by Ariful | Aug 27, 2026 | US Updates
TITLE: Preparing for the IRS FIRE System Retirement: Your Guide to IRIS and the Foreign Filer TCC Registration System
The IRS is retiring the FIRE system in 2026. From 1 January 2027, IRIS will become the sole electronic filing system for information returns, including current-year forms, prior-year forms and corrections.
This change matters if your UK, EU or other international business files US information returns. It is especially important if you issue Forms 1099 to US contractors or file Form 1042-S for US-source income paid to foreign persons.
The IRS has also introduced a Foreign Filer TCC Registration System. This gives eligible overseas filers a route to obtain the credentials needed to transmit returns electronically through the International Data Exchange System (IDES).
The key message: prepare before the FIRE deadlines
Do not wait until the 2027 filing season. Your filing system, user access and supporting data should be ready during 2026.
The important dates are:
| Date |
What happens |
| 1 November 2026 |
Last day to file test information returns through the FIRE Trading Partner Test System |
| 9 November 2026 |
Last day to modify existing FIRE IR Applications for TCCs |
| 19 November 2026 at 3:00 p.m. ET |
Final deadline to file information returns through FIRE |
| December 2026 |
FIRE becomes read-only after its filing activity ends |
| 1 January 2027 |
IRIS becomes the sole electronic intake system for information returns |
The IRS has also stopped accepting new FIRE applications for Transmitter Control Codes. Existing FIRE applications can only be updated until the relevant 2026 deadline.
You can review the current requirements on the IRS FIRE system retirement page.
Understand what IRIS replaces
The Information Returns Intake System, or IRIS, is the IRS platform replacing FIRE for electronic information return filing.
IRIS supports:
- Forms 1099 and other information returns.
- Form 1042-S.
- Current-year filings.
- Prior-year filings.
- Corrections.
- Automatic extension requests.
- Manual entry or CSV uploads through the taxpayer portal.
- Application-to-application filing through approved software.
From 1 January 2027, you cannot continue using FIRE for electronic submissions. A FIRE Transmitter Control Code is also not an IRIS credential. You must apply for a separate IRIS TCC if your authorised user has a US tax identification number.
The IRS states that electronic filing is mandatory when you have 10 or more information returns. This threshold applies from tax year 2023 and is generally calculated by aggregating covered information returns rather than counting each form type separately.
For example, you may reach the threshold by combining:
- Six Forms 1099-NEC for US contractors.
- Two Forms 1099-MISC.
- Two other applicable information returns.
That total may require electronic filing even if you have fewer than 10 forms of any single type.
Review the IRS IRIS electronic filing guidance before deciding which filing route applies to your business.
Check whether your business can use IRIS directly
IRIS requires authorised users to complete IRS identity verification. The normal process requires the user to hold a US taxpayer identification number, such as:
- A Social Security number (SSN).
- An Individual Taxpayer Identification Number (ITIN).
This created a practical barrier for many overseas businesses. A responsible officer or employee of a UK or EU company may have no SSN or ITIN, even when the business has a US EIN and reporting obligations.
If your authorised user has an SSN or ITIN, use the standard IRIS application process. Do not use the Foreign Filer TCC Registration System in that situation.
If your authorised users do not have an SSN or ITIN, the new foreign filer route may apply.
Use the Foreign Filer TCC Registration System if eligible
The IRS announced the Foreign Filer TCC Registration System in IRS Bulletin No. 2026-06, issued on 4 May 2026.
The system is designed for foreign filers whose authorised users lack an SSN or ITIN and therefore cannot obtain or maintain an IRIS TCC directly.
An approved foreign filer registration provides the credentials needed to transmit eligible information returns through IDES, including:
- Forms 1042-S.
- Applicable Forms 1099.
- Other information returns supported by the process.
The Foreign Filer TCC is separate from both FIRE and IRIS credentials. You cannot use a FIRE TCC or IRIS TCC to transmit returns through IDES.
Read the IRS Foreign Filer TCC Registration guidance and its official FAQs before registering.
