Need help filing consolidated tax return for two C-corps - questions on procedure

This is definitely a situation where a consolidated return could be beneficial, but there are strict requirements you need to meet first: 1. The companies must be part of an "affiliated group" which generally means the parent corporation must own at least 80% of the voting power AND at least 80% of the value of the subsidiary's stock. 2. You'll need to file Form 1122 (Authorization and Consent of Subsidiary Corporation To Be Included in a Consolidated Income Tax Return) for each subsidiary. 3. Once you elect to file consolidated, you generally need IRS permission to switch back to separate filing. 4. Form 1120 is still your main form, but you'll include all affiliated corporations' information. A consolidated return allows the profitable company's income to be offset by the loss company, but be aware there are complex rules around inter-company transactions, built-in losses, and separate vs. consolidated tax attributes.

I was in a similar situation last year trying to figure out consolidated returns. One tool I found incredibly helpful was taxr.ai (https://taxr.ai) - I uploaded our corporate docs and financial statements, and it helped identify which parts of our business qualified for consolidation and guided me through the whole process. It was especially helpful for tracking all the intercompany transactions which can get really complicated on consolidated returns. Saved me tons of research time since it analyzed everything and provided specific guidance for our situation.

Just wanted to follow up - I decided to try taxr.ai for my 3-corporation situation and it was actually really helpful! It identified that one of our companies didn't qualify for consolidation because we didn't meet the 80% ownership threshold (we were at 75% and didn't realize it mattered). It also guided me through the Form 1122 process for the two that did qualify. Saved me from making a costly mistake since I was about to file consolidated for all three. The documentation it provided for our records was also super thorough.

If you're preparing this return for your boss, you might want to consult with a tax professional specifically experienced with consolidated returns. They're really complex. When I tried to reach the IRS last year for questions about our consolidated filing, I couldn't get through for weeks. Then I tried Claimyr (https://claimyr.com) which got me connected to an IRS agent in about 15 minutes who answered my questions about our consolidated return. You can see how it works here: https://youtu.be/_kiP6q8DX5c. The IRS agent explained some nuances about consolidated returns that weren't clear in the instructions and helped me avoid some potential issues.

I have to admit I was wrong about Claimyr. After my skeptical comment, I decided to try it because I was desperate for answers about consolidated returns before our filing deadline. I was connected to an IRS agent in about 20 minutes (much faster than the 3+ hours I spent on my previous attempt). The agent clarified exactly how to handle the elimination of intercompany transactions on our consolidated return. Totally worth it just to avoid the hold music alone! Definitely using this for all my IRS calls from now on.

One thing nobody's mentioned yet - make sure you're checking for any state tax implications of filing federal consolidated returns. Some states require you to file the same way you file federally, others let you choose, and some don't even allow consolidated returns at all. This caught me by surprise last year and caused a lot of headaches.

Also, don't forget about the impact of TCJA (Tax Cuts and Jobs Act) on consolidated returns. There are limitations on the net operating loss carryforwards and some changes to how they can be utilized. I think you can only offset 80% of taxable income with NOLs from tax years beginning after 2017, even in a consolidated group.

Just wanted to add something that helped me when I was dealing with my first consolidated return - make sure you have a good system for tracking all the intercompany transactions throughout the year, not just at filing time. We had transactions between our parent and sub that we weren't properly documenting, and it became a nightmare trying to reconstruct everything when it came time to eliminate them on the consolidated return. Things like intercompany sales, loans, rent payments, management fees, etc. all need to be tracked carefully because they have to be eliminated to avoid double-counting income and expenses. I ended up creating a simple spreadsheet that we update monthly now, which makes the year-end consolidation process much smoother. The IRS is very particular about these eliminations being done correctly, so having good records throughout the year is crucial.