If you forget to file OR are late for filing Form 5472 and Form 1120 as a Foreign-Owned Single-Member LLC, then the fine from the IRS is $25,000. Read more about it here.

If your U.S. corporation is at least 25% owned by a foreign entity or person, then you’re required to file Form 5472 and Form 1120, which will report any business you had that was involved in US Trade or Business as well as let you know how much income tax liability you have. However, generally speaking, as long as you don’t have a physical presence in the US and are a purely online business, you will only need to make an informational filing in the US and not pay US income taxes (you’d then pay income taxes only in your home country). Physical presence = you are in the US, your employees are, you have a physical office etc! If none of these apply then you don’t have a physical presence.    Learn more here. You can also learn more about US tax filing requirements in our ultimate guide to US tax filings.

To learn more about US federal government taxes, check out our tax filing guide!    Requirements for each state vary. If you registered your company in the following States, then you don’t have to pay State Income Taxes. Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming, Tennessee, and New Hampshire.

The full name of a W9 is the “Request for Taxpayer Identification Number and Certification.” It is used for the business to report payments to freelancers that sum to more than $600 during the tax year. The W9 is an informational form used to prepare the 1099-NEC, which is what the IRS requires a business to report each year.    The W9 is not what is sent to the IRS. It is used to prepare the 1099. W9s are simply informational forms that are used to accurate prepare 1099s at year-end.

These forms are unlikely to apply to most beneficiaries that are paid by businesses.    In general, the W-8ECI is used for special instances in which a foreign individual receiving nonbusiness income would not be subject to the 30% tax as in forms W-8BEN and W-8BEN-E. Instead, the individual would be taxed at the same graduated rate as US citizens. The W-8EXP is primarily used by foreign governments, foreign tax-exempt entities, and any US possessed or foreign central banks. If you believe your business may need to use these informational forms, please contact our in-house CPA for a consultation on your specific business situation.

In the United States, individuals report their earnings from sources other than wages, salaries, or tips as a specific line of taxable income. Generally, individuals who receive payment as an independent contractor, who does not have taxes withheld from each paycheck, will rely on a form 1099 to accurately report their income on their personal return.    The 1099 series is relevant to businesses since many will pay individuals, freelancers, or other vendors for services rendered during the year. Other circumstances for 1099s to be issued include stockholders who receive dividends from a company or bank account holders who are paid interest. For companies that only hire full-time or part-time employees that are paid through payroll, the W2 would be the appropriate form. There are two main forms that are applicable to most entities in the United States: the 1099-NEC and 1099-MISC. Individuals who receive these forms would not be considered employees. As a final note, 1099s are only sent in relation to trade or business. Payment for personal services such as gardening at your house would not need to be reported through a 1099.

This form is the most common 1099 form reported in the US. If your business pays any independent contractors, freelancers, or other non-employees an amount of over $600 for services rendered during the tax year, your business will need to send a 1099-NEC to that taxpayer.    This rule applies to everyone that was paid by the business and is not considered an employee. Due to this, it is vital for companies to obtain accurate and complete W9s from any vendors, independent contractors, or freelancers that are being used as soon as possible.

The 1099-MISC is commonly used for any payments sent to individual taxpayers by the business that aren’t for services rendered. This includes any payments for rent, payments for prizes, payments for royalties, as well as other miscellaneous income outside of the realm of employment.

All entities are required to send 1099s by mail during February in the year that taxes are reported. For each instance of non-compliance (failure to send a 1099), the penalty is $250 per form. At doola, we are able to make sure these are filed on a timely basis to ensure compliance.

Form 6166 is the TRC for the United States, with the official IRS title being “Certification of US Tax Residency.” It is used by US residents to show foreign governments that they are eligible for tax treaty benefits.    Example: A US resident who works as an engineer travels to Norway to work for a few weeks out of the year on a new pipeline. He was paid by a Norwegian company for work performed in Norway. To avoid being taxed at the higher rates in Norway and instead claim those wages in the US, he would need to present a US TRC: Form 6166. At doola, we can assist our customers with directly obtaining this form.

While Form 6166 is the official TRC used to show residency, the actual application for IRS Form 6166 is Form 8802, the “Application for United States Residency Certification.”    This form would be submitted to the IRS to obtain Form 6166. For any clients seeking to obtain this, doola can assist in the application process. Some of the requirements for application include that the applicant has filed an appropriate income tax return in the year of their request and did not file as a nonresident in the year of the request.