IC-DISC Export Tax Incentive Services in Chicago, IL

Before establishing any new structure, you deserve clear, straightforward answers about expected returns. Our feasibility analysis examines your export sales, gross receipts, current tax rates, and ownership structure. We model potential tax savings under both calculation methods to determine optimal results.

You'll receive a detailed report showing estimated annual tax savings, break-even timeline, and long-term value creation. This allows you to make an informed decision about whether IC-DISC implementation makes financial sense.

Establishing an IC-DISC requires precision from day one. The entity must meet specific criteria under sections 991-997 of the Internal Revenue Code. If these requirements are missed, the entire structure can be disqualified.

At Lewis.cpa, we handle the complete formation process: incorporating the entity, ensuring initial capitalization meets requirements, filing Form 4876-A to make the IC-DISC election, and establishing corporate governance. The IC-DISC can be formed retroactively to the beginning of your tax year.

The commission calculation sits at the heart of your IC-DISC strategy. Each year, we analyze your qualified export receipts and determine the optimal commission using one of two IRS-approved methods:

- 50% method: Based on the combined taxable income from export sales.

- 4% method: Based on qualified export receipts.

We run both calculations annually and recommend the approach that maximizes your tax savings, including a detailed analysis of your sales data and comprehensive documentation supporting our methodology.

We prepare and file Form 1120-IC-DISC each year, reporting commission income received, calculating any interest charge on deferred tax liability, and ensuring the entity maintains its qualified status.

Beyond the return itself, we track qualified assets, monitor required distributions to shareholders, coordinate timing to optimize your overall tax position, and maintain detailed records to help you achieve long-term success.

Transfer pricing between related entities draws IRS attention. We prepare detailed transfer pricing studies that document your commission calculation approach, demonstrate compliance with safe harbor provisions, and provide the supporting analysis needed if your return is examined.

The tax benefits only materialize when commission income flows to shareholders as qualified dividends. We work with you to determine optimal distribution schedules, evaluate the interplay between IC-DISC benefits and other deductions, and integrate IC-DISC planning with your overarching financial goals.

In the case that the IRS selects your IC-DISC structure for examination, you need representatives who understand both the technical requirements and the examination process. At Lewis.cpa, we've defended IC-DISC structures through numerous IRS inquiries.

Our examination support includes responding to information requests, explaining your commission calculation methodology, providing documentation for qualified export sales, and working toward efficient resolution.

The main benefit is direct and powerful: converting ordinary income to qualified dividends. For individual shareholders in the top federal bracket, this means reducing your effective rate from 37% to 20% — a 17-percentage-point reduction on export profits.

Many tax strategies simply postpone liability to future years. IC-DISC benefits are different — they're permanent reductions in your federal income tax. Income distributed as qualified dividends is taxed at the preferential rate permanently.

For pass-through entities, the tax savings flow immediately to shareholders' personal returns. This results in more after-tax cash available each year — money you can reinvest in operations, use to reduce debt, or apply toward personal financial goals.

Lower tax liability means more resources available for your business. Many exporters reinvest IC-DISC tax savings to improve pricing competitiveness in international markets, expand distribution networks, develop new products for foreign customers, or enhance marketing efforts abroad.

IC-DISC structures integrate smoothly with other planning techniques. We coordinate your export tax incentive with income tax planning for optimal overall results, qualified business income deductions, state and local tax considerations, retirement plan contributions, and charitable giving strategies.