Instructions for Filling Out Form 926

This document offers a comprehensive guide to filling out Form 926, a form used to report certain transfers of tangible or intangible property to a foreign corporation. It covers who must file, the purpose of the form, penalties for failure to file, and step-by-step instructions for each part of the form.

In this article, we'll provide information on Form 926 and a step-by-step guide on how to fill it out, ensuring compliance with U.S. tax laws and accurate tax calculations.

What is Form 926?

Form 926 is a document used by the Internal Revenue Service (IRS) to report certain transfers of tangible or intangible property to a foreign corporation. The purpose of this form is to ensure compliance with the Internal Revenue laws of the United States, as required by section 6038B. It must be filed by a U.S. citizen or resident, a domestic corporation, or a domestic estate or trust to report specific property transfers to a foreign corporation. The form should be filed with the U.S. transferor's income tax return for the tax year that includes the date of the transfer. Failure to comply with section 6038B may result in penalties.

Who Must File Form 926?

Form 926 must be filed by a U.S. citizen or resident, a domestic corporation, or a domestic estate or trust to report certain transfers of property to a foreign corporation. These transfers are described in section 6038B(a)(1)(A), 367(d), or 367(e) of the Internal Revenue Code. The form is used to ensure compliance with U.S. tax laws and accurate tax calculations for these specific property transfers.

Form 926 Tax Filing Deadlines and Due Dates

As the due dates for Form 926 are not explicitly mentioned in the provided instructions, it is important to note that the form should be filed with the U.S. transferor's income tax return for the tax year that includes the date of the transfer. Therefore, the due date for Form 926 would generally align with the due date of the transferor's income tax return.

Form 926 Late Payment Penalty

If a taxpayer fails to file Form 926 on time, they may face a late payment penalty. This penalty is equal to 10% of the fair market value of the property at the time of the transfer. However, the penalty will not apply if the failure to comply is due to reasonable cause and not willful neglect. Additionally, the penalty is capped at $100,000, unless the failure to comply was a result of intentional disregard.

Step-by-Step Instructions for Form 926

Step by step instructions for filling out Form 926:

1. Part I—U.S. Transferor Information: This section requires the transferor's identifying number, name, and address. It also asks for information about the transferor's U.S. tax return and the nature of the transfer.
2. Part II—Transferee Foreign Corporation Information: This section requires information about the foreign corporation receiving the property, including its name, address, country of incorporation, and entity classification.
3. Part III—Information Regarding Transfer of Property: This section requires detailed information about the property being transferred, including its description, fair market value, cost or other basis, and gain recognized on transfer.
4. Part IV—Additional Information Regarding Transfer of Property: This section asks for additional information about the transfer, including the type of nonrecognition transaction that gave rise to the reporting obligation and whether the transfer resulted from a change in entity classification.
5. Instructions for Form 926 - Notices: This section provides information about the Paperwork Reduction Act Notice.

The webpage also provides detailed instructions for each line of the form, as well as definitions of key terms and references to relevant sections of the Internal Revenue Code.

How to Submit Form 926

To submit Form 926, follow these steps:

1. Complete Part I - U.S. Transferor Information.
2. Complete Part II - Transferee Foreign Corporation Information.
3. Complete Part III - Information Regarding Transfer of Property.
4. Complete Part IV - Additional Information Regarding Transfer of Property.
5. Attach any additional information required in the Supplemental Part III Information Required To Be Reported section.
6. File the form with the U.S. transferor's income tax return for the tax year that includes the date of the transfer.

Keep in mind that all information reported on Form 926 must be in English and all amounts must be stated in U.S. dollars. If the information required in a given section exceeds the space provided within that section, complete all entry spaces in the section and attach the remaining information on additional sheets. Penalties may apply for failure to comply with section 6038B or for underpayment resulting from an undisclosed foreign financial asset understatement.

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