Form 1120-F for Expats
What is Form 1120-F?
Form 1120-F is filed by foreign corporations doing business in the US, to report their income, gains, losses, deductions, credits, and to calculate their US income tax liability.
Who Must File Form 1120-F?
Americans living abroad often have to file additional forms relating to their foreign registered bank accounts, investments and businesses. Expats with a US-registered corporation have to file Form 1120, while expats with a foreign registered corporation that does business in the US and meet certain criteria have to file Form 1120-F. Even if foreign corporations do not have a US source of income or all income is exempt from tax under a tax treaty, they must file Form 1120-F if they engage in a trade or business in the US.
The criteria for being required to file Form 1120-F are:
- The corporation was engaged in trade or business in the US.
- The corporation had income from a US source that was not subject to withholding tax.
- The corporation had income, gains or losses that were ‘effectively connected’ to trade or business in the US. To be effectively connected means a foreign corporation has premises, production, or employees in the US.
- The corporation wants to claim benefits under a US tax treaty – in which case they must also file Form 8833.
- The corporation overpaid US tax and needs to claim a refund.
- The corporation wants to claim any US credits or benefits.
Others that have to file Form 1120-F include:
- A Mexican or Canadian branch of a US mutual life insurance company.
- A receiver, assignee, or trustee in dissolution or bankruptcy, who holds title to virtually all of the foreign corporation’s property or business.
- An agent in the US if the foreign corporation has no place of business (office) in the US at the time the return is due.
Who needs to sign Form 1120-F?
Form 1120-F must be signed and dated by:
- The president, vice president, treasurer, assistant treasurer, chief accounting officer; or
- Any other corporate officer that is authorized to sign.
The IRS’ ‘Instructions for Form 1120-F (2020)’ provides more detail into the procedure depending on who is signing the form.
Can Form 1120-F be filed electronically?
Generally, corporations can file Form 1120-F electronically through e-File.
What is the deadline for filing Form 1120-F?
If the corporation has premises in the US, the deadline for filing Form 1120-F with the IRS is March 15. If the corporation does not have premises in the US, the deadline is June 15. In both situations, a six-month extension can be requested by filing Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns.
I want to know more about form 1120-F
What tax forms do expats need?
Expats with foreign registered businesses most likely will be required to file an FBAR (Foreign Bank Account Report) if the business has a foreign registered bank account. Make sure you are aware of whether you have this filing requirement, as the penalties for not filing your FBARs are steep.
Another tax form that you may need to be aware of are:
- Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business.
- Form 8302, Electronic Deposit of Tax Refund of $1 Million or More.
- Form 5472, Information Return of a 25% Foreign-Owned US Corporation or a Foreign Corporation Engaged in a US Trade or Business.
- Form 8886, Reportable Transaction Disclosure Statement.
- Form 8832, Entity Classification Election.
What are the penalties for failing to file Form 1120-F?
If you do not file Form 1120-F when you have this filing requirement, you can face penalties from the IRS that start at 5% of the unpaid corporate tax owed, which then rises to 25% after a five-month period.
Moreover, if a US corporation fails to file Form 1120-F when they are engaged in US trade or business, the IRS may prohibit the corporation from claiming any deductions or credits.
Do foreign companies pay US income tax? What is the tax rate for 1120-F?
For Form 1120-F, the tax rate on the gross income items is 30% or such lower rate specified by a tax treaty.
What information do I need to file Form 1120-F?
The information required to complete Form 1120-F is largely similar to your domestic corporation income tax return (Form 1120).