Gather the information required for registration
Prepare your registration details before starting. The process requires several connected accounts and identifiers.
You will generally need:
-
An EIN for the foreign business.
The legal name entered during registration must match the legal name used when the EIN was issued. Matching the records correctly will reduce avoidable delays.
-
A Login.gov or ID.me account.
This provides secure access to the Foreign Filer TCC Registration System.
-
A responsible officer or authorised point of contact.
The responsible officer completes the registration and acts as the primary contact.
-
A TCC GIIN.
The TCC Global Intermediary Identification Number supports the TCC request and IDES enrolment.
-
A Foreign Filer TCC.
This is a system-specific five-character identifier used for IDES submissions.
-
IDES enrolment.
You must enrol with the International Data Exchange System to transmit the relevant returns.
The responsible officer must also serve as the IDES account administrator. Keep the Foreign Filer ID and all registration credentials in a secure internal record. Losing access can disrupt your filing process at a critical deadline.
See how the change affects international ecommerce sellers
Example 1: A UK seller paying US contractors
Suppose your London-based ecommerce company uses US-based designers, customer support contractors or marketing specialists.
You should review:
- Whether each payee is a US person or foreign person.
- Whether you collected the correct Form W-9 or Form W-8 series documentation.
- Whether the payments require a Form 1099, such as Form 1099-NEC.
- Whether your total information returns reach the 10-return electronic filing threshold.
- Which authorised user will manage the IRS filing account.
If the authorised user has no SSN or ITIN, the Foreign Filer TCC route may be necessary. Do not assume that your UK company’s EIN alone gives you access to IRIS.
Example 2: A UK or EU business paying foreign persons from US-source income
Form 1042-S is used to re
by Ariful | Aug 27, 2026 | EU VAT Updates
TITLE: Key Australian Tax and Super Deadlines: 28 August 2026 Compliance Update
Thursday 27 August 2026 brings two urgent Australian compliance deadlines, a final opportunity to comment on proposed Dynamic PAYG instalment guidance, and significant proposed reforms for self-managed superannuation funds.
This update is relevant to businesses and trustees across Sydney, Melbourne, Brisbane, Perth, Adelaide and Canberra. It also matters to international sellers with Australian entities, including digital businesses, ecommerce brands and growing SMEs trading across the UK, USA, Canada, Australia and Europe.
Complete these two urgent deadlines by Friday
You have until Friday 28 August 2026 to complete the following obligations where they apply.
1. Lodge your 2025–26 TPAR electronically
The 2025–26 Taxable Payments Annual Report (TPAR) is due by 28 August 2026.
The report covers relevant contractor payments made between 1 July 2025 and 30 June 2026. The ATO no longer accepts paper TPAR lodgments, so you must lodge electronically through an approved channel, such as ATO online services or SBR-enabled accounting software.
If you do not need to lodge a TPAR for the year, submit a non-lodgment advice by the same date where applicable. This helps prevent unnecessary ATO follow-up.
Use the ATO TPAR lodgment guidance to confirm your reporting position.
2. Lodge and pay Q4 SGC where required
The quarter 4 2025–26 Superannuation Guarantee Charge (SGC) statement and payment are also due by 28 August 2026 if employee superannuation was not paid in full and on time.
Check your payroll records now. Confirm:
- Superannuation contributions were calculated correctly.
- Payments reached the employees’ funds by the required date.
- Any shortfall or late payment has been identified.
- The SGC statement is ready if a shortfall exists.
- The full SGC amount can be paid by the deadline.
Do not treat this as an ordinary payroll reconciliation. Late super can create additional administrative and cash-flow pressure.
Review Dynamic PAYG instalment changes before consultation closes
The ATO is preparing to introduce Dynamic PAYG instalments from 1 July 2027.
Under the proposed system, eligible small and medium businesses will be able to opt in to reporting and paying PAYG instalments monthly. The calculation will use an ATO-approved method embedded in accounting software.
This approach is intended to align instalment payments more closely with current business performance. That may help businesses manage cash flow when profits change during the year.
The opportunity is particularly relevant to:
- Subscription-based digital businesses.
