Hi community!
I know a lot of you are facing this issue so I want to explain how I was able to do this.
I own 100% of shares in a Delaware C Corporation. I live and work from Ecuador. Last year (2021) I have to fill the form 5472 as I received payments from my C Corp.
I used a service on 2020 to fill the form 1120 and as the my C Corp was just created it barely had any transactions. But I found it to be very useful to do everything online.
However, if you have to fill the form 5472 you HAVE to send everything by email or fax. With no notice if the form was accepted or everything was received.
So, this is what I did:
1.- I still use TA to fill the 1120 form. I love that they have e-file and a confirmation when the IRS accepted the form. The price is way cheaper that hiring an accountant with no e-filing option.
2.- Instead of me receiving payments directly from my C Corp, for my management and tech work. I coordinate with a friend to invoice the company (he use Paypal invoices), and receive the payments.
3.- As I didn’t receive any money directly from my C Corp, I avoid file the form 5472 so I can use TA to do everything online.
In my country I can invoice my friend and receive my money.
As mentioned by the IRS: Corporations file Form 5472 to provide information required under sections 6038A and 6038C when reportable transactions occur with a foreign or domestic related party.
My friend is not a related party. So everything is fine. However it’s important for you to notice:
I know a lot of you are facing this issue so I want to explain how I was able to do this.
I own 100% of shares in a Delaware C Corporation. I live and work from Ecuador. Last year (2021) I have to fill the form 5472 as I received payments from my C Corp.
I used a service on 2020 to fill the form 1120 and as the my C Corp was just created it barely had any transactions. But I found it to be very useful to do everything online.
However, if you have to fill the form 5472 you HAVE to send everything by email or fax. With no notice if the form was accepted or everything was received.
So, this is what I did:
1.- I still use TA to fill the 1120 form. I love that they have e-file and a confirmation when the IRS accepted the form. The price is way cheaper that hiring an accountant with no e-filing option.
2.- Instead of me receiving payments directly from my C Corp, for my management and tech work. I coordinate with a friend to invoice the company (he use Paypal invoices), and receive the payments.
3.- As I didn’t receive any money directly from my C Corp, I avoid file the form 5472 so I can use TA to do everything online.
In my country I can invoice my friend and receive my money.
As mentioned by the IRS: Corporations file Form 5472 to provide information required under sections 6038A and 6038C when reportable transactions occur with a foreign or domestic related party.
My friend is not a related party. So everything is fine. However it’s important for you to notice:
- My C Corp did had profits and I did pay the tax accordingly. I don’t encourage to avoid tax payments and you should always consult a professional to avoid errors.
- You can use this method to avoid filing the form 5472 but I do encourage to do everything legally. Signing a contract with a trusted local friend or business to avoid problems. Again, if you have doubts, consult a professional.
- Don’t try to do this with your immediate family invoicing your C Corp, as they are considered related parties by the IRS. You can read more about this here.
- I do have knowledge in business management, I do recommend using an online service to fill your taxes if you can understand the topics related to pay taxes.
- Always pay your taxes at least one month prior the deadline. Last year I was almost not able to fill the forms thinking that I will be able to do everything online.
- Learn as much as you can in this or related forums. I own a lot to the knowledge shared by other entrepreneurs in this community.
- If all this is too confusing. Hire a professional. But learn everything you can first. I have a partner that spend more than 10 times what he should by simply trusting an online accountant.
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