For individual CPAs and ones working at local firms, helping clients who have international issues can require time-consuming research and training to understand compliance and reporting requirements. Often times, the easiest path forward is to bring in an outside international specialist who can help provide you with the right technical answers while ensuring you maintain the direct relationship with your client.
“Local CPA firms have amazing relationships with their clients and a deep understanding of local, state, and federal requirements, but understandably, they often don’t have an international specialist in house,” said Nick Uren, Senior Manager, International Tax, at Aldrich. “Fully understanding international areas that may impact your clients both for compliance and planning can be an important part of building on those relationships and mitigating risk.”
With CPAs in the midst of spring busy season, here’s a quick checklist for any client who has international activities.
Client Issue: Tax Compliance and Reporting Requirements
CPA Considerations:
- Ensure the client is compliant with US “account” reporting tax laws, including FBAR (Foreign Bank Account Report) and FATCA (Foreign Account Tax Compliance Act) filings such as FinCen 114 and Form 8938.
- Ensure the client is compliant with US “outbound” reporting tax laws, including ownership in CFCs (Controlled Foreign Corporations), PFICs (Passive Foreign Investment Companies), Foreign Partnerships, and Foreign Branches such as Forms 5471, 8621, 8865, and 8858.
- Ensure the client is compliant with US “flow-through” reporting tax laws, including Schedules K-2 and K-3 and
- Identify applicable US “individual” reporting and compliance, including GILTI (Global Intangible Low-Taxed Income) and Subpart F inclusions; Section 962 elections; and FTC (Foreign Tax Credit) reporting, including filing Forms 8992, 1116, and 1118.
Client Issue: International Tax Planning and Structuring
CPAs Should:
- Evaluate the tax efficiency of US and foreign entity structure, whether it’s an offshore trust, corporation, disregarded entity, or partnership, and whether the foreign structure is consistent with the US structure.
- Analyze transfer pricing considerations if the client owns businesses operating in multiple countries.
- Plan for potential GILTI or Subpart F tax implications on foreign corporation income, including GILTI and Subpart F kick-outs like the high tax exclusion and other exceptions and offsets.
- Check for “event” issues, such as contributions, distributions, reorganizations, or new business endeavors that could impact all aspects of the client’s international tax profile.
Client Issue: Inbound Tax Issues
CPA Considerations:
- Ensure the client is compliant with US inbound corporate reporting tax laws, including those relating to foreign ownership in US corporations and filing Form 5472.
- Ensure the client is compliant with US inbound partnership reporting tax laws, including those relating to foreign partners in US partnerships and filing Forms 8804 and 8805 and Schedules K-2 and K-3.
- Ensure the client is compliant with US inbound branch reporting tax laws, including those relating to foreign corporations with US branches, branch profits tax, and filing Form 1120-F.
- Ensure the client is compliant with Ch. 3 and Ch. 4 withholding tax laws, including any required withholding on payments to foreign people; treaty-based positions; and filing Forms 1042, 1042-S, and 8833.
Client Issue: New Regulatory and Statutory Considerations
CPA Considerations:
- Ensure new proposed regulations that were published over the last few years are considered, and be aware of final regulations when they are codified.
- Be aware of upcoming TCJA renewal as well as new statutes that may accompany the TCJA renewal, and plan for the implementation of the new laws.
- Plan for any sunsetting statutes that will not be reimplemented.
Sometimes an Advisor Needs an Advisor
For help with these or any other international tax issues your clients may be facing, please reach out to Nick Uren.
