When your “paper” corporation decides to talk to Export Tax Management about IC-DISC or Interest Charge Domestic International Sales Corporation, we make sure you understand the tax benefits you may have been missing out on. Our talented staff helps you understand this is not a tax shelter, but instead, it provides permanent tax savings through export tax commissions.
IC-DISCs are specifically designed by the Internal Revenue Service to provide exporters of the United States the ability to compete globally to reduce the liability of the U.S.
Export Tax Management knows there are questions concerning IC-DISC. We are here to help answer those .
Most corporations have been aware or are quickly becoming aware of IC-DISC. Not much changes on a daily basis as far as exporting materials. If you think about IC-DISC as though you have a person on the inside who is an agent and works completely on commissions. Your salesperson sells a product, the exporter is responsible to attain, provide an invoice, and ship. If you are willing to keep and maintain separate books and records for your IC-DISC, the tax incentive is there for the taking.
How much can I save in Federal Tax?
Let’s suppose your S corporation exports internationally around $2 million. They pay $80,000 to their IC-DISC in commissions. If you use the highest capital gain of 23.8% tax rate, your S corporation will owe $19,040 in federal tax on the qualified distributions from the IC-DISC.
It is possible for the owner to owe less on the earnings of the S corporation. When you deduct your commissions to the IC-DISC of $80,000, your S corporation receives a tax savings of $31,680. This is again assuming they receive the highest tax savings of $39.6%.
This shows your S corporation receives a net savings of $12,640 or 15.8% of the commission charge. However, it is also possible to use 50% of net export income to pay higher on your commission.
Will customers want their IC-DISC tax saving at a reduced price?
For the most part, the general public is not going to know about IC-DISC. The only people who will, are the ones who can assist you with getting set up properly. This means, the IRS, your CPA and the experts at Export Tax Management in Charleston, SC. Nothing changes on a daily basis so there should never be a point where your supplier/commissions agreement should be disclosed. Therefore, the answer is no.
How do I carry out IC-DISC strategy properly?
Step 1: Form your new IC-DISC corporation following the SC state laws.
Step 2: Perform the IC-DISC election in 90 days of developing your corporation.
Step 3: Provide one class of stock with a gross value of $2,500
Step 4: Assemble and maintain completely separate records and books for the IC-DISC
What benefits can Export Tax Management provide?
Yes, the tax reduction is one of the most essential reasons corporations begin exploring IC-DISC, but there are several other benefits of which to be aware.
- With an IC-DISC you are able to reduce the cost of your capital by supplying ongoing financing.
- Income can be moved to the IC-DISC as tax free money and then distributed to the shareholders. If distributed this way, IC-DISC allows for buyouts and creates tax advantages for industries like vehicles and estate planning.
- IC-DISC insures your C corporation does not get double taxed.
- IC-DISC assists with the management of employee incentives for shareholders.
Why Export Tax Management?
Export Tax Management is here to assist you with any questions you may have or learn more about the benefits our company can help you find. Contact us today to find out more information!