- Agencies with uneven monthly revenue.
- Ecommerce sellers with seasonal sales.
- Growing companies managing international transactions.
- Businesses experiencing rapid changes in expenses or profitability.
Understand draft PCG 2026/D3
The ATO has published draft Practical Compliance Guideline PCG 2026/D3. It explains the ATO’s proposed compliance approach to the general interest charge (GIC) on excessive PAYG instalment variations.
The draft states that the ATO will not allocate compliance resources to apply or collect GIC where a taxpayer:
- Uses the Dynamic PAYG calculation method as intended.
- Takes reasonable care with the data and values entered.
- Maintains reliable accounting records.
- Avoids actions or omissions that compromise the accuracy or completeness of the inputs.
This is not a blanket exemption. Your bookkeeping data still needs to be complete and credible. Incorrect sales figures, missing expenses or poorly reconciled bank accounts can undermine the calculation.
Submit comments by 28 August
Comments on PCG 2026/D3 close on 28 August 2026.
If your business, accounting software provider or professional body has concerns about how the proposed method will work in practice, submit feedback before the consultation closes. The ATO consultation material provides the relevant details.
The proposed framework is discussed in the PwC Australia August 2026 Monthly Tax Update.
Prepare for proposed SMSF safeguards
Assistant Treasurer Daniel Mulino announced a proposed SMSF reform package following the collapses of Shield and First Guardian. The proposals are designed to reduce the risk of scams, financial abuse, misconduct and poor consumer outcomes.
They are not law yet. Legislation must still be developed and passed. Existing SMSF requirements continue to apply unless and until the proposals become law.
What the proposals could change
The package could introduce the following requirements and powers:
- The ATO could stop rollovers into a new SMSF where there is a well-founded suspicion of consumer harm or scam activity.
- New SMSF trustees may need to satisfy basic knowledge or education requirements before operating a fund.
- SMSFs may need a uniquely identifiable bank account.
- A written investment strategy may need to be in place before a new fund accepts rollovers.
- Newly established SMSFs may need to disclose whether a financial adviser assisted with establishment.
- New disclosure requirements may include the fees charged for establishment or ongoing advice.
- Annual supervisory costs may increase from $253 to $295.
- SMSFs may contribute to the Compensation Scheme of Last Resort (CSLR), with the estimated cost expected to be less than $20 per fund per leviable period for most funds.
The Treasury fact sheet outlines the proposed consumer protection measures. Further reporting was published by Accountants Daily.
Strengthen governance now
You do not need to wait for legislation to improve your SMSF controls.
Use this checklist:
- Keep a current written investment strategy.
- Reconcile the fund bank account regularly.
- Verify rollover instructions independently.
- Be cautious of unsolicited investment approaches.
- Confirm adviser identities and fee arrangements.
- Keep trustee decisions and supporting documents.
- Investigate unusual payment requests before transferring funds.
- Store fund records securely and restrict account access.
These steps support stronger governance today. They may also make future compliance changes easier to implement.
Check GST registration if you operate a religious institution
The ATO issued updated guidance on 24 August 2026 clarifying GST registration for religious institutions.
A not-for-profit religious institution must consider the updated guidance carefully. The clarification affects how these entities determine their GST registration obligations and whether they need to be registered for goods and services tax.
If your institution receives donations, government funding or other forms of income, you should review your current GST status against the new guidance. The ATO has indicated that the updated rules aim to provide greater certainty for religious institutions about when GST registration is required.
Seek professional advice if you are uncertain whether the updated guidance changes your existing GST registration position. This is particularly important if your institution has multiple branches or operates across state borders.
by Ariful | Aug 26, 2026 | US Updates
TITLE: Backup Withholding on Third-Party Network Transactions: What International Sellers Must Know
The IRS and Treasury have finalized new backup withholding regulations for third-party network transactions. The change matters if your UK or international business receives US-related ecommerce payments through platforms such as PayPal, Venmo, or similar payment networks.
