Form 1120-F Reporting for Foreign Corporations: Filing Obligations Under IRS Scrutiny

The IRS recently announced it will address Form 1120-F noncompliance as a focus of its Large Business and International Division’s Audit and Compliance Campaign. The announcement signals a change in the Service’s emphasis and follows data findings that 1120-F non-filing is widespread and increasing.

Foreign corporations must file Form 1120-F if they engaged in a trade or business in the United States, or had income, gain or loss that would be treated as effectively connected with the conduct of a U.S. trade or business. Filing obligations go further than these two criteria: a corporation taking the position that it avoided having a permanent establishment in the U.S. or claiming some other income tax treaty benefit must also file to document that position.

Foreign corporations with only limited activities may file a “protective return” to preserve tax benefits if an IRS examination later proves the corporation should have filed a return.

While Form 1120-F is similar in structure to the income tax return of a domestic corporation in terms of information required, taxpayers filing an 1120-F also must allocate U.S. source and foreign source income and deductions. Tax advisers need to know the rules for determining income sourcing to avoid tax consequences.

Listen as our experienced panel provides a practical guide to completing Form 1120-F, including determination of filing requirements and other audit avoidance strategies, and completing schedules specific to Form 1120-F.

1. Form 1120-F filing requirements: Who must file
2. Transactions subject to 1120-F filing obligations
3. Treaty provisions
4. Protective returns
5. Exceptions
6. IRS audit priority campaign

The panel will discuss these and other important topics:

• Permanent establishment issues and challenges
• Types of corporations that must file
• Filing Form 1120-F to claim a treaty benefit
• Protective returns
• How the IRS will pursue its examination campaign of noncompliant corporations
• Penalties for delinquence

Learning Objectives

After completing this course, you will be able to:

• Identify foreign corporations and transactions that require filing Form 1120-F
• Recognize the income sourcing and attribution rules for allocating a foreign corporation’s U.S. taxable income
• Discern how to use Form 1120-F as part of a tax treaty position
• Determine when to file Form 1120-F as a protective return

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience at mid-level within the organization, preparing complex tax forms and schedules, supervising other preparers/accountants. Specific knowledge and understanding of effectively-connected income sourcing rules, tax treaty and permanent establishment provisions.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).