Tag: tax law

By Anthony Diosdi In order to provide the Internal Revenue Service (“IRS”) with the information necessary to claim a foreign tax credit, a U.S. corporation claiming a foreign tax credit must attach Form 1118 otherwise known as “Foreign Tax Credit - Corporations,” to its tax return. This is the seventh of a series of articles designed to provide a basic overview of the Form 1118. This article is designed to supplement the instructions for the Form 1118 promulgated by the IRS.Introduction to Schedule F-2Schedule F-2 is designed to compute the tax deemed paid by a first-tier foreign corporation with respect to dividends received from a second-tier foreign corporation prior to the Tax Cuts and Jobs Act of 2018. Schedule F-2 is applicable to dividends or inclusions for taxable years of…

By Anthony Diosdi In order to provide the Internal Revenue Service (“IRS”) with the information necessary to claim a foreign tax credit, a U.S. corporation claiming a foreign tax credit must attach Form 1118 otherwise known as “Foreign Tax Credit - Corporations,” to its tax return. This is the sixth of a series of articles designed to provide a basic overview of the Form 1118. This article is designed to supplement the instructions for the Form 1118 promulgated by the IRS.Introduction to Schedule F-1Schedule F-1 is designed to figure the tax deemed paid by a domestic corporation for first-tier corporation and inclusions of earnings from a first or lower tier foreign corporation prior to the Tax Cuts and Jobs Act of 2018. Schedule F-1 is applicable to dividends or inclusions…

By Anthony Diosdi In order to provide the Internal Revenue Service (“IRS”) with the information necessary to claim a foreign tax credit, a U.S. corporation claiming a foreign tax credit must attach Form 1118 otherwise known as “Foreign Tax Credit - Corporations,” to its tax return. This is the third of a series of articles designed to provide a basic overview of the Form 1118. This article is designed to supplement the instructions for the Form 1118 promulgated by the IRS.Introduction to Schedule CSchedule C is utilized to report taxes paid by the domestic corporation under Section 960(a) with respect to Section 951(a) subpart F inclusions.  inclusions under Section 951(a)(1). However, Schedule C should not be utilized to report 965 inclusions.Column 1a. Name of Foreign CorporationFor column 1a, the preparer…

By Anthony Diosdi In order to provide the Internal Revenue Service (“IRS”) with the information necessary to claim a foreign tax credit, a U.S. corporation claiming a foreign tax credit must attach Form 1118 otherwise known as “Foreign Tax Credit - Corporations,” to its tax return. This is the second of a series of articles designed to provide a basic overview of the Form 1118. This article is designed to supplement the instructions for the Form 1118 promulgated by the IRS.Introduction to Schedule BSchedule B is utilized to report foreign taxes paid, accrued, or deemed paid for the taxable year. All transactions on Schedule B must be reported in U.S. dollars. If the corporation must convert from foreign currency, attach a schedule showing the amounts in foreign currency and exchange…

By Anthony Diosdi In order to provide the Internal Revenue Service (“IRS”) with a foreign corporation’s current earnings and profits (“E&P”) for US tax purposes, each year certain US person with interests in foreign corporations must attach a Schedule H to IRS Form 5471 otherwise known as “Information Return of U.S. Persons With Respect to Certain Foreign Corporations.” This is the 12th of a series of articles designed to provide a basic overview of Form 5471. This article is designed to supplement the IRS instructions to the Form 5471.Who Must Complete Schedule HForm 5471 and its schedules must be completed (to the extent required by each schedule) and filed by the following categories of persons:Category 1- US persons who are officers, directors or ten percent or greater shareholders in a…

By Anthony Diosdi IntroductionJust about all Controlled Foreign Corporations (“CFCs”) generate subpart F income and/or Global Intangible Low-Taxed Income (“GILTI”). In most cases, subpart F and GILTI income become reclassified as Previously Tax Earnings and Profits (“PTEP”). Each PTEP then needs to be placed into a separate Section 904(d) category basket. In addition, each PTEP is subject to a certain set of ordering rules that clarifies how distributions of such a PTEP is treated to each CFC shareholder.The classification of PTEPs and the ordering rules are important to calculate foreign tax credits and to determine the creditability of foreign taxes allocable to each Section 904(d) basket. It is also important to determine any Section 904(a) limitation with respect to each specific basket. For example, any foreign taxes paid or accrued…

By Anthony Diosdi In 2017, Congress enacted the 2017 Tax Cuts and Jobs Act. The 2017 Tax Cuts and Jobs Act dramatically changed the way cross-border transactions are taxed and reported to the Internal Revenue Service (“IRS”). Nowhere is this more true than with Schedule J of Form 5471. Schedule J is used to report accumulated earnings and profits (“E&P”) of controlled foreign corporations. This article will compare the pre-2017 Tax Cuts and Jobs Act Schedule J with the post-2017 Tax Cuts and Jobs Act Schedule J. I. Pre-2017 Tax Cuts and Jobs Act Schedule J Introduction Prior to 2018, Category 4 and 5 filers of a “controlled foreign corporation” (“CFC”) had to attach a Schedule J to their Form 5471. Section 957(a) defined a CFC as a foreign corporation…