Form 851

Understanding Federal Form 851

Federal Form 851, also known as the Affiliations Schedule, is used by corporate taxpayers who are members of an affiliated group filing a consolidated tax return. Corporations aggregate their income and deductions to determine the group's tax liability. The purpose of this form is to summarize all the corporations included in the consolidated return, indicating their common parent.

Decoding the form 851 affiliations schedule

Form 851 contains details about each affiliated corporation— its common parent, tax year end, number of shares of voting stock owned by the parent, and the total value. This summary's importance lies in its purpose to provide a clear picture of the relationships between the various entities included in the tax return.

How To Fill Out the IRS Form 851

Knowing how to fill out the form is essential to ensure accurate documentation and compliance with tax codes.  So, here is a guide that will help you to do that correctly:

1. Start with the "Name of common parent corporation" in the first text box. Make sure you input the full legal name of the corporation, including any suffixes such as "Inc." or "LLC".
2. Right next to it, there's a box marked "Employer identification number". Input the correct EIN for the parent corporation here.
3. Locate the next field and fill it accordingly. Be as specific as possible in this area to avoid any confusion.
4. The next text boxes request the corporate address. These should be correctly filled out.
5. Next, fill out the corporation name and address, then the Employer ID just like the previous steps.
6. Under the next box, specify the amount that was previously overpaid or estimated. Also, in the adjacent box, provide the "Portion of tax deposited with Form 7004".
7. Up next is the total. This should be the summation of the amounts filled in the privious section. 
8. Scroll down to the "Principal Business Activity, Voting Stock Information, Etc." section. You should provide a detailed description of the main activities taking place in your business here. It's important to give a precise account of your voting stock information under the respective subsection.
9. Move to the section where you need to chart out the changes in stock holdings that happened during the tax year.
10. For the "Additional Stock Information" section, provide any further details about your company's stock.
11. After completing all sections, double-check for errors, then you can proceed to download, print, or share the form via email.

Key tips for completing tax form 851

Fulfilling your corporation's tax obligations can feel like a daunting task, especially when it comes to managing data from multiple entities. Here are some valuable tips to help you navigate the completion and submission of tax form 851.

• Identify Your Affiliates: Make sure to list all corporations connected to the parent company. The IRS requires comprehensive data about all subsidiaries and their respective profits.
• Verify Tax Year Dates: Ensure you have the correct start and end dates for the tax year of each corporation within the affiliation. Remember, they may not align with the calendar year.
• Check Ownership Details: Validate the percentage of ownership for each affiliated corporation before filling out the form. Any discrepancy can raise issues later.
• Gather EIN Information: You'll need the Employer Identification Numbers (EIN) for all affiliated corporations, so have this information before you start filling out the form.
• Get Consent: Every corporation in the consolidated group must consent to the filing of the consolidated tax return. Make sure to secure their consent before submission. 
• Early Preparation: Do not leave filling out the IRS form 851 to the last minute. Leaving enough time for its completion ensures that you provide accurate and detailed information. 
• Double-check Everything: Before submitting the federal form 851, it's crucial to cross-check all provided information for errors. Poorly filled forms can lead to delays or potential penalties.
• Consult a Professional: If you're uncertain about any aspects of form 851, it's best to consult a tax professional. They can provide you guidance and ensure you've filled out the form correctly.