USA Tax Compliance

What is typically due each year

• Federal income tax return — Form 1120 for a corporation, 1065 for a partnership, or a Schedule for a single-member LLC
• Form 5472 with a pro forma 1120, for a foreign-owned single-member LLC, regardless of income
• State income or franchise tax return in each state where registered
• State annual report or statement of information
• Delaware franchise tax, where incorporated there
• Payroll filings and Forms W-2, where there are employees
• Forms 1099, where contractors were paid above the threshold
• Sales tax returns, where nexus exists in a state

Form 5472 is the one that catches people

A single-member LLC wholly owned by a non-US person must file Form 5472 together with a pro forma Form 1120 each year, reporting transactions between the LLC and its foreign owner. This includes the formation contribution itself.

The filing is informational, not a tax return in substance, and the penalty for failing to file is substantial and assessed per year. Indian owners who form an LLC and assume no filing is needed because there was no US income frequently accumulate several years of exposure before discovering it.

Economic nexus for sales tax

Sales tax is a state matter, and states now assert nexus based on economic activity rather than physical presence. Crossing a state’s revenue or transaction threshold creates a registration and collection obligation there.

For a business selling into many states, the compliance load can be considerable and it is easy to accumulate obligations unknowingly. Marketplaces collect and remit in many states on the seller’s behalf, which reduces but does not eliminate the position.

The Indian side runs in parallel

• The overseas entity must be disclosed in Schedule FA of your Indian return
• An Annual Performance Report is due for the entity each year under the overseas investment rules
• The FLA return applies where the Indian entity holds the foreign asset
• Income taxed in the US may attract treaty relief in India, subject to documentation

How we handle it

1. 1 Mapping the obligations We establish which federal, state and informational filings apply, since the informational ones carry the largest penalties.
2. 2 Preparing the books The year is closed and transactions with the foreign owner identified separately for Form 5472.
3. 3 Federal filing The federal return and any informational forms are prepared and filed.
4. 4 State filings State returns, annual reports and franchise tax are filed in each state where registered.
5. 5 Nexus review Sales activity is reviewed against state economic nexus thresholds to identify any new obligation.
6. 6 Indian coordination We align the position with your Indian Schedule FA disclosure and overseas investment reporting.

Frequently asked questions