The rules restore the $20,000 and 200-transaction thresholds for many third-party settlement organizations. However, the lookback rule can still trigger withholding from your first payment of the following year.
Act now: understand the rule change
Treasury Decision 10053, titled Backup Withholding on Third Party Network Transactions, adopts the January 2026 proposed regulations without change.
The final rule was filed on 7 August 2026 and published in the Federal Register on 10 August 2026. It became effective on 10 August 2026.
The regulations apply to payments made in calendar years beginning after 31 December 2024. This means they apply to payments made from 2025 onwards.
The rules reflect changes made by the One Big Beautiful Bill Act to Internal Revenue Code Section 3406.
Check both thresholds before withholding starts
A third-party settlement organisation, or TPSO, generally does not need to apply backup withholding to third-party network payments unless both conditions are met during the calendar year:
- Gross reportable payments to the payee exceed $20,000.
- The number of reportable transactions exceeds 200.
These are the same thresholds now used for Form 1099-K reporting for third-party network transactions.
The conditions are cumulative. Crossing only one threshold does not normally activate the de minimis rule for that year.
However, the timing of the trigger is important.
Withhold from the transaction that crosses the threshold
The platform must apply backup withholding to:
- The entire transaction that causes the payee to exceed the relevant threshold later in time.
- Every subsequent transaction paid to that payee during the same calendar year.
This is not limited to the amount above $20,000. The entire triggering payment can be subject to withholding.
Federal Register Example 1
The final regulations provide this example:
- Platform A makes 201 payments to a payee during 2026.
- The payments total $20,000.01.
- The payee has not supplied the required taxpayer identification number.
- The 201st payment causes the transaction count to exceed 200 and the payment total to exceed $20,000.
Platform A must apply backup withholding to the entire 201st transaction and to later transactions during 2026.
This example assumes the payee is otherwise subject to backup withholding. A properly documented foreign payee may be treated differently, as explained below.
Do not miss the lookback rule
The most important operational point is the preceding-year lookback rule.
If one or more payments to the payee were reportable third-party network payments in the preceding calendar year, the de minimis exception does not apply in the current year.
As a result, backup withholding can apply from the first payment of the current year, even if the payee has fewer than 200 transactions and receives less than $20,000.
Federal Register Example 2
The regulations provide the following example:
- In 2026, the platform made reportable payments to the payee.
- In 2027, the platform makes 199 payments totalling $18,000.
- The 2027 payments are below both thresholds.
Backup withholding still applies to each 2027 payment because the platform made reportable payments to the payee during 2026.
This creates a year-to-year compliance link. You must review the previous year’s platform reporting status before assuming that the current year’s totals are below the threshold.
Apply the correct rate: 24% is backup withholding
The backup withholding rate under Section 3406 is a flat 24%.
For example, if a payment platform processes a $1,000 payment that is subject to backup withholding, it may withhold $240 and pay the remaining $760, subject to the platform’s treatment and reporting process.
Backup withholding is generally a prepayment of federal income tax. If it is shown on your information return, you may generally claim it as federal income tax withheld on the relevant tax return.
The IRS confirms the 24% rate in Topic No. 307, Backup Withholding.
Give foreign-status documentation to the platform
International sellers should not automatically complete Form W-9.
A foreign individual will generally provide Form W-8BEN. A foreign company or other foreign entity will generally provide Form W-8BEN-E when requested by the payment platform or withholding agent.
These forms document non-US status. Where the platform can rely on valid documentation and the applicable payment rules are satisfied, the payee may not be treated as a US person for Form 1099-K and backup withholding purposes.
The IRS states that:
Keep the documentation current. Review it when your legal entity, address, ownership, tax status, or payment arrangements change. Missing, expired, incomplete, or invalid documentation can cause a platform to apply the wrong withholding treatment.
Separate 24% backup withholding from 30% foreign withholding
Do not confuse backup withholding with chapter 3 or chapter 4 withholding.
- Backup withholding: generally 24%, usually connected with US payee identification and certification issues.
- Foreign-person withholding: commonly 30% on certain US-source fixed or determinable annual or periodical income, unless a treaty or another exception reduces the rate.
