Recently, a UK company director (pseudonym Dan) raised a series of specific questions about completing Form 1120-F after receiving a notice letter from the US Internal Revenue Service (IRS) regarding EIN registration (notice dated April 3, 2019). The company, registered in the UK, provided conference arrangement services to a US client, with services performed in the UK, invoice dated March 25, 2019, full payment received, and the income not subject to US tax under US tax law. Because the US client required an EIN to avoid US tax withholding, the company completed EIN registration before receiving payment. The following is a summary of the original inquiry and key questions, for reference by taxpayers in similar situations.

I. Selection of Tax Year and Accounting Period

Dan's fiscal year is November 1, 2018, to October 31, 2019. He asked how to fill in the year information on page 1 of Form 1120-F: whether to select "For calendar year 2018" or fill in "tax year beginning 2018, ending 20…".

According to IRS regulations, the year field on Form 1120-F should indicate the beginning and ending dates of the tax year. Since Dan's fiscal year is not a calendar year, he should select "tax year beginning" and fill in the dates, i.e., "2018-11-01" to "2019-10-31". Note that the notice letter may require filing for the 2018 calendar year, but the specific requirements of the IRS notice letter should prevail. If the notice letter pertains to the 2018 calendar year, filing must be on a calendar-year basis; however, given his fiscal year spans two calendar years, it is recommended to confirm with the IRS or consult a tax professional.

II. Tax Computation and Zero-Filing Handling

Dan asked whether lines 1 through 9 in "Computation of tax due / Overpayment" on page 1 should be filled with zeros. Since the company has no US-source income (or income not effectively connected with a US trade or business) and no US tax withheld, these lines are typically filled with zeros. However, note that if there is any US-source income (such as interest, dividends, etc.), it must be reported accordingly.

III. Income Reporting on Page 3 (Non-Effectively Connected Income)

Dan plans to fill in on page 3, "SECTION I—Income From U.S. Sources Not Effectively Connected With the Conduct of a Trade or Business in the United States": line 10b "Gross amount" as $3,000, line 10c "Rate of tax (%)" as zero, line 10d "Amount of tax liability" as zero, line 10e "Amount of U.S. income tax paid or withheld at the source" as zero, line 12 "Total" as zero, and include it on page 1, line 5i.

Is this treatment appropriate? The key is whether this income qualifies as "non-effectively connected income." Since the services were performed entirely in the UK, with no US office or employees, this income is generally not considered US-source income and may not need to be reported on page 3. However, if the IRS determines the income is US-source (e.g., because the client is in the US), it must be reported and a zero tax rate may apply (under the tax treaty). It is recommended to carefully review IRS guidance or consult a tax advisor to avoid misreporting.

IV. Schedule L (Balance Sheet) Completion

Dan asked whether it is mandatory to complete Schedule L (balance sheet per books) on page 7, or whether he can attach the annual return filed with Companies House as of October 31, 2018. He also asked which accounting period should be reported (1.11.17-31.10.18 or another).

Generally, Form 1120-F requires a balance sheet as of the end of the tax year. If the tax year is November 1, 2018, to October 31, 2019, Schedule L should reflect the financial position as of October 31, 2019. However, the annual return Dan mentioned is as of October 31, 2018, which belongs to the previous fiscal year. Therefore, he needs to prepare a balance sheet as of October 31, 2019, or follow IRS instructions. If not available in time, he may attach audited statements and note differences, but it is best to follow the form instructions.

V. Historical Data in Parts c and d of Schedule L

Dan asked whether he must fill in parts c and d as of October 31, 2017. Schedule L typically requires beginning and ending balances; the beginning balance is the end of the previous tax year (i.e., October 31, 2018), not 2017. Therefore, 2017 data is not required unless specifically requested by the IRS.

VI. Other Sections to Complete

In addition to the above, Form 1120-F may require other sections, such as shareholder information, related-party transactions, etc. Dan should review all applicable parts of the form and ensure completeness. If uncertain, he can refer to the IRS Form 1120-F instructions or seek professional assistance.

VII. Filing Methods and Fees

Dan asked whether there is a free online filing option or the cheapest online filing method. The IRS offers free electronic filing systems (such as Modernized e-File), but these require approved software providers. For Form 1120-F, some software may charge fees, so it is advisable to compare prices. Paper filing by mail is also possible, but note whether the mailing date is considered the filing date.

VIII. Validity of Mailing Date

Dan asked whether the mailing date from the UK is considered the IRS filing date. According to IRS rules, if using the US Postal Service or designated private delivery services, the mailing date (as indicated by postmark) is generally considered the filing date. However, for international mailing, he may need to use IRS-approved carriers and retain receipts. It is recommended to use a traceable mailing method and confirm that the IRS accepts international postmarks.

Summary: Completing Form 1120-F involves many details, especially for non-US companies. It is recommended that Dan carefully read the IRS notice letter and form instructions, and consult a cross-border tax expert if necessary, to ensure compliance and avoid penalties.