The 2026 Compliance Revolution: New Forms and Stricter Oversight
For business owners and expats, the 2026 filing season (reporting 2025 income) is not “business as usual.” The IRS has rolled out a suite of new schedules designed to capture global income with surgical precision.
At KKCA, we are identifying three major shifts that will define your tax experience this year.
1. The Death of “GILTI” and the Birth of NCTI
As discussed in previous posts, the One Big Beautiful Bill Act (OBBBA) has officially rebranded GILTI as Net CFC Tested Income (NCTI). But it’s more than a name change.
- The Formula Shift: The 10% deduction for tangible assets (QBAI) has been eliminated. You are now taxed on the entirety of your foreign company’s net income.
- The Rate Adjustment: The new effective tax rate is approximately 12.6% (up from 10.5%).
- Foreign Tax Credit (FTC) Relief: The “haircut” on foreign tax credits has been reduced from 20% to 10%, meaning you can use more of the taxes you paid in India or Europe to offset your U.S. bill.
2. Meet Schedule H-1 (Form 5471)
If you own a foreign corporation, say hello to Schedule H-1. This is a brand-new mandatory attachment for the 2026 filing season.
- Purpose: It tracks your Controlled Foreign Corporation’s (CFC) “Adjusted Net Income” specifically for the Corporate Alternative Minimum Tax (CAMT).
- The Catch: Even if your company has $0 in income, the IRS instructions state that the schedule must still be filed with “one or more zero amounts” to be considered a complete return.
3. The New York LLC Transparency Act
If your foreign company operates via a U.S. LLC authorized to do business in New York, you face a new state-level deadline.
- Requirement: Effective January 1, 2026, foreign-owned LLCs in NY must disclose Beneficial Ownership Information (BOI) to the NY Department of State.
- Penalty: Failure to comply can lead to the suspension of your authority to do business in the state and significant monetary fines.
4. Enhanced AI Matching for FBAR & 1099-DA
The IRS has officially activated its “Digital Asset Data Matching” engine for 2026.
- Form 1099-DA: Expect to receive this form from your crypto brokers by February 17, 2026.
- Automated Flags: If the 1099-DA shows a higher volume of sales than your tax return, the IRS’s new AI tools will flag the discrepancy for an automated letter audit (CP2000).
5. Your 2026 “Clean-Up” Strategy
The complexity of these new rules means that “self-filing” is riskier than ever. At KKCA, we recommend:
- CAMT Review: Determining if your global group of companies triggers the new Alternative Minimum Tax thresholds.
- Basis Verification: Manually verifying the cost basis on your 1099-DAs before the IRS does.
- State Compliance: Ensuring your NY or California LLCs are up-to-date with new 2026 transparency filings.
The KKCA Promise
We don’t just file forms; we build a protective wall around your global wealth. Our 2026 workflow includes:
- Schedule H-1 Preparation: Ensuring your CAMT reporting is accurate from Day 1.
- NCTI Optimization: Re-calculating your foreign business distributions to leverage the new 10% FTC haircut.
- AI-Proofing: Pre-matching your FBAR and 1040 data to avoid automated IRS inquiries.
Looking for personalized tax services about your specific tax situation, please contact us. We are here to help you with your specific tax matters.
Disclaimer
This blog is intended for informational purposes only and does not constitute legal or tax advice. Please consult a qualified U.S. CPA or tax attorney for guidance specific to your situation.