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Stiffer Requirements This Year on Corporate Tax Forms

February 6, 2012

Accountants working on corporate taxes are seeing some changes this year.

During the New York State Society of CPAs’ Corporate Taxation Conference in New York last Thursday, Peter Baum, a tax partner at the firm Imowitz Koenig & Co., talked about some of those changes. For example, in the Form 1120 and 1120S, lines 1a through 1e have been revised to accommodate the 1099-K. On line 2, the cost of goods sold no longer refers to Schedule A. Instead, Schedule A has been replaced by the new Form 1125-A.

Schedules J and K have also been expanded for Form 1120. Part II of Schedule J has been added to show details of tax payments and refundable credits. In addition, lines 15a-15b have been added to Schedule K to capture 1099 reporting.

There are also new requirements for foreign income reporting, Baum pointed out, for both individuals and businesses. For example, there is a new requirement for expatriates related to applying for an Employer Identification Number. “We’re living in a new world right now,” said Baum. “We sent an email around to the international tax community. It’s a new regulation that’s been in effect since 2009, but almost nobody knows about it. It’s more of a burden on us to fill out the information.”

He also advised the accountants in attendance to check with their clients to make sure they have filed their 1099s. The new 1120F form that was recently released for the U.S. income tax return of a foreign corporation includes a new item for a change of business address. A new form, the 1125-E, details the compensation of officers, and replaces Schedule E. “If you own more than 10 percent of a controlled foreign corporation, you’re considered a shareholder and have a filing requirement,” said Baum. “Even if you’re not a 10 percent shareholder, you can be a U.S. officer or director, and you would have a filing requirement.”

Baum noted that the biggest change he has seen in recent years is that the penalty regime has become more robust. Failure to file the Form 5471, the information return for U.S. persons with respect to certain foreign corporations, is $10,000 per year per controlled foreign corporation. “If the IRS says, ‘Where is it?’ you have 90 days to produce it, or the penalty goes up to $50,000,” he said. “So you don’t want to be in the position of not filing these.”

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