QUESTION: I noticed that the PROFORMA 1120 AND 5472 only ask about transactions with me as the foreign owner, not with third parties outside the U.S. Are we not required to report those transactions?
EXPERTS ANSWER:
It is correct that you are not required to report transactions with third parties on Form 5472 and the Proforma 1120 if those transactions were directly handled by your LLC and do not involve related parties. The primary focus of these forms is to document transactions between the LLC and its foreign owner(s) or other related entities. This is designed not for the assessment of taxes directly but for information purposes to track potential transfer pricing, money laundering, illicit financing activities, information sharing and to ensure compliance with U.S. tax regulations concerning related party transactions.
Despite the specificity of these forms towards related parties, it is crucial for you as the owner to continue monitoring your overall tax obligations. Particularly, if your activities generate income that could be taxed in the U.S., you should consider whether additional filings are necessary, such as Form 1040-NR if you are an individual, or Form 1120-F if the ownership entity is a foreign corporation.
Given the complexities of U.S. tax law, especially in relation to international business activities, you might find it helpful to consult further with a CPA who specializes in this field. They can provide tailored advice, ensuring that all potential tax liabilities are accurately addressed and that you are fully compliant with U.S. tax obligations.
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