The 30% rate is not the backup withholding rate.
A valid W-8 form documents foreign status. It does not automatically eliminate every possible US withholding obligation. The payment type, source, entity status, treaty position, and platform classification still matter.
For that reason, review your platform account classification and withholding statements together. Do not rely only on the percentage shown on a payment statement.
Continue reporting all income
The absence of Form 1099-K does not make income non-taxable.
The preamble to T.D. 10053 expressly confirms that the taxability of income and your obligation to report income are not determined by:
- Whether you receive Form 1099-K.
- Whether the platform files Form 1099-K.
- Whether backup withholding applies.
- Whether your payments remain below the reporting thresholds.
You must continue recording and reporting your gross business income under the rules applicable to your entity and activities.
The thresholds are reporting and withholding rules. They are not a tax-free allowance.
Work through these international seller examples
UK Amazon FBA seller
Suppose a UK limited company sells through Amazon and receives payments through a US payment network. The business uses a US warehouse and may also work
by Ariful | Aug 25, 2026 | Australia Updates
TITLE: Key Tax and Super Deadlines: TPAR, SGC and Payday Super Updates for Australian Businesses
As at Tuesday, 25 August 2026, Australian businesses have two immediate compliance checks before the end of the week:
- Lodge your 2025–26 Taxable Payments Annual Report (TPAR), or submit a non-lodgment advice, by 28 August 2026.
- If June-quarter super was late, lodge and pay the Superannuation Guarantee Charge (SGC) by 28 August 2026.
- Prepare your payroll process for Payday Super, which applies to qualifying earnings from 1 July 2026.
- Distinguish between enacted MIT capital-loss ordering rules and draft AMIT-related Tranche 2 measures.
This update applies across Australia, including businesses operating in Sydney, Melbourne, Brisbane, Perth, Adelaide and Canberra, as well as international sellers with Australian entities, contractors, employees or investment structures.
ATO position today: no new media release identified
Our review of the ATO’s publicly available news and media pages did not identify a new ATO media release dated 25 August 2026.
The deadlines below are based on existing official ATO requirements and published guidance. The managed fund development now needs to be split accurately between enacted MIT loss-ordering rules and separate draft Tranche 2 measures that remain subject to consultation outcomes.
1. Lodge your 2025–26 TPAR by 28 August
Check contractor payments before Friday
Your business may need to lodge a Taxable Payments Annual Report if it paid contractors for relevant services during the year ended 30 June 2026.
The main TPAR service categories are:
- Building and construction.
- Cleaning.
- Courier and road freight.
- Information technology.
- Security, investigation or surveillance.
For many businesses, the relevant services must represent a significant part of the business’s income. The ATO commonly refers to the 10% income threshold when determining whether the TPAR obligation applies.
This can affect digital businesses, agencies, software companies and growing SMEs that use IT contractors. It can also affect businesses that outsource courier, fulfilment, cleaning or security functions.
Payments must generally have been made during the 2025–26 financial year. An invoice that remained unpaid at 30 June may not belong in that year’s TPAR.
Submit a non-lodgment advice if no TPAR is required
If the ATO expects a TPAR but your business does not need to lodge one for 2025–26, submit a TPAR non-lodgment advice by 28 August 2026.
This may apply where:
- You did not pay contractors for reportable services.
- Reportable services were not a significant part of your business income.
- You stopped paying contractors and no longer expect to lodge TPARs in future years.
Submitting the advice helps close the reporting expectation and can reduce unnecessary ATO follow-up.
Use electronic lodgment only
The ATO no longer accepts paper TPAR lodgments. Submit the report electronically through:
- Online services for business.
- SBR-enabled accounting software.
- Online services for agents if your registered agent lodges for you.
A non-lodgment advice must also be submitted electronically through the appropriate ATO service.
Understand the new contractor pre-fill effect
For tax time 2026, TPAR information will be used to pre-fill income for contractors in the relevant industries.
This creates an important reconciliation point:
- Your business reports payments made to the contractor.
