IRS Regulation

Summary of What This Blog Covers

• Dormant LLCs can still require federal and state filings.
  
  
• Filing needs depend on tax classification and state rules.
  
  
• States may charge annual fees or franchise taxes despite no activity.
  
  
• You can maintain, reinstate, or dissolve the LLC to stay compliant.
  
  

You started your LLC with big plans. Maybe it was going to be your main business, a side hustle, or a stepping stone to something larger. But life and business have a way of changing course. Perhaps you paused operations to focus on another project. Maybe you decided to wait for better market conditions. Or perhaps your priorities shifted altogether.

Now your LLC is sitting dormant. There is no income, no expenses, and no activity. That can feel like a non-event from a tax perspective. Many owners assume that if nothing happened, nothing is due.

That assumption can be expensive.

Even with zero activity, a dormant LLC can still have tax filing and compliance requirements at both the federal and state level. If you ignore them, penalties can accumulate, your LLC can lose its good standing, and bringing it back to life later can cost much more than maintaining it now.

The good news? Once you understand what is required for your specific situation, you can keep your dormant LLC compliant with minimal time and expense. This guide will show you how to do exactly that.

Why a Dormant LLC Still Has Obligations

The IRS and state agencies do not look at your LLC the same way you do. You see inactivity and think “no taxes.” They see a registered legal entity with ongoing obligations, regardless of whether it was active.

The confusion comes from two main areas:

1. Mixing up federal and state rules
   Federal rules are set by the IRS and apply across the country. State rules vary widely. Your state might require an annual report or franchise tax just for the privilege of keeping your LLC registered. In many states, failing to file will result in late fees, interest charges, and eventually administrative dissolution.
2. Not knowing your LLC’s tax classification
   An LLC is flexible in how it is taxed. It can be taxed as a sole proprietorship, partnership, S corporation, or C corporation. Filing requirements and potential penalties depend on that classification, not on your activity level.

The first step is knowing exactly how your LLC is taxed. A licensed CPA, tax accountant near you, or tax advisor in Austin can confirm your classification by reviewing your IRS election forms and state registration.

Federal Filing Requirements by LLC Type

Even with no revenue or expenses, the IRS often still expects a return. The exact form depends on your LLC’s tax classification.

Single-Member LLC (Default Sole Proprietorship Status)

• IRS Form: Typically reported on the owner’s IRS Form 1040 Schedule C.
  
  
• No income: If there is truly no activity and no expenses, you may not need to file Schedule C. However, if you have any deductible expenses such as state fees, bank charges, or professional services, it’s worth filing to document the loss.
  
  
• Why file anyway: Filing helps you maintain a clean paper trail and can reduce the risk of IRS scrutiny later.
  
  

Multi-Member LLC (Default Partnership Status)

• IRS Form: Form 1065 (U.S. Return of Partnership Income).
  
  
• Requirement: Must be filed annually, even with no activity.
  
  
• Penalty for late filing: $240 per partner per month, up to 12 months.
  
  
• Why it matters: Even if you made no money, this form tells the IRS that your LLC exists, is in good standing, and that you are reporting transparently.
  
  

LLC Taxed as an S Corporation

• IRS Form: Form 1120-S.
  
  
• Requirement: Required every year, regardless of activity.
  
  
• Penalty for late filing: $245 per shareholder per month, up to 12 months.
  
  
• Why file on time: Filing late can add up quickly. For example, a two-shareholder LLC filing six months late would face $2,940 in penalties.
  
  

LLC Taxed as a C Corporation

• IRS Form: Form 1120.
  
  
• Requirement: Must file annually. Even if your revenue is $0, the IRS can penalize you for failing to file.
  
  
• Extra caution: C corporations may also need to make estimated tax payments during the year, depending on their situation.
  
  

An experienced tax preparer near you or Austin, Texas CPA can quickly determine which forms apply and whether any elections or status changes were made in prior years that affect your current obligations.

State-Level Requirements for a Dormant LLC

State compliance is where many owners are caught off guard. The rules differ dramatically from state to state.

Annual Reports
 Many states require an annual or biennial report to confirm your LLC’s details, such as address, members, and registered agent. This applies even if there was no business activity.

Franchise Taxes
 Some states, like Texas, charge a franchise tax based on revenue. Even if your LLC earns no revenue, you may still need to file a “No Tax Due” report to avoid penalties.

