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Form 973: Corporation Claim for Deduction for Consent Dividends
IRS Form 973 is Corporation Claim for Deduction for Consent Dividends, filed under Section 561 of the Internal Revenue Code. The estimated burden for business taxpayers filing this form is approved under OMB control number 1545-0123.
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IRS Form 973 - Corporation Claim for Deduction for Consent Dividends
IRS Form 973 is Corporation Claim for Deduction for Consent Dividends, filed under Section 561 of the Internal Revenue Code. The estimated burden for business taxpayers filing this form is approved under OMB control number 1545-0123.
Risk Radar
Scan points- 1Do not claim a deduction unless the stock is 'consent stock' and not a 'preferential dividend'.
- 2Filing without listing all classes of stock involved in cumulative dividends on Page 2.
- 3Omitting a description if any distribution was unequal across shares of a class.
- 4Not showing the amount of earlier unpaid cumulative dividends when required.
- 5Claiming deductions for amounts not stated on Form(s) 972.
Plain English
This form allows a corporation to claim a tax deduction for dividends that shareholders agreed upon but were not actually paid out. By filing Form 973, the corporation documents these 'consent dividends' so they can reduce its taxable income. It is attached to the company’s main income tax return.
Submission Date
- Filing date: 2016-11-15 00:00:00
- Preparation window: collect IDs, supporting records, and signatures in advance.
- Final review: verify names, dates, and required fields before submission.
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What this form is for
- Use this form when a corporation claims a consent dividend deduction under Section 561 of the Internal Revenue Code.
- Do not use it when claiming a consent dividend deduction that is defined as a 'preferential dividend' (as defined in section 562(c)).
- Check Form 972 instead when attaching documentation for each shareholder who agreed to treat the consent dividend as a taxable dividend.
Form selector
Use this form or another form?
Shareholder is a Nonresident Alien
Corporation must pay withholding tax if dividend was actually paid
✓ Check the specific form required to report the payment.
Stock has unequal distribution per share
This is necessary when a distribution wasn't made on all shares of any class
✓ Ensure the inequality is clearly described.
Use this form and specify in the description
Stock changes during tax year
Required if there are other changes in outstanding stock besides dividend rights
✓ Provide details in the 'Description of other changes...' field.
Use this form and describe the change(s)
Deadline or filing window
The filing is tied directly to the corporation’s tax year. The form covers the period beginning 1/1/20__ and ending 12/31/20__. There is no specific deadline mentioned other than attaching it to the annual income tax return.
Checklist
What you need before filling it out
Purpose
Claiming a consent dividend deduction under section 561 (or 565) · Form 973 Title/Instructions
Filer Eligibility
Corporation reasonably believes it is subject to accumulated earnings tax, PHC, FPHC, RIC, or REIT · Instructions p.2
Required Attachments (Shareholder)
Signed Form 972 OR unsigned Form 972 with matching info · Instructions p.2
Withholding Tax Reporting (Foreign Shareholders)
Form 1042, Form 1042-S, and/or Form 1042-T · Instructions p.2
Stock Entitlement Detail
If last day stock is entitled to cumulative dividends; show prior unpaid amount & class · Page 2 of Form 973
Distribution Status
Actual distributions per share made in tax year · Line on Page 1 of Form 973
Before you submit
- 1The corporation has filled out all required fields on Form 973.
- 2If unequal treatment occurred, the description of dividend rights includes details of that inequality.
- 3If there were changes in outstanding stock, those are described (or noted as none).
- 4For every shareholder agreement, either a signed or unsigned Form 972 is attached to the income tax return.
- 5If foreign shareholders exist, withholding taxes have been paid if necessary.
- 6The corporation has verified that the consent dividend amount relates only to 'consent stock' (not preferential).
- 7The form is attached to the corporation’s income tax return for the relevant tax year.
How to file this form
- 1Complete all required fields on Form 973, including identifying the corporation and detailing share counts.
- 2Attach Form 973 to the corporation’s income tax return for the tax year the deduction is claimed.
- 3For each shareholder agreement, attach either a signed or unsigned Form 972 to the same income tax return.
- 4If nonresident aliens/foreign shareholders are involved, ensure the required withholding taxes have been paid and report them using Forms 1042, 1042-S, and/or 1042-T. Confirm payment receipt.
Known limitations
- 1A consent dividend deduction can only be taken for the amount stated on Form 972.
- 2The stock involved must be 'consent stock' as defined in section 565(f)(1).
- 3The stock must not be a 'preferential dividend' as defined in section 562(c).
- 4The amount must constitute a 'dividend' as defined in section 316 if actually paid.
- 5For nonresident aliens or other foreign shareholders, the corporation must pay any withholding tax it would have withheld if the dividend had been actually paid.
Field map
Compact field-by-field guide
General Info
2 items
Full legal name and taxpayer identification number (SSN or EIN).
Current mailing address.
Details
2 items
Complete all applicable sections of this form according to the official IRS instructions.
Enter the relevant dollar amount if this form involves tax calculation.
Certification
1 items
Read and acknowledge any certifications required by this form.
Signatures
1 items
Sign and date. Unsigned forms cannot be processed.
Almost done reviewing the fields?
