Set Up an IC-DISC for Foreign Sales Resulting in Initial $32,000 Tax Savings
We assisted a client with setting up an IC-DISC (C Corporation) because of their substantial sales to foreign customers. The manufacturing company (S Corporation) calculates a commission based on foreign sales and pays it to the IC-DISC. This provided the S Corporation a deduction from ordinary income. The IC-DISC turned around and paid a dividend to the S Corporation for the same amount, and the IC-Disc pays no tax. The S Corporation reports dividend income taxed at 23.8% versus ordinary income taxed at 39.6%. For this client, that was a tax savings $32,000 in the first year.