Flat Fees
 Certain states impose a flat annual fee on LLCs, regardless of activity. California is well known for its $800 annual franchise tax.

State Examples:

• Texas: Requires an annual Franchise Tax Report and Public Information Report. Even $0 revenue LLCs must file a no-tax-due report.
  
  
• Delaware: Annual franchise tax due regardless of activity. Missing it can result in dissolution.
  
  
• Florida: Annual report due every year, even with no business activity.
  
  

A tax consultant near you or an Austin small business accountant can research your state’s requirements in minutes and help you calendar them to avoid late fees.

Choosing the Best Path for Your Dormant LLC

If your LLC is inactive, you have three main choices:

1. Maintain the LLC

• File required federal and state forms on time.
  
  
• Pay annual fees and taxes, even if minimal.
  
  
• Pros: Keeps your entity in good standing, protects your business name, and makes reactivation simple.
  
  
• Cons: Ongoing cost, even if you’re not using it.
  
  

2. Reinstate the LLC

• If your LLC has been administratively dissolved for non-compliance, you can pay back fees and penalties to restore it.
  
  
• Pros: Keeps your original formation date, which may help with credit history and branding.
  
  
• Cons: Can be expensive if the LLC has been inactive for years.
  
  

3. Dissolve the LLC

• File dissolution paperwork with your state to officially close the entity.
  
  
• Pros: Ends future filing requirements and costs.
  
  
• Cons: If you want to use the entity again, you must refile, possibly losing the original name or paying higher fees.
  
  

A chartered professional accountant or certified public accountant near you can run the numbers to see which option is most cost-effective for your plans.

Building a Low-Stress Compliance Routine

You can keep a dormant LLC compliant with just a few steps each year:

1. Know your deadlines
   
   

• Federal: Typically March 15 for partnerships and S corps; April 15 for sole proprietors and C corps.
  
  
• State: Varies, often tied to the anniversary of formation or a fixed annual date.
  
  

1. Keep records organized
   
   

• Maintain digital copies of your EIN, state formation documents, and past returns.
  
  
• Store securely, especially any documents with SSNs or EINs.
  
  

1. Check in annually with a CPA
   
   

• Even if you think nothing changed, a tax professional near you or Austin accounting service can confirm no new filing requirements apply.
  
  

1. Use a compliance calendar
   
   

• Mark recurring due dates and set reminders at least a month in advance.
  
  

The Risk of Ignoring Dormant LLC Obligations

It’s tempting to think nothing will happen if you skip filings for a dormant LLC. Unfortunately, that’s not the case. The risks include:

• IRS Penalties: Even an informational return like Form 1065 can carry significant late fees.
  
  
• State Penalties: Late fees and interest charges accumulate quickly.
  
  
• Administrative Dissolution: Your LLC can be dissolved by the state, forcing you to reinstate or start over.
  
  
• Loss of Name Rights: If your LLC is dissolved, someone else can register your business name.
  
  

An Austin tax accountant or taxation accountant can assess your situation and create a catch-up plan if you’ve already missed deadlines.

Dormant LLC as a Strategic Asset

A dormant LLC doesn’t have to be a burden. It can be a strategic tool for the future:

• Protects your brand name from competitors.
  
  
• Holds intellectual property, trademarks, or even real estate.
  
  
• Provides a ready-to-go legal structure when you’re ready to relaunch.
  
  

But it only works in your favor if it’s kept in good standing.

How Insogna Helps

At Insogna, we guide business owners through every step of dormant LLC compliance. We:

• Identify your exact federal and state filing requirements.
  
  
• Prepare and file necessary returns such as Form 1065, 1120-S, or state franchise tax reports.
  
  
• Calculate whether maintaining or dissolving your LLC is the most cost-effective choice.
  
  
• Create a simple compliance system so you never miss a deadline.
  
  

Whether you need tax preparation services, fbar filing, or ongoing tax help from a CPA near you, we deliver clarity, accuracy, and peace of mind.

Your Next Step

If you’re unsure whether you owe taxes or filings for your dormant LLC, don’t wait until penalties arrive. The fix is often much simpler and cheaper when handled early.

Contact Insogna today to get a clear compliance plan that protects your LLC, avoids unnecessary penalties, and keeps your business ready for whatever’s next.

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Summary of What This Blog Covers

• W-9: For U.S. contractors to provide tax details for 1099 NEC.
  
