When you're ready to start a small business in the US, you quickly realize that The American Dream may not be as glamorous as it seems! The administrative slog, the bureaucratic red tape, and the jolly taxman all wait with towering expectations and vague directions. Luckily, there is help for those in need.
Whether you're an American filing your small business taxes from abroad or a future US citizen filing for your US-based small business, finding expert guidance is the name of the tax game. Does it seem like you, a person with a brain and the ability to read, should be able to file yourself? Of course it does. Will you succeed if you try? Maybe. Could a mistake be catastrophic? Absolutely. Allow yourself to bypass the frustration of filing on your own and get some tax help for small businesses from people who know how to do it.
Tax Help for Small Businesses: Forms, Forms, Forms
You will need targeted help for your small business depending on the services you provide, the number of employees you have, the income you generate, and the nature of your work. However, there are a few tax forms that all small businesses need, no matter what they do.
Questions about what to pay, how, and when, should be directed to a CPA with specialized experience in foreign-owned U.S. businesses. However, some primary universal forms can help foreign entrepreneurs get started. Before sharing those general forms, though, here are a few things to remember:
- Small foreign-owned businesses in America first must become single-member LLCs, which can then file as a disregarded entity (DE). A DE is a sole proprietorship.
- A DE is treated like a corporation in America, but don’t panic! You're not paying corporate taxes. The IRS simply asks that your DE reports information in the same way that corporations do.
With those technicalities and their meanings out of the way, here are the tax forms that every foreign-owned business owner must complete:
- Form 1120 - US Corporation Income Tax Return
This form just wants the name and address of the foreign-owned “DE”, plus items B and E on the first page.
- Form 5472 - Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business
This form reports transactions with a foreign or domestic “related party.” What is a foreign party, you may ask? And what exactly does “related to” mean? These are good questions with tricky answers. Best to engage tax help for your small business for this form.
- Form 1116 - Foreign Tax Credit
This form is essential and often overlooked! Filing 1116 will defray the taxes you pay in America because you already pay an income tax in your country of residence.
- Form 114 - Report of Foreign Bank and Financial Accounts (FBAR)
114 is another form that needs expert consultation. This form relates to foreign accounts related to a U.S.-based business or business owner. The reason for reporting these accounts relates to a U.S.-based business owner's tax responsibilities in their home country or country of residence.
Tax Help for Small Businesses: What If We Aren’t An L.L.C./DE?
You will need additional guidance f your business is a foreign-owned partnership, a C corporation, an S corporation, or any other business structure. When you’re looking for expert information and tax help for small businesses, contact Accountants Without Borders for the support you need. Our diverse, knowledgeable team works tirelessly to ensure that all business owners receive the clear, comprehensive guidance they need to run a small business aligned with the tax laws in whatever country they operate.