Instructions For Form 1120-Fsc - 2016 (Page 5 of 14) in pdf

more space is needed on the forms or

Generally, FSCs may use a calendar year or

1120-FSC,” and the tax period to which the

schedules, attach separate sheets using the

a fiscal year. Personal service corporations,

payment applies on the check or money

same size and format as the printed forms.

however, must generally use a calendar

order. Enclose the payment when Form

year.

1120-FSC is filed.

If there are supporting statements and

FSCs that do maintain an office or place

attachments, arrange them in the same order

Note. The tax year of a FSC must be the

of business in the United States must pay the

as the schedules or forms they support and

same as the tax year of the principal

tax due by electronic funds transfer. The

attach them last. Show the totals on the

shareholder which, at the beginning of the

FSC can pay the tax using EFTPS or it can

printed forms. Enter the FSC's name and EIN

FSC tax year, has the highest percentage of

arrange for its tax professional, financial

on each supporting statement or attachment.

voting power. If two or more shareholders

institution, payroll service, or other trusted

have the highest percentage of voting power,

third party to make deposits on its behalf. In

Accounting Methods

the FSC must have a tax year that conforms

addition, the FSC also has the option to

to the tax year of any such shareholder. See

Figure taxable income using the method of

arrange for its financial institution to initiate a

section 441(h).

accounting regularly used in keeping the

same-day payment.

FSC's books and records. In all cases, the

Rounding Off to Whole

method used must clearly show taxable

Note. If the due date falls on a Saturday,

Dollars

income. Permissible methods include cash,

Sunday, or legal holiday, the payment is due

accrual, or any other method authorized by

on the next day that isn't a Saturday,

The FSC may round off cents to whole

the Internal Revenue Code.

Sunday, or legal holiday.

dollars on its return and schedules. If the

Electronic Deposit

FSC does round to whole dollars, it must

Generally, the following rules apply:

round all amounts. To round, drop amounts

Requirement

A FSC (other than a qualified personal

under 50 cents and increase amounts from

service corporation) must use an accrual

FSCs with an office or place of business in

50 to 99 cents to the next dollar (for example,

method of accounting if its average annual

the United States must use electronic funds

$1.39 becomes $1 and $2.50 becomes $3).

gross receipts exceed $5 million. However,

transfers to make all federal tax deposits.

see Nonaccrual experience method for

If two or more amounts must be added to

Generally, electronic funds transfers are

service providers, later.

figure the amount to enter on a line, include

made using EFTPS. However, if the

Unless it is a qualifying taxpayer or a

cents when adding the amounts and round

corporation does not want to use EFTPS, it

qualifying small business taxpayer, a FSC

off only the total.

can arrange for its tax professional, financial

must use an accrual method for sales and

institution, payroll service, or other trusted

purchases of inventory items. See

Recordkeeping

third party to make deposits on its behalf.

Schedule A, Cost of Goods Sold Related to

Also, it can arrange for its financial institution

Keep the FSC's records for as long as they

Foreign Trading Gross Receipts, later.

to submit a same-day wire payment on its

may be needed for the administration of any

behalf. EFTPS is a free service provided by

For more information, see Pub. 538,

provision of the Internal Revenue Code.

the Department of the Treasury. Services

Accounting Periods and Methods.

Usually, records that support an item of

provided by a tax professional, financial

income, deduction, or credit on the return

Change in accounting method. Generally,

institution, payroll service, or other third party

must be kept for 3 years from the date the

the FSC must get IRS consent to change

may have a fee.

return is due or filed, whichever is later. Keep

either an overall method of accounting or the

For more information about EFTPS or to

records that verify the FSC's basis in

accounting treatment of any material item.

enroll in EFTPS, visit , or call

property for as long as they are needed to

To do so, the FSC generally must file Form

1-800-555-4477.

figure the basis of the original or replacement

3115, Application for Change in Accounting

property.

Method. For more information, see the

Depositing on time. For any deposit made

Instructions for Form 3115.

by EFTPS to be on time, the FSC must

The FSC should keep copies of all filed

submit the deposit by 8 p.m. Eastern time the

returns. They help in preparing future and

Section 481(a) adjustment. If the

day before the date the deposit is due. If the

amended returns.

FSC's taxable income for the current tax year

FSC uses a third party to make deposits on

is figured under a method of accounting

Tax Payments

its behalf, the third party may have different

different from the method used in the

cutoff times.

preceding tax year, the FSC may have to

The FSC must pay the tax due in full no later

make an adjustment under section 481(a) to

Same-day wire payment option. If the

than the due date for filing Form 1120-FSC

prevent amounts of income or expense from

FSC fails to submit a deposit transaction on

(not including extensions). See When To

being duplicated or omitted. The section

EFTPS by 8 p.m. Eastern time the day

File, earlier, for this due date. The method for

before the date a deposit is due, it can still

481(a) adjustment period is generally 1 year

payment of the tax due depends upon

for a net negative adjustment and 4 years for

make the deposit on time by using the

whether the FSC has an office or place of

a net positive adjustment. However, in some

Federal Tax Collection Service (FTCS). To

business in the United States.

use the same-day wire payment option, the

cases, a FSC can elect to modify the section

FSCs that do not maintain an office or

481(a) adjustment period. The FSC may

FSC will need to make arrangements with its

place of business in the United States can

have to complete the appropriate lines of

financial institution ahead of time regarding

use the Electronic Federal Tax Payment

Form 3115 to make an election. See the

availability, deadlines, and costs. Financial

System (EFTPS) to pay the tax due providing

Instructions for Form 3115 for more

institutions may charge a fee for payments

the FSC has a U.S. bank account. If the FSC

information and exceptions.

made this way. To learn more about the

does not have a U.S. bank account, it may

information the FSC will need to provide to

If the net section 481(a) adjustment is

arrange for a financial institution to initiate a

its financial institution to make a same-day

positive, report it on page 4, Schedule F,

same-day wire payment on its behalf or it

wire payment, visit the IRS website at

line 16, as other income. If the net section

can arrange for either a qualified

and click on

481(a) adjustment is negative, report it on

intermediary, tax professional, payroll

“Same-day wire.”

page 4, Schedule F, line 18, as a deduction.

service, or other trusted third party to make a

Estimated Tax Payments

deposit on its behalf using a master account.

Accounting Period

In addition, the FSC still has the option to

Generally, the following rules apply to the

A FSC must figure its taxable income on the

pay by check or money order, payable to

FSC's payments of estimated tax.

basis of a tax year. A tax year is the annual

“United States Treasury.” To help ensure

accounting period a FSC uses to keep its

proper crediting, write the FSC's employer

The FSC must make installment

records and report its income and expenses.

identification number (EIN), “Form

payments of estimated tax if it expects its

Instructions for Form 1120-FSC (Rev. 12-2016)

-5-

Instructions For Form 1120-Fsc - 2016 Page 5

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