Fillable formOpen in Editor->The current edition is Revision November 2016 (Rev. 11-2016). The source indicates that information about Form 973 and its instructions can be found at www.irs.gov/form973.
What changed or needs a fresh check
- Edition date — confirm the revision reads November 2016 (Rev. 11-2016)
- OMB Control Number — confirm it reads 1545-0123
- Tax Year Range — confirm the form covers tax years beginning 20, and ending 20.
- Filer Identification — ensure the Corporation's Employer identification number is entered.
- Stock Details — verify that both 'Number of shares outstanding on first day' and 'last day' are provided.
Quick Facts
Downloads
After you file
- 1Attach Form 973 to the corporation’s income tax return for the tax year the deduction is claimed.
- 2For each shareholder who agreed to treat the consent dividend as a taxable dividend, attach either the signed Form 972 or an unsigned Form 972 with matching information.
- 3If the corporation submits an unsigned Form 972, it must retain the original, signed Form 972 in its records.
- 4For foreign shareholders receiving a Form 972, the corporation must use Forms 1042, 1042-S, and 1042-T to report and send the tax withheld.
Sources
- SRCForm 973 is filed by a corporation claiming a consent dividend deduction under section 565 (Instructions p.2).
- SRCThe estimated burden for business taxpayers filing Form 973 is approved under OMB control number 1545-0123 (Form p.2).
- SRCA consent dividend deduction may only be taken to the amount stated on Form(s) 972 (Instructions p.2).
- SRCThe corporation must attach Form 973 to its income tax return for the year the deduction is claimed (Instructions p.2).
- SRCIf a distribution was not made on all shares of any class, the filer must describe this unequal treatment (Form p.1).
- SRCIf stock outstanding on the last day of the year is entitled to cumulative dividends, show unpaid amounts from earlier years at the beginning of the tax year (Instructions p.2).
Common confusion points
Who needs to file Form 973?
Corporations that reasonably believe they are subject to accumulated earnings tax, personal holding companies, foreign personal holding companies, regulated investment companies, or real estate investment trusts.
→ Check if your entity type matches one of the listed groups.
What happens when a dividend isn't paid on every share class?
The corporation must describe any unequal treatment in the section designated for that purpose.
→ Look at the space provided on Form 973 to ensure you detail the disparity.
Must I attach a signed or unsigned Form 972?
You can attach either the signed Form 972 or an unsigned Form 972, as long as it contains the same information stated on the signed version.
→ If you use the unsigned version, ensure you keep the original signed copy in your files.
What if a stock class is entitled to cumulative dividends?
Show the amount for earlier years unpaid at the beginning of the tax year and specify the class(es) involved.
→ Review Page 2 of Form 973 before completing the section regarding last-day outstanding stock.
If I receive a Form 972 from a foreign shareholder, what is my next step?
The corporation must pay any withholding tax it would have withheld if the dividend had been actually paid.
→ Verify that you are prepared to file Forms 1042, 1042-S, and 1042-T.
What is the purpose of Form 973?
It is filed by a corporation claiming a consent dividend deduction under section 565.
→ Confirm that your claim relates to a consent dividend deduction.
Workflow map
Related forms and next steps
Before
Current
After
Often used with
⚠ If something goes wrong
- Form 1042 (Annual Withholding Tax Return for U.S. Source Income of Foreign Persons) — Used to report withheld tax from foreign persons.
- Form 1042-T (Annual Summary and Transmittal of Forms 1042-S) — Used to summarize and transmit the tax withheld from multiple 1042-S forms.
Questions about IRS Form 973
What is IRS Form 973 used for?
This form allows a corporation to claim a tax deduction for dividends that shareholders agreed upon but were not actually paid out. By filing Form 973, the corporation documents these 'consent dividends' so they can reduce its taxable income. It is attached to the company’s main income tax return.
Who must file IRS Form 973?
A corporation may file IRS Form 973 if it reasonably believes it is subject to accumulated earnings tax, personal holding companies, foreign personal holding companies, regulated investment companies, or real estate investment trusts.
What information does IRS Form 973 require?
The form collects the name and Employer identification number of the corporation. It also requires details such as the Class of stock, Number of shares outstanding on first day of tax year, and Description of dividend rights.
When is IRS Form 973 due?
Form 973 is filed for a specific tax year beginning 1/1/20__ and ending 12/31/20__. The filing must accompany the corporation’s income tax return for that tax year.
Where do I file IRS Form 973?
The form must be attached to the corporation’s income tax return. If submitting an unsigned Form 972, the corporation must retain the original, signed Form 972 in its records.
How do I complete IRS Form 973?
First, complete all sections detailing the stock and dividend rights. Next, attach Form 973 directly to the corporation’s income tax return for the relevant year. Finally, ensure that if any shareholders agreed to this deduction, they have also attached their signed (or unsigned) Form 972.
What happens if IRS Form 973 is filed incorrectly?
Failing to provide the required information may result in the IRS being unable to figure and collect the right amount of tax from the corporation.
Who needs to file Form 973?
Corporations that reasonably believe they are subject to accumulated earnings tax, personal holding companies, foreign personal holding companies, regulated investment companies, or real estate investment trusts. Check if your entity type matches one of the listed groups.
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