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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Workflow for Investment Fund
Year-End Tax Returns

This video illustrates the workflow for Investment Fund Year-End Tax Returns, the process follows the execution of a service engagement between our clients and us, and concludes upon the submission of tax returns to the relevant tax authorities, including forms like 1065, 1040, 1120, and 1120-S. Additionally, we ensure the distribution of tax statements to Investors and vendors, such as Schedule K-1, Form 1099, and 1042-S.









Why Hedge Fund Tax?

Hedge Fund Tax is part of Formidium's tax services group. We are located in Downers Grove, IL serving the tax reporting needs of over 600+ Funds and have licensed CPAs leading our tax practice. Our experienced and qualified tax service team includes 75+ 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 Tax Accounting & Allocation Technology, Seamless Tax, 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.

Seamless Tax

Seamless Tax is our proprietary tax accounting and allocation technology, a part of our flagship fund accounting software, SeamlessTM. The tax accounting and allocations technology redefines and streamlines the process of calculation & allocation of capital gain/other incomes/expenses, federal/state returns preparation, tax schedules such as K1s, and informational returns such as 1099s and 1042s for SPV. This tax accounting and allocation technology enables tax professionals and practitioners to spend more time on tax data analysis and handling complex tax matters.

Seamless Tax can handle complex allocations & waterfall calculations, allocation of tax numbers received on K1/1099 received from underlying passthrough investment, generates fund level taxable income/loss numbers and investor level tax numbers after different adjustments as per the tax provisions. It can generate a lot wise capital gain (loss) report with bifurcation of gain (loss) in short/long-term.

Seamless Tax ensures that all investor-level tax allocations are calculated efficiently and books vs. tax adjustments are tracked & reconciled. It has good quality controls which ensures efficient and accurate processing of tax returns, K-1s,1099s, and other tax schedules required by US tax returns for investment funds.

Client Testimonial

"Hear what Rob Topping, has to say about his experience with our tax returns services"

Rob Topping

Founder and Managing Member - Topping Capital

Client Testimonial

"Hear what Sharad Daswani, has to say about his experience with our tax returns services"

Sharad Daswani

Founding Member - Spru Crew Investor Circle

Client Testimonial

"Hear what Indra Chandra, has to say about his experience with our tax returns services"

Indra Chandra

CFA Managing Member - CIG Spectrum Capital, LLC