Preparing Form 1120-F for Foreign Corporations: 2020 Revisions, ECI, Protective Claims, and Branch Profits Tax

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Thursday, May 27, 2021

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Course Materials

This course will provide a practical explanation of completing form 1120-F, U.S. Income Tax Return of a Foreign Corporation. Our foreign tax reporting experts will explain how to properly prepare this onerous form, including who is required to file, filing protective claims, and illustrative examples of the completed form.

Description

The default classification for foreign entities whose members all have limited liability is a corporation. Barring a check-the-box election, these entities file an 1120-F. The growth of the global economy has enhanced access to U.S. markets and customers. Being engaged in a trade or business is enough to trigger a foreign corporation's filing requirement even if no U.S. source income is generated. When income received is exempt by an income tax treaty between the U.S. and the country in which a foreign corporation is registered, not filing a return when required could lead to disallowance of expense deductions resulting in taxation on gross rather than net income if the I.R.S. determines that the foreign corporation's U.S. source income is not exempt from U.S. tax.

Expenses related to specific gross income categories are allocated to that income. Deductions for U.S. source effectively connected income) (ECI) are reported on page 4, Section II. Expenses that must be allocated and apportioned between ECI and non-ECI, according to regulations Section 1.861-8 and temporary regulations Sections 1.861-8 and 1.861-17, are reported on an additional attachment, Schedule H. Knowing where and how to allocate and deduct allowed expenses is critical for tax preparers working with international entities. Additionally, the 1120-F and its supporting schedules are continually revised for tax law changes and, most recently, pandemic relief requiring advisers to monitor and grasp new filing requirements and strategies constantly.

Listen as our authoritative panel of international tax experts details who should file and when and how to prepare and file Form 1120-F and its auxiliary forms and schedules to support treaty-based positions, how to maximize deductions, how to calculate branch profits tax, and how to reduce overall taxation of foreign entities.

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Outline

  1. Who should file Form 1120-F
    1. Entity classifications
    2. Protective claims
  2. Simplified procedures for refunds
  3. IRS campaign
  4. 2020 revisions
  5. Pages 2-3, Additional Information
    1. Trade or business determinations
    2. Permanent establishment
    3. Form 5472, Information Return
    4. Controlled foreign corporations
    5. Form 8833, Treaty-Based Return Position Disclosure
    6. Other information disclosures
  6. Page 4, Effectively Connected Income
  7. Page 5, Schedule C, Dividends Received Deduction
  8. Schedule H, Deductions Allocated to ECI
  9. Schedule I, the Interest Expense Limitation
  10. Page 5, Schedule J, Tax computation
  11. Page 6, Branch Profits Tax
  12. Page 7, Schedule L, Balance Sheet
  13. 1120-W estimates
  14. Best practices

Benefits

The panel will review these and other key issues:

  • Who is required to file Form 1120-F, Income Tax Return for Foreign Corporations?
  • When should an entity file an 1120-F protective claim, even though not subject to tax and possibly not required to file?
  • What methods are used to allocate and apportion ECI and non-ECI expenses on Schedule H?
  • What are examples of treaty-based positions that might require filing Form 8833, Treaty-Based Return Position Disclosure?
  • What recent changes have been made to the 1120-F?

Faculty

Dougherty, Alison
Alison N. Dougherty, J.D., LL.M., CPA
Partner
Aronson

Ms. Dougherty specializes in U.S. international tax reporting, compliance, consulting, planning, and structuring as a...  |  Read More

Gifford, Dirk
Dirk Gifford
Managing Director, International Tax Services
KPMG

Mr. Gifford serves in the firm's International Corporate Services Practice. He focuses on working primarily with...  |  Read More

Phelan, Kimberlee
Kimberlee S. Phelan, CPA, MBA
Tax Partner
Withum Smith+Brown

Ms. Phelan has more than 15 years of tax and accounting experience at national and regional accounting firms. Her...  |  Read More

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