The Tax Cuts and Jobs Act (TCJA) of 2017 significantly altered U.S. tax requirements for shareholders of foreign corporations. As a result, U.S. persons doing business internationally may need to file extra tax forms, meet new reporting obligations, and navigate added complexity during tax prep. One of the new requirements introduced by the TCJA is Form 8992, which calculates the amount of global intangible low-taxed income (GILTI) you’ll need to include in your annual taxable income.
Key Takeaways
- Purpose: Form 8992 calculates and reports the GILTI inclusion for U.S. shareholders of CFCs, as required by the TCJA.
- Who Must File: U.S. shareholders owning 10% or more of the voting power or value of stock in one or more CFCs must file Form 8992.
- Due Date: Form 8992 is due with the income tax return, with deadlines varying by entity type, and extensions available.
- Penalties: Failing to file or incomplete filing can result in substantial penalties, including $10,000 initially and $50,000 per month of continued noncompliance after notification.
Purpose of Form 8992
The TCJA requires U.S. shareholders who own a controlled foreign corporation (CFC) to include GILTI in their gross income. Form 8992 calculates the amount of the GILTI to be included with the shareholder’s income and to report related information.
Generally, Schedule A (Form 8992) is also completed and attached to Form 8992. However, if the U.S. shareholder is a member of a U.S. consolidated group, Schedule B (Form 8992) is completed and attached to Form 8992 instead.
Who has to file Form 8992?
The IRS requires U.S. shareholders (including partners of a domestic partnership) who own stock in one or more CFCs to file Form 8892.
A U.S. shareholder of a foreign corporation is defined as a U.S. person who owns (directly, indirectly, or constructively) 10% or more of the total combined voting power of all the classes of voting stock or 10% or more of the total value of shares of all classes of stock of the foreign corporation.
What is the due date for Form 8992?
Form 8992 is due on the same day as your income tax return and should be included in that return. For example, C corp tax returns are due by the 15th day of the fourth month following the end of the tax year (you can extend this deadline up to 6 months). Partnership and S cops must submit their completed tax returns by the 15th day of the third month following the end of the tax year (as with C corps, you can also delay this due date up to six months by filing an extension).
Where is Form 8992 filed?
Form 8992 is filed as part of your income tax return. Follow the IRS’s instructions to submit your filing online or by mail.
Where do I find the newest version of Form 8992?
Download the current version of Form 8892 on the IRS website.
How do I find the instructions for Form 8992?
Visit the IRS website for detailed instructions and other information on Form 8992.
Why is it important to file Form 8992?
The TCJA requires U.S. shareholders to pay taxes on their share of the CFC’s global intangible low-taxed income. Form 8992 calculates the portion of the CFC’s GILTI that will be included in your annual taxable income. Any GILTI included in your taxable income is subject to immediate taxation at ordinary rates. As such, you’ll want to make sure the calculations on Form 8992 are accurate to avoid overpaying or getting into trouble with the IRS.
It is important to note that the GILTI calculation is separate from any Subpart F calculations. This means that a U.S. shareholder may have both a GILTI calculation and a Subpart F calculation.
In addition, even if Subpart F is not required because there are no current earnings and profits, there still can be a GILTI inclusion.
GILTI is determined by subtracting net Deemed Tangible Income Return (DTIR) from the net CFC Tested Income (tested income minus tested loss).
Are there penalties for mistakes in filing Form 8992?
The penalty for failing to file Form 8992 or filing incompletely is $10,000. Once you’ve been notified by the IRS that you need to file Form 8992, the penalty is $50,000 per month of noncompliance.
Thankfully, the IRS has developed various amnesty programs to help taxpayers become compliant with GILTI regulations. Speak with a qualified accountant to find out which program(s) are best for your tax situation.
Which documents are required to file Form 8992?
Most often, U.S. shareholders will need to complete Schedule A of Form 8992 to fulfill their filing requirements. This schedule reports the shareholder’s pro rata share of GILIT for each CFC from Schedule I-1 (Form 5471).
If the shareholder is a member of a U.S. consolidated group, they will use Schedule B of Form 8992 instead of Schedule A to provide the equivalent information.
Can I apply tax deductions using Form 8992?
Unfortunately, you cannot use Form 8992 to claim tax deductions against GILTI. This form is only used to calculate and report on the amount of the CFC’s GILTI to be included in the shareholder’s taxable income.
Do I need to file Form 8992?
Any U.S. shareholder of one or more CFCs that must take into account its pro rata share of the “tested income” or “tested loss” of the CFC(s) in determining the U.S. shareholder’s GILTI inclusion must file Form 8992.
This TCJA requirement applies to the first tax year of a CFC beginning after December 31, 2017, and the U.S. shareholder’s year with or within which that year ends, and all subsequent tax years.
How do I prepare Form 8992?
Using Schedule A of Form 8992, calculate the pro rata share for each CFC in which you have ownership. You can find this information in the CFC’s Schedule I-1 of Form 5471.
How long does it usually take to prepare Form 8992?
Typically, it takes 4-6 weeks to prepare Form 8992 or 2-3 weeks to review. During this time, your accountant will also prepare related tax forms, including Form 5471.
What are common errors seen on Form 8992?
Preparing Schedule I-1 of Form 5471 incorrectly is a common cause of errors on Form 8992. Because the information on Form 5471 is needed to complete Form 8992, any mistakes on Form 5471 will impact Form 8992 as well.
Do you have any tips for filing Form 8992 correctly?
Make sure that Form 5471, Schedule I-1 has been completed accurately and fully before filling out Form 8992.
Can I get a refund by filing Form 8992?
You cannot use Form 8992 to calculate or claim a tax refund. However, you can avoid overpaying taxes on GILTI by ensuring that the information and calculations on Form 8992 are correct.
Can Cleer Tax help me file Form 8992?
Yes, Cleer Tax is here to help you with your tax and bookkeeping needs! GILTI is a complex part of the U.S. tax code that is easier to navigate with an experienced accountant by your side. Cleer can help you file Form 8992 as part of our Foreign Subsidiary Package, which is designed to take care of the tax needs of global entrepreneurs like you. Sign up today to get the tax guidance your business needs to thrive.
If you have further questions or need assistance, feel free to contact us.