  
• W-8: For foreign contractors to confirm non-U.S. status and treaty benefits.
  
  
• 1042-S: Reports certain U.S.-source payments to foreign persons.
  
  
• Correct forms prevent penalties, withholding errors, and IRS issues.
  
  

If your business has grown enough to hire contractors, congratulations. That means your reach is expanding, your workload is growing, and you’re building a network of talented people to help you achieve your goals. But if you’ve hired a mix of U.S. and international contractors, you’ve probably discovered something that’s far less exciting than the work itself: IRS tax forms.

For many business owners, especially those without a small business CPA in Austin or experienced tax preparer near them, the terms W-9, W-8, and 1042-S can blur together. They all sound official. They’re all from the IRS. And they all seem like something you “just have to fill out.” But the truth is, each serves a completely different role in U.S. tax compliance.

Getting them right matters. Getting them wrong can lead to penalties, extra taxes, or payments withheld unnecessarily from your contractors.

In this guide, we’re going to slow down, unpack each form, explain when it’s needed, and walk through real examples so you can make confident, informed decisions.

Why This Matters More Than Most Business Owners Realize

When you hire someone, whether it’s a web designer across town or a software developer across the ocean, you are not just building your business. You’re also creating a relationship that has legal and financial obligations.

If you collect the wrong form, you risk:

• Filing incorrect 1099 NEC forms or 1042-S forms.
  
  
• Triggering IRS penalties for missing or wrong information.
  
  
• Applying the wrong withholding rate, which can frustrate your contractors and damage trust.
  
  
• Leaving yourself exposed in the event of an IRS audit without proper documentation.
  
  

In other words, the right form is about more than compliance. It’s about protecting your reputation, your contractors’ trust, and your business finances.

W-9: The Contractor ID for U.S. Workers

The W-9 tax form is the starting point for paying independent contractors, freelancers, and vendors who are U.S. persons or U.S.-registered businesses. Think of it as a business ID card for tax purposes, it tells you exactly how to report what you pay them.

When you use a W-9:

• The contractor is a U.S. citizen, U.S. resident alien, or U.S. entity (corporation, LLC, partnership).
  
  
• The contractor is providing services, not classified as an employee.
  
  

What it collects:

• Legal name and, if applicable, business name.
  
  
• Federal tax classification (individual, partnership, corporation, LLC, etc.).
  
  
• 
  
  
• Taxpayer Identification Number (TIN), either a Social Security Number (SSN) or Employer Identification Number (EIN).
  
  

Why it matters:
 You will use the information from the W-9 to prepare a 1099 NEC form at year-end if the contractor was paid $600 or more. Without a valid W-9, you risk filing with incorrect details or having to apply 24% backup withholding on their payments.

Example scenario:
 A creative agency in Austin hires a U.S.-based marketing strategist for a year-long retainer. They skip collecting the W-9, assuming they already have the strategist’s LLC name from their contract. At tax time, the IRS rejects the 1099 NEC because the LLC name and EIN don’t match its records. The agency now has to chase down updated info, refile, and risk late penalties.

W-8: The International Contractor Certificate

When your contractor is not a U.S. person, the W-9 doesn’t apply. Instead, you’ll need a W-8 form to certify their foreign status.

There are several versions:

• W-8BEN — For non-U.S. individuals.
  
  
• W-8BEN-E — For non-U.S. entities.
  
  
• W-8ECI, W-8EXP, W-8IMY — For more specialized situations (effectively connected income, exempt payees, and intermediaries).
  
  

Why it matters:

• It confirms the contractor is a non-U.S. person and documents their foreign tax residency.
  
  
• It allows you to apply reduced withholding rates if a tax treaty exists between the U.S. and their country.
  
  
• Without it, the default IRS rule may require you to withhold 30% of certain payments.
  
  

Expiration rule:
 W-8 forms are valid until the last day of the third calendar year after signing. That means a W-8 signed in May 2025 expires on December 31, 2028.

Example scenario:
 An Austin, Texas CPA hires a Canadian software engineer as an independent contractor. With a W-8BEN on file, the contractor qualifies for reduced withholding under the U.S.-Canada tax treaty. Without it, the CPA would be forced to withhold the full 30%, complicating the payment process and potentially harming the working relationship.

