Is there a penalty for filing Form 8993 late?
The form is a computation attached to a corporation's return rather than a standalone information return, so the first thing to establish is what actually arrived late: the return, or the schedule that claims the deduction. Where the return itself is late, the consequences attach to the return and to any tax left unpaid. Where the return went in on time without the schedule, the expensive problem is usually that the deduction was never claimed at all, so the corporation has reported more tax than the law asks of it. We would not quote a figure for either without reading the rules for the year concerned, because the charge depends on which of the two happened.
Can we claim the FDII deduction on an amended return?
An amended return can carry the computation, and that is the ordinary route where a filed year claimed nothing. The difficulty is rarely the arithmetic. The deduction turns on income earned from serving foreign markets, so the year has to be evidenced with the records that existed at the time: who the customer was, where the property or service was used, and how the revenue was recognised. Reconstructing that two or three years later from invoices and a sales ledger is the bulk of the work, and it sets the ceiling on what can honestly be claimed. Where the records will not support a revenue line, we leave it out rather than estimate it.
What happens if I forgot to attach Form 8993 to the return?
The return stands as filed, and it computes tax without the deduction. Nothing in the system corrects that for you: a corporation that qualified and did not claim has simply paid at the undiscounted figure. The fix is a corrected filing that carries the computation, not a request for relief, because there is nothing to forgive here. The tax was overstated rather than underpaid. Before filing we check whether the omission was an oversight or a judgement somebody made about which income qualified, since the second case needs the position written down and supported before anything is submitted.
Our Canadian return was late too, so what does the CRA charge?
That is a separate charge on a separate return, and it helps to keep the two apart. For the 2025 tax year the CRA's late-filing penalty is five per cent of the balance owing at the due date, plus one per cent of that balance for each full month the return is late, to a maximum of twelve months. The penalty itself does not compound. Interest does, daily, on whatever is unpaid. So a Canadian year with no balance owing carries little by way of penalty, while on the United States side of an export-income year a dropped schedule can cost you a deduction whether or not tax was due.
Why did our US tax rise when export sales stayed flat?
One ordinary explanation is that the deduction for income from foreign markets was claimed in one year and not in the next, usually because the schedule was dropped when a return was prepared late or by a different hand. The underlying trade did not change; the computation did. It is worth comparing the two returns line by line before looking for a commercial cause. The same comparison catches the opposite error, where a deduction was claimed on revenue that was not in fact earned from serving foreign customers, which is a position you want to find yourself rather than have found for you.
Should we run the deduction before deciding where to bill from?
Yes, and for a services exporter that decision is a computation rather than a preference. The deduction sits inside a United States corporation and rewards income earned from serving foreign markets, while the rules on low-taxed income earned in foreign subsidiaries pull in the opposite direction. Which arrangement leaves less tax depends on where the people are, where the customers are and how the work is charged, and the answer moves as those move. Where returns have been filed late, we do this exercise on the delayed years first, because it often shows the arrangement being defended was never the cheaper one.
What is GILTI?
A US rule that taxes shareholders of controlled foreign corporations currently on the corporation's income above a routine return on its tangible assets, rather than waiting for a dividend. The target was profit — especially from intangibles — parked in low-tax jurisdictions. The name, the deduction and the asset-based reduction are the parts Congress has revisited, so we compute it from the rules in force for the filing year instead of a remembered percentage. See the GILTI inclusion and Form 8992.
What is a permanent establishment, and how easily do we create one?
A taxable presence in another country under the treaty — typically a fixed place of business such as an office, branch, factory or workshop, or a dependent agent habitually concluding contracts on your behalf. Some treaties add a services test measured in days. Purely preparatory or auxiliary activity is excluded, but that carve-out is narrower than it sounds: one senior employee working from home in the other country, with authority, has been enough. See business profits and permanent establishment.
