Form 965 (Schedule H)

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What Is IRS Form 965 Schedule H

IRS Form 965 Schedule H is a tax form used for reporting the untaxed foreign earnings of U.S. shareholders using accumulated post-1986 deferred foreign income. Essentially, this form is a part of the Transition Tax Statement, which came into effect with the Tax Cuts and Jobs Act of 2017. Shareholders of specified foreign corporations may need to file this form to calculate their transition tax on these earnings as they comply with the new international tax system.

When to Use IRS Form 965 Schedule H

You should use IRS Form 965 Schedule H in the following situations:

  • When you are a U.S. shareholder who needs to report a one-time transition tax on untaxed foreign earnings.
  • If you are a shareholder of deferred foreign income corporations or a direct or indirect owner of a specified foreign corporation.
  • To recalculate the transition tax liability for a given tax year in the case of changes such as amended tax returns or adjusted earnings.
  • If you need to report corrections related to your transition tax or if you're considering elections that impact the previously reported amounts.

How To Fill Out Form 965 Schedule H Instruction

Filling out IRS Form 965 Schedule H can be intricate, but these step-by-step instructions will guide you through the process:

When to File IRS Form 965 Schedule H

The filing of IRS Form 965 Schedule H coincides with your income tax return. This means:

  • Start by calculating your total Section 965(a) inclusions, essentially the accumulated foreign earnings you're being taxed on. Then, calculate the deductions under Section 965(c) to reduce the taxable amount based on your share in the deferred foreign income corporation.
  • Apply the appropriate tax rates to the inclusion amounts (after deductions) to compute the total transition tax. You must break down the tax into various portions subject to different rates.
  • Subtract any foreign taxes you've paid attributable to the Section 965(a) inclusion amounts for a more accurate tax liability.
  • Factor in any payments or credits that apply to your transition tax liability, including the first tax installment if you've elected to pay in installments.
  • The result will be your final tax liability if you owe additional tax or an overpayment if you've paid more than necessary.
  • The schedule must be attached and filed with your Form 1040 for individual filers by the annual tax filing deadline, typically April 15th.
  • For corporations, it should accompany Form 1120 and filed by the due date of the corporation’s income tax return.
  • In case of making an election under section 965(h) to pay the net tax liability in installments, the schedule should be filed with the first tax return that reflects the election decision.
Fillable online Form 965 (Schedule H)
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