How to Report Foreign Subsidiaries on Form 1120
As the tax representative for a corporation, you must use IRS Form 1120 (U.S. Corporation Income Tax Return) to file your company's tax return each year. If your company wholly owns subsidiaries that operate outside the U.S., you may be eligible to deduct dividends said foreign subsidiaries pay to your domestic corporation. Reporting the amount of these dividends requires only a single line on the form and takes only a few minutes of your time.
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Instructions
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Determine which of your foreign-owned subsidiaries meet the IRS' requirements for deducting dividends. Your domestic corporation must directly or indirectly own all of the stocks whose dividends it receives, and your foreign subsidiary must generate all its gross income from sources connected with the U.S. For example, if you have a subsidiary in Singapore whose stock is even 1-percent owned by Singaporeans or that generates its income even partially in Singapore, this corporation's dividends would not be eligible for deduction.
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Add the U.S. dollar amount of all eligible deductions and enter it in Box 8a under Schedule C. Enter the same value in Box 8c. Unlike some of the other items under Schedule C, these types of dividends are 100-percent deductible.
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Add your dividends from Box 8c together with the rest of the items in column C of Schedule C, and write the total both in boxes 20c (on page 2) and 29b (on page 1). Schedule C is but a worksheet addendum to aid you in figuring amounts, so the IRS only considers the value you write on the proper tax return (page 1 in the case of Form 1120).
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