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Foreign-owned US LLC filing tax forms with the IRS

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Topcat

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Aug 15, 2023
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#1
I'm aware that a foreign-owned US LLC has to file forms 1120 and 5472 by April 15th every year to avoid a $25k fine.

Filling out form 1120 was very straightforward. Just requires entering the company name and address in the section at the top, the EIN number in section B at the top and also checking a box in section E. Job done.

Form 5472 requires more work though and I don't know what to enter in some of the fields:

"4d Country of citizenship, organization, or incorporation" is this asking for country of my citizenship (UK) or incorporation (US)?

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"1n Country(ies) under whose laws the reporting corporation files an income tax return as a resident" What to put here? I'm not a resident in my home country the UK so I don't file a return there and was told not to by HMRC because I don't spend enough time in the UK for that. I'm also not an official resident of anywhere else. I move around and don't have an official residence. So what to put in this field? Or is it okay to just leave it blank?

"1o Principal country(ies) where business is conducted" - Same issue. If I put the UK it's not really true.

"4a Name and address of direct 25% foreign shareholder" - Same issue in all the below.
"4c Principal country(ies) where business is conducted"
"8a Name and address of related party"
"8f Principal country(ies) where business is conducted"
"8g Country(ies) under whose laws the related party files an income tax return as a resident"

Can anyone shed any light on what to write in any of the fields of form 5472 listed above please?
 
#3
daniels27 said:
Form 1120 should also include the business activity code
Click to expand...
The resource you linked above says there's no need for that on form 1120.
Nice resource though, thanks. It doesn't answer my confusion about things from the form such as "Principal country(ies) where business is conducted", when I don't have an official residence anywhere.

"Country(ies) under whose laws the direct 25% foreign shareholder files an income tax return as a resident" - this too. If you don't file a return anywhere because you're not resident anywhere, what to put here?
 
#5
daniels27 said:
I think you should get some residence somewhere for this case. I mean what address you use to open a bank account?
Click to expand...
I used my parents UK address to open bank accounts. So as far as the banks are concerned, I'm UK based. The thing about the UK is, tax residence is decided using a clear cut days test. You're either in the UK enough days to be tax resident there, or you're not. I'm never there enough days each year to be classed as tax resident. Not even close. I had a letter from HMRC many years ago where they told me I shouldn't be filing tax returns there because I'm non-resident. So if the banks ever go to them about me, they'd see right away I'm non-resident and probably move on to the next because I always fail the residency days test.

I guess this applies to the IRS too? I could put on form 5472 that I'm in the UK, use UK address on the form. And if the IRS ever go to HMRC and say hey someone resident in your country is running a US LLC from there, just so you know...then HMRC would quickly find out I'm non-resident and move on to the next. Hopefully...

...Or would they tell the IRS I'm non-resident in the UK, and then I'd get questions from the IRS saying, "the UK told us you're not resident there, so where are you resident?" I don't know. If anyone can provide any clarity on this please drop a reply.

For the time being, in this first year of my LLC, filing form 5472 with NO company transactions, I think I'm going to just use my parents UK address even though I'm rarely there. I doubt the IRS will care or even look. Though eliciting on the form that I file a tax return in the UK is not true, so I'm uncomfortable with that.

But going forward you are right, I should be looking to establish a proper residency somewhere.

Again if anyone can provide any clarity on this, please drop a reply.
 
#6
4d is your personal citizenship
1o, 4c, 8f the IRS guidance says that you cannot put "worldwide" but have to name the countries. I guess, you just put a bunch of countries there were you actually lived.
4a, 8a just put an address where you can be reached at. I guess your parents.
8g if you do not file anything, you leave it empty. I personally would put UK, file it there and they discard it.
 
#7
Thanks. I ended up hiring a US-based tax attorney to handle it. Just for peace of mind. And he has recommended to use the UK as my tax residence on the form.

That makes sense I suppose. If the IRS tell HMRC that I declared myself tax resident in the UK, I'll then fail the UK's tax residency days test by a mile, so they'd have no case toward claiming I'm actually UK tax resident (unless they change the law, but as it stands, shouldn't be an issue). And for the IRS, well I'm foreign and have no US trade or business, so my income won't be taxable in the US, so they won't care if I declare the UK as my tax residence, especially as it's my citizenship country. So I think that's it sorted.
 
#8
Cool. How much are you paying? Any recommendations? Those US forms are really dangerous. I may want to get my forms checked too, any recommendation for somebody cheap and reliable would be appreciated.
 
#15
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