- The ATO uses the reported data for contractor pre-fill.
- The contractor checks the pre-filled amount against their own records.
Most TPAR data becomes available after businesses lodge their reports. Contractors who lodge tax returns in July or early August may not yet see all TPAR information. They must still check their own records and include all relevant income.
Accurate TPAR reporting helps reduce mismatches, amendments and possible refund repayment issues.
Official ATO sources: TPAR overview, lodge your TPAR, and TPAR non-lodgment advice.
2. Check June-quarter super before the 28 August SGC deadline
Separate the 28 July fund deadline from the 28 August SGC deadline
The June quarter covered 1 April to 30 June 2026. Ordinary super contributions for that quarter were required to reach employees’ super funds by 28 July 2026.
If the required super did not reach the fund by that date, you generally need to:
- Lodge a Superannuation Guarantee Charge statement – quarterly.
- Pay the SGC to the ATO by 28 August 2026.
The 28 August deadline is therefore not an extension for paying ordinary June-quarter super into the fund. It is the deadline for reporting and paying the charge where the original super payment deadline was missed.
Do not assume a late contribution fixes the June quarter
For the June 2026 quarter, the ATO has confirmed that the late payment offset is not available. A late contribution cannot simply be used to reduce the SGC in the usual way.
Contributions received on or after 29 July 2026 may instead be dealt with under the new Payday Super framework. Review the payment date, fund receipt date and employee earnings period carefully before finalising the SGC statement.
This is particularly important if payroll teams in Sydney, Melbourne or Brisbane processed payments close to the transition date, or if international payroll providers were involved.
3. Implement Payday Super from 1 July 2026
Calculate 12% of qualifying earnings
From 1 July 2026, Payday Super requires employers to calculate super at 12% of qualifying earnings.
Qualifying earnings can include:
- Ordinary time earnings.
- Commissions.
- Salary sacrifice contributions.
- Other amounts previously included in salary or wages for super guarantee purposes.
Super contributions must generally be received by the employee’s fund within seven business days of each payday.
The change requires more than a payroll rate update. You should also check:
- Payroll software settings.
- Pay-cycle dates.
- Super clearing-house processing times.
- Fund receipt confirmations.
- Single Touch Payroll reporting.
- Reconciliation between payroll, bank payments and super records.
A contribution leaving your bank account is not the same as a contribution being received by the employee’s fund. Build in processing time to avoid late payment exposure.
by Ariful | Aug 25, 2026 | US Updates
TITLE: 2026 US Tax Rules for International Sellers: 1099-K, Remittance Tax, and Form 5472 Updates
If you sell into the US from the UK or another country, several 2026 rules require immediate attention.
The federal Form 1099-K threshold has reverted. A new 1% remittance transfer tax applies to certain physical-money transfers. Foreign-owned US LLCs must also maintain accurate Form 5472 and foreign tax identification number records.
This daily update explains what has changed and what you should do next.
1. Form 1099-K threshold returns to $20,000 and 200 transactions
The One, Big, Beautiful Bill retroactively reinstated the previous federal threshold for third-party settlement organisations (TPSOs).
For 2026, a TPSO generally must issue Form 1099-K when both conditions apply:
- Gross reportable payments exceed $20,000.
- The number of reportable transactions exceeds 200.
This applies to many marketplace and payment network transactions, including certain Amazon, PayPal and other platform payments.
The IRS confirmed this position in Fact Sheet FS-2025-08 and its Form 1099-K FAQs.
Payment card transactions follow a different rule
Do not apply the $20,000 and 200-transaction test to payment card transactions.
Credit and debit card payments remain reportable for any amount. There is no federal minimum threshold or de minimis exception for payment card transactions.
This means a Shopify seller could receive a Form 1099-K for card payments even when the total is below $20,000.
State reporting may still use a $600 threshold
The federal threshold does not override state reporting rules. Some states continue to require reporting at much lower levels, including $600 thresholds.
Examples commonly relevant to international sellers include:
- Maryland
- Massachusetts
- Vermont
- Virginia
- Montana
- North Carolina
- District of Columbia
State requirements can change independently. A seller may therefore receive a Form 1099-K for state reporting even when the federal TPSO threshold is not met.
