Fill Form 8865 Miscellaneous 2023-2024

Today, we're talking about forum 54 71 mm-hm, but if we're going to discuss that forum, the first thing we need to address is controlled foreign corporations (CFCs). Controlled foreign corporations are entities that are controlled by 50 percent or more of a US person and are located offshore. So, essentially, a corporation located outside the US and controlled by a US person. Now, why is this important? Why should you care? It all comes down to international taxation and the concept of deferral. Deferral is the game of all international tax planning. When you move things offshore, you're essentially trying to defer taxes and reduce your tax liability. The goal is to have your investments overseas grow tax-free. People often wonder why not just use a 401k instead of going through all these processes. Well, firstly, you may not qualify for a 401k if you make too much money. Additionally, a 401k may not offer the type of investment opportunities you're looking for, especially if you're interested in smaller or medium-sized businesses. Deferring your income allows it to grow tax-free. Let's consider a basic example: if you have an 8% return each year and start with $100,000, after thirty years, you would have $340,000. However, when you repatriate the money and bring it back to the US, it becomes taxable. In comparison, if you had an after-tax return of 5%, you would have $250,000 at the end. The advantage of deferring your income is that most taxes have already been paid on the earnings. Furthermore, deferral can also have positive effects on state taxes. Most state taxation is based on your federal adjusted gross income. So, when your federal adjusted gross income goes down, so does your state tax liability. This can result in significant tax savings over time....