Instructions For Form 1120-Fsc - 2002 (Page 4 of 16) in pdf

services, and other amounts paid for

transactions. All of the direct and indirect

Where To File

personal services actually rendered, such

expenses relating to the performance of

File Form 1120-FSC with the Internal

as bonuses or compensation paid for

those activities must be reflected on the

Revenue Service Center, Philadelphia,

services on the basis of a percentage of

books of the FSC and on Form

PA 19255.

profits); and

1120-FSC.

•

Include the allowable depreciation

Who Must Sign

Under Temporary Regulations section

deduction for equipment or facilities (or

The return must be signed and dated by:

1.925(a)-1T(b)(2)(ii), an election may be

the rental cost for its use) that can be

•

The president, vice president,

made to include on the FSC’s books all

specifically identified or associated with

treasurer, assistant treasurer, chief

expenses, other than cost of goods sold,

the activity, as well as the contract price

accounting officer or

that are necessary to figure combined

of an activity performed on behalf of the

•

Any other corporate officer (such as tax

taxable income for the transaction or

FSC by a contractor.

officer) authorized to sign.

group of transactions. The expenses must

Total direct costs means all of the

Receivers, trustees, or assignees must

be identified on Schedule G on the

direct costs of any transaction attributable

also sign and date any return filed on

applicable line.

to activities described in any paragraph of

behalf of a corporation.

section 924(e). For purposes of the 50%

test of section 924(d)(1)(B), total direct

If an employee of the corporation

Who Must File

costs are based on the direct costs of all

completes Form 1120-FSC, the paid

File Form 1120-FSC if the corporation

activities described in all paragraphs of

preparer’s space should remain blank. In

elected to be treated as a FSC or small

section 924(e). For purposes of the 85%

addition, anyone who prepares Form

FSC, and the election is still in effect.

test of section 924(d)(2), however, the

1120-FSC but does not charge the

total direct costs are determined

corporation should not complete that

Note: A FSC that elects to be treated as

separately for each paragraph of section

section. Generally, anyone who is paid to

a domestic corporation under section

924(e).

prepare the return must sign it and fill in

943(e)(1) does not file Form 1120-FSC.

the “Paid Preparer’s Use Only” area.

Foreign direct costs means the

Instead, it files Form 1120 (or Form

The paid preparer must complete the

portion of the total direct costs of any

1120-A).

required preparer information and —

transaction attributable to activities

•

Sign the return, by hand, in the space

performed outside the United States. For

When To File

provided for the preparer’s signature

purposes of the 50% test, foreign direct

(signature stamps and labels are not

costs are based on the direct costs of all

Generally, a corporation must file Form

acceptable).

activities described in all paragraphs of

1120-FSC by the 15th day of the 3rd

•

Give a copy of the return to the

section 924(e). For purposes of the 85%

month after the end of the tax year. A

taxpayer.

test, however, foreign direct costs are

FSC that has dissolved must generally file

determined separately for each paragraph

by the 15th day of the 3rd month after the

Paid Preparer

of section 924(e).

date it dissolved.

Authorization

For more details, see Regulations

If the due date falls on a Saturday,

section 1.924(d)-1(d).

If the FSC wants to allow the IRS to

Sunday, or legal holiday, the FSC may file

discuss its 2002 tax return with the paid

Check the applicable box(es) on line

on the next business day.

preparer who signed it, check the “Yes”

11b, Additional Information, on page 2

box in the signature area of the return.

of the form, to indicate how the FSC met

Private delivery services. FSCs can

This authorization applies only to the

the foreign direct costs requirement.

use certain private delivery services

individual whose signature appears in the

designated by the IRS to meet the “timely

Grouping transactions. Generally,

“Paid Preparer’s Use Only” section of the

mailing as timely filing/paying” rule for tax

the foreign direct cost tests under

FSC’s return. It does not apply to the firm,

returns and payments. The most recent

Regulations section 1.924(d)-1(d) are

if any, shown in that section.

list of designated private delivery services

applied on a transaction-by-transaction

was published by the IRS in September

If the “Yes” box is checked, the FSC is

basis. However, the FSC may make an

2002. The list includes only the following:

authorizing the IRS to call the paid

annual election (on line 11d, Additional

•

Airborne Express (Airborne): Overnight

preparer to answer any questions that

Information, on page 2 of the form) to

Air Express Service, Next Afternoon

may arise during the processing of its

apply the foreign direct cost tests on a

Service, Second Day Service.

return. The FSC is also authorizing the

customer, contract, or product or product

•

paid preparer to:

line grouping basis. Any grouping used

DHL Worldwide Express (DHL): DHL

•

Give the IRS any information that is

must be supported by adequate

“Same Day” Service, DHL USA

missing from the return,

documentation of performance of

Overnight.

•

Call the IRS for information about the

activities and costs of activities relating to

Federal Express (FedEx): FedEx

processing of the return or the status of

the grouping used. See Regulations

Priority Overnight, FedEx Standard

any related refund or payment(s), and

section 1.924(d)-1(e) for details.

Overnight, FedEx 2Day, FedEx

•

Respond to certain IRS notices that the

International Priority, and FedEx

Exception for foreign military property.

FSC has shared with the preparer about

International First.

The economic process rules do not apply

•

math errors, offsets, and return

United Parcel Service (UPS): UPS Next

to any activities performed in connection

preparation. The notices will not be sent

Day Air, UPS Next Day Air Saver, UPS

with foreign military sales except those

to the preparer.

2nd Day Air, UPS 2nd Day Air A.M., UPS

activities described in section 924(e). See

The FSC is not authorizing the paid

Worldwide Express Plus, and UPS

Regulations section 1.924(d)-1(f) for

preparer to receive any refund check,

Worldwide Express.

details.

bind the FSC to anything (including any

The private delivery service can tell

Section 925(c) Rule

additional tax liability), or otherwise

you how to get written proof of the mailing

represent the FSC before the IRS. If the

To use the administrative pricing rules to

date.

FSC wants to expand the paid preparer’s

determine the FSC’s (or small FSC’s)

authorization, see Pub. 947, Practice

profit on a transaction or group of

Extension of time to file. File Form

Before the IRS and Power of Attorney.

transactions, the FSC must perform (or

7004, Application for Automatic Extension

contract with another person to perform)

of Time To File Corporation Income Tax

The authorization cannot be revoked.

all of the economic process activities

Return, to request a 6-month extension of

However, the authorization will

relating to the transaction or group of

time to file.

automatically end no later than the due

-4-

Instructions for Form 1120-FSC

Instructions For Form 1120-Fsc - 2002 Page 4

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