Example: UK Amazon seller below the federal threshold
Suppose your UK business sells $18,500 through a US marketplace in 240 transactions.
You may not receive a federal Form 1099-K because your gross payments do not exceed $20,000. However:
- The income is still taxable and must be included in your records.
- A state may apply a lower reporting threshold.
- Marketplace and payment statements must still be reconciled to your bookkeeping.
- Refunds, returns, fees and sales tax collections must be separated from gross revenue.
No Form 1099-K does not mean no reporting obligation. You must report all business income, whether or not a form is issued.
2. The 1% remittance transfer tax now applies to certain physical transfers
The IRS issued proposed regulations on 10 April 2026 under IR-2026-48.
The new tax applies from 1 January 2026 to certain remittances sent from the US to a foreign country.
The key point is the payment method. The tax applies when the sender provides a physical instrument such as:
- Cash
- A money order
- A cashier’s check
- A traveller’s check
- A similar physical instrument
The sender is legally liable for the tax. Remittance transfer providers must generally collect it, make semimonthly deposits and report it quarterly on Form 720.
The first semimonthly deposits were due on 29 January 2026. Notice 2025-55 provides limited relief from failure-to-deposit penalties for providers during the first three quarters of 2026.
Routine electronic transfers may be treated differently
Do not assume that every transfer from a US business bank account is subject to the 1% tax.
The proposed rules focus on covered remittance transfers where the sender provides cash or a similar physical instrument to the provider. The treatment of bank transfers, cards and checks can differ, so you should retain the payment method and provider records for every cross-border transfer.
Example: repatriating profits from a US entity
A US LLC owned by a UK company sends $50,000 to the UK through a remittance provider. If the sender uses a cashier’s check or cash, the potential tax is:
The sender remains liable, even though the provider normally collects the amount.
Record the transfer separately from ordinary operating expenses, owner distributions and intercompany payments. This will help you determine whether the transfer falls within the final rules and support your reporting position.
3. Form 5472 enforcement remains a major risk for foreign-owned US LLCs
A foreign-owned US disregarded entity can be treated as a reporting corporation for Form 5472 purposes.
Generally, the entity must file Form 5472 with a pro forma Form 1120 when it has reportable transactions with its foreign owner or another related party.
Common reportable activity can include:
- Capital contributions
- Distributions
- Loans and repayments
- Payments to or from a foreign owner
- Related-party service charges
- Inventory or platform arrangements
- Formation, acquisition or dissolution transactions
A business does not avoid the filing requirement simply because it has no US income tax liability.
Understand the Form 5472 penalties
The IRS instructions provide for:
- $25,000 for each failure to file a complete and correct Form 5472 on time.
- An additional $25,000 for each 30-day period, or part of a period, when the failure continues more than 90 days after IRS notification.
- No maximum limit on continuation penalties.
- Separate exposure for different related parties and reporting corporations in applicable circumstances.
The IRS Form 5472 instructions also confirm that a substantially incomplete form can be treated as a failure to file.
An IRS notice should be treated as urgent. Responding quickly can help prevent the continuation penalty from increasing.
Example: foreign-owned Amazon FBA LLC
A UK owner operates a US LLC for Amazon FBA sales. During the year:
- The UK owner contributes $30,000 to fund inventory.
- The US LLC pays a US warehouse.
- The owner withdraws $20,000.
- The LLC pays related-party service fees to the UK company.
These transactions need to be reviewed and classified correctly. The LLC may have Form 5472 obligations even if Amazon collected the sales tax and the LLC paid little or no federal income tax.
4. Keep FTIN and W-8 documentation valid
Foreign owners and companies regularly provide Forms W-8BEN or W-8BEN-E to US payers and withholding agents.
For entities, the foreign tax identifying number (FTIN) is generally entered on Form W-8BEN-E, Part I, line 9b. If an FTIN is required but missing or invalid, the form may not support treaty benefits or the intended w
