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Hedge Fund Tax

Hedge Fund Tax is part of Formidium's tax services group. We offer a full suite of tax services to solve any complexities and challenges in tax calculations, reporting, and filings for hedge funds that trade or invest in any asset classes, including public/private equity, commodities, fixed income products, OTC, digital assets, and fund of funds. We offer our all-inclusive tax services to a vast network of managers and funds located globally.

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Why Hedge Fund Tax ?

Hedge Fund Tax is part of Formidium's tax services group. We are a licensed CPA firm located in Downers Grove, IL serving over 350 clients for their tax reporting. Our experienced and qualified tax service team includes 50+ individuals to handle tax filings and reporting of schedule K-1s for your investors. We use our in-house technology platform to fetch, clean, and sanitize transactional data, calculate capital gains/losses using various methods, reconcile and process a high volume of data, and tax lot accounting. 

Using our proprietary technology, our tax specialists provide you with industry-leading tax support coupled with the highest level of client service, because cutting-edge technology and high-touch client service are at the core of everything we do. 

Services we offer

We provide comprehensive tax services across entity's entire lifecycle, as described below:

  • Review of private placement memorandum tax section.
  • Preparation of U.S. federal returns (1065, 1120, 1120-S), and state tax returns for all U.S. states, including composite tax returns, handling state filing fees, state tax withholdings, etc.
  • Preparation of all supporting and additional tax forms that are filed along with federal and state tax returns. (Form 8949, 4797, 8825, 8990, 8082, 8832-B, etc.)
  • Preparation of federal and state schedule K-1 reporting for investors.
  • Partner tax allocations using appropriate allocation methods.
  • Preparation and compliance with foreign investments. (Form 5471, 8865)
  • U.S. tax reporting and compliance for Non-U.S. investors. (Form 1042, 8804, 8805)
  • Preparation of international reporting tax forms K-2 and K-3.
  • Preparation of other miscellaneous forms like Form 1099s, name change, address change forms, and many more.
  • Preparation of responses to IRS and state revenue notices.
  • Offering and organizing cost amortization, book-to-tax reconciliations, maintaining tax basis for investor's capital and fund's investment, and handling the assignment of interest from one investor to another.
  • Tax lot level capital gain/loss calculations, wash sales calculation.
  • Carried interest reporting under IRC 1061.

We provide comprehensive tax services across entity's entire lifecycle, as described below:

  • All the items covered for U.S. Funds/Entities.
  • Preparation of foreign partnerships, blocking corporations' tax returns, including foreign master-feeder structures.
  • Analysis of the entity's structure to determine its applicable U.S. tax filings. (Passive foreign investment company vs. controlled foreign corporation determination)
  • Filing applicable tax forms for Non-U.S. funds/entities, including Form 8621, 5472 reporting.
  • Preparation of K-1 equivalent forms for Non-U.S. entity/fund's investors, including PFIC/CFC reporting.

We provide specialized tax services tailored to the requirements of hedge funds including analysis and tax adjustments for:

  • Incentive fee/Profit tax allocation, management fees allocation.
  • Recharacterization of Long-term capital gains ( carried interest ) as per section 1061.
  • Stuffing allocations for redeemed partners, aggregate allocation of trading income including Full netting and partial netting approach.
  • Calculation and allocation of business interest expense limitations as per section 163 J.
  • Qualified business income deduction.
  • Passive Activity Losses/At-Risk Limitations reporting's.
  • Section 475(f) mark to market allocation, section 1256 Contracts/Straddle/short sales rules/constructive sales adjustments and allocations
  • Footnotes and relevant disclosures on K-1s.
  • Reporting Dividend details i.e. Domestic vs Foreign, Section199-A, 897,1250, REIT dividend, capital gain distribution etc.
  • Handling PTP and Underlying Investment's K-1s.
  • Investor vs. Trader analysis and its implications.
  • Itemized deductions and net operating losses
  • Wash sales calculations
  • Reporting of Recourse and non recourse liability
  • Dividend expense adjustments as per section 263H.
  • Gross receipts calculations as per section 448.
  • Contribution and Distribution-in-kind adjustments
  • Handling and reporting cross border investments.
  • Preparing all the additional forms and schedules like Form 8865/8804/8805/8949/8990 etc.
  • Tax withholding and reporting for foreign investors.