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IC-DISC, due diligence can set you up for a flawless tax season

May 28, 2014

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As member of an international business, no doubt you were relieved to see tax season come and go. Prior to the March and April deadlines, you’d spent countless hours figuring out your expenses and ensuring that all proper documents were in order.

The factor of significant exports can complicate matters as well, adding another wrinkle to the entire process. Now that it is all done, odds are you’d rather sit back, relax and not worry about your fiscal responsibilities. However, now can be the perfect time to make crucial changes – such as the formation of an Interest Charge Domestic International Sales Corporation, or IC-DISC. This export can result in substantial tax savings, but it requires the correct steps during implementation to achieve the most benefits.

At Clark Schaefer Hackett, we have decades of experience working closely with international businesses such as yours. As a result, we’ve put in the hours to develop a comprehensive, in-depth understanding of the exporting industry and its related fiscal components. When consulted, we’ve provided valuable tax-saving services to numerous organizations, including advice to avoid expensive mistakes. When working with you, we’ll help you implement an IC-DISC properly and set yourself up for a flawless tax season.

A lack of preparation can lead to problems
Fiscal problems can appear quickly if you don’t allow yourself enough time to prepare for tax season. Waiting until the last minute will limit your options, and could potentially force you to make decisions you don’t want to make. While it is understandable if taxes are the last thing on your mind right now, taking advantage of incentives and other breaks will reduce your fiscal expenses in the long run. For example, forming an IC-DISC will be beneficial, but not digging into the details will prove costly.

The key to an easy, hassle-free tax season is awareness. For example, you may be interested in the formation of an IC-DISC – and now is the perfect time to get started. This federal tax incentive is designed to help encourage domestic exports, and it remains the sole fiscal plan tailored for U.S. exporters with at least 50 percent of their products manufactured domestically. To get started, you and the IC-DISC enter a written agreement. You then pay tax-deductible commissions to the IC-DISC, and you can then deduct these payments in full while the IC-DISC is exempt from tax on the commission income. The IC-DISC shareholder is then taxed on IC-DISC dividends at the preferential qualified dividend – leading to more money in your pocket at the end of the day.

Most importantly, implementing an IC-DISC requires analytics and due diligence. Without these steps, things can go wrong quickly. All of your exports must truly be exports, and legwork is required on your end to ensure that everything goes smoothly during this process.

Use past data to make informed decisions
Forming an IC-DISC – and filing taxes in general – requires a careful inspection of past data, such as years’ worth of returns. Taking the time to look back on this information can provide numerous beneficial results, and also make upcoming tax seasons much smoother for your international business.

Inc. magazine explained that your current and previous returns highlight avenues where your business can improve. For instance, has anything changed recently? Did you miss out on certain claim deductions that you normally take advantage of? Most important of all, analyze historical tax trends for your company. This level of due diligence will easily show you how you can improve your tax situation and your international business.

Focus on effective, secure recordkeeping
Poor records will make implementing an IC-DISC – and filing taxes – much harder for your business. What would happen if your data were compromised? This could happen thanks to a natural disaster, a computer error, or a human mistake. With that in mind, backing up your records should be a top priority now, so when tax season rolls around you’ll be prepared.

Marc Scheipe, chief financial officer for Sage North America, wrote in Forbes that technology can simplify recordkeeping. The rise to prominence of the cloud – an online storage method where users can upload information and access it at any time, from any device – has made saving data electronically safe, easy and cost-effective. While on-site storage is never a bad idea, it is best to keep files in another location as well.

This added layer of security will make tax season a breeze for your international business. In addition, the analytics and due diligence process behind IC-DISC implementation will also be vastly improved with easy access to all the relevant information you’ll need.

Working with experts will simplify the process
A comprehensive analysis behind IC-DISC implementation can get complicated, as can all of your fiscal responsibilities. In too many cases do international businesses underestimate the importance of due diligence, and the earlier the better. While you will perform most of the legwork, consulting advisors will help streamline the process and make everything go much more smoothly.

Our experts at Clark Schaefer Hackett understand the details behind forming an IC-DISC and filing taxes. When you want to start the steps, make sure you work with a firm that has decades of experience. At Clark Schaefer Hackett, we have dedicated professionals in place to prevent problems from forming with your international business.

For example, we bring to the table a specialized and focused knowledge about your industry, including many services that will help you avoid missed fiscal opportunities. Better yet, our experts will work closely with you so you’ll understand all the details and parts of the process behind filing taxes and forming an IC-DISC.

© 2014

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

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