. If taxpayers file extensions, they will be able to extend the filing deadline for their 2019 tax returns to October 15th.Anthony Diosdi is a partner and attorney at Diosdi Ching & Liu, LLP located in San Francisco, California. Diosdi Ching & Liu, LLP also has offices in Pleasanton, California and Fort Lauderdale, Florida.…
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Beware of the New CFC Rules Triggering a Surprise 965 Inclusion

Beware of the New CFC Rules Triggering a Surprise 965 Inclusion

Tax Law
By Anthony Diosdi The Controlled Foreign Corporation (“CFC”) rules are embedded in the Internal Revenue Code. The CFC rules are designed to limit artificial deferral of foreign income using foreign entities. The CFC provides that certain classes of taxpayers must include in their U.S. taxable income amounts earned by foreign entities they or related entities/persons control. The 2017 Tax Cuts and Jobs Act made significant changes to these rules. The Definition of a CFC Before the Enactment of the 2017 Tax Cuts and Jobs ActPrior to the 2017 Tax Cuts and Jobs Act, Internal Revenue Code Section 951 provides that a United States shareholder of a CFC must include in its income its pro rata share of its “Subpart F income” regardless of whether that income has been distributed to…
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Relief from Filing Forms 3520 and Form 3520-A for Some

Relief from Filing Forms 3520 and Form 3520-A for Some

Tax Law
By Anthony Diosdi The Internal Revenue Code provides that if any United States Person (i.e. U.S. citizen or U.S. resident) beneficiary receives (directly or indirectly) a distribution from a foreign trust during any taxable year, such person is required to make a return with respect to such a trust for such year using Internal Revenue Service (“IRS”) Form 3520, and show thereon the name of the trust, the amount of the aggregate distribution received, and any other data the IRS may require. The IRS may assess an annual penalty equal to 35 percent of the gross value of the trust. See IRC Section 6048(c).The Internal Revenue Code also provides that each U.S. Person treated as an owner of any portion of a foreign trust under Internal Revenue Code Section 671…
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The IRS Has Deferred 2020 Income Tax Payments by 90 Days. What Happens in 90 Days?

The IRS Has Deferred 2020 Income Tax Payments by 90 Days. What Happens in 90 Days?

Tax Law
By Anthony Diosdi Treasury Secretary Steven Mnuchin recently announced that the Internal Revenue Service (“IRS”) is deferring income tax payments for the 2019 tax year by 90 days. Steven Mnuchin says that taxpayers will not be assessed interest and penalties on the late payments. According to Mnuchin, individuals can defer up to $1 million in federal taxes. Businesses can defer up to $10 million in federal taxes. The deferral is only available for tax payments. It does not permit the deferral of payroll taxes or estate and gift taxes. The announcement also does not impact estimated tax payment requirements. As of now, the income and corporate tax filing deadlines still have not pushed back. Although the announcement this is a step in the right direction. It does not go nearly…
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Demystifying the Form 5471 Part 7. Schedule P

Demystifying the Form 5471 Part 7. Schedule P

Tax Law
By Anthony Diosdi Schedule P is used to report the Previously Taxed Earnings and Profits (“PTEP”) of the U.S. shareholder of a controlled foreign corporation (“CFC”) in the CFC’s functional currency (Part I) and in U.S. dollars (Part II). This schedule is also used to report the PTEP of the U.S. shareholder of a specified foreign corporation (“SFC”) that is only treated as a CFC for limited purposes under Internal Revenue Code Section 965(e)(2). This is the seventh of a series of articles designed to provide a basic overview of the Internal Revenue Service (“IRS”) Form 5471. This article is designed to supplement the IRS’ instructions to Schedule P of IRS Form 5471. This article will go column by column and line by line through the attachment to Form 5471.Who…
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