1042-S: Reporting Certain Foreign Payments

While the W-8 is about collecting contractor information, the 1042-S form is about reporting payments to the IRS. You, the payer, must file it if you pay U.S.-source income to a foreign person, and that income is subject to withholding.

When you might need to file a 1042-S:

• A foreign contractor performed work physically in the United States.
  
  
• You paid royalties, interest, or dividends considered U.S.-source income to a non-U.S. person.
  
  
• You withheld tax under IRS rules or a tax treaty.
  
  

Why it matters:
 It provides a record to both the IRS and the foreign recipient of what was paid and what, if any, withholding was applied. Failing to file it when required can lead to per-form penalties that add up quickly.

Example scenario:
 An Austin tech startup hires a designer from Spain. For three months, the designer works remotely from Austin. Because the work is physically performed in the U.S., the payments are U.S.-source income. The company must withhold taxes as required and file a 1042-S to document the payment.

Comparing W-9, W-8, and 1042-S

Why Misfiling Creates Bigger Problems Than You Expect

One incorrect form can trigger a chain reaction:

• Wrong form → Wrong reporting → IRS rejection or notice.
  
  
• Missed withholding → You’re liable for the tax you should have withheld.
  
  
• No documentation → You have no defense in an IRS audit.
  
  

This is especially important if you use QuickBooks Self-Employed, issue 1099 NEC forms, or have contractors in multiple countries. A solid form process is as critical as tracking invoices or paying bills on time.

Integrating Form Collection into Your Workflow

Here’s how to make this painless:

1. Collect forms at onboarding. Do not send the first payment until the correct form is on file.
   
   
2. Store securely. Use encrypted storage for sensitive information like SSNs and EINs.
   
   
3. Track expirations. Especially for W-8 forms, use reminders to collect new ones before the old ones expire.
   
   
4. Coordinate with your CPA. Your Austin tax accountant or tax advisor in Austin can confirm form accuracy and handle year-end filings.
   
   

How Insogna Helps

At Insogna, we work with clients across industries (creative agencies, tech startups, consultants, and e-commerce sellers) to make sure their contractor paperwork is correct from day one. We:

• Determine whether a W-9 or W-8 applies.
  
  
• Guide you through the nuances of treaty benefits and withholding.
  
  
• Prepare accurate 1099 NEC, 1042-S, and related IRS forms.
  
  
• Advise on related compliance like self-employment tax, 1040-ES estimated tax payments, and capital gains tax
  
  

When you have the right process, you avoid last-minute scrambles and create a smoother experience for both you and your contractors.

The Takeaway

If you remember nothing else from this guide, remember this:

• S. contractor? Collect a W-9.
  
  
• Foreign contractor? Collect the right W-8.
  
  
• Foreign contractor with U.S.-source income? Collect a W-8 and file a 1042-S.
  
  

Getting this right is one of the simplest yet most impactful steps you can take to protect your business and maintain strong working relationships. And when in doubt, bring in a licensed CPA or certified public accountant near you to review your setup.

Unsure which form applies to your global team? Let’s demystify your filing needs together. Whether you need a W-9 for a local freelancer, a W-8BEN for an overseas consultant, or a 1042-S for U.S.-source foreign payments, Insogna can guide you through each step with clarity, accuracy, and confidence.

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Summary of What This Blog Covers:

• Understand Which IRS Forms Your Foreign-Owned LLC Needs to File: Learn why Form 1120-F, Form 5472, and FBAR (FinCEN Form 114) are essential for international entrepreneurs with U.S. LLCs, even if your business had no income.
  
  
• Avoid Costly Tax Penalties Through Correct, Timely Filing: Discover how skipping or misfiling key tax forms can trigger $25,000+ in IRS penalties per year, and how a certified public accountant near you can help prevent it.
  
  
• Identify If You Have Effectively Connected Income (ECI): Get clear on whether your U.S. activity is taxable under IRS rules and why filing a protective 1120-F may be a smart safeguard for your business.
  
  
• Get Year-Round Support from a CPA Who Understands Cross-Border Taxes: Why working with a CPA in Austin or a specialist tax advisor near you makes all the difference when it comes to international compliance, deductions, and strategic tax planning.

If you’re an international entrepreneur running a U.S. LLC from abroad, you’re not alone and you’re in smart company. The U.S. market is a magnet for business growth, and foreign founders are using U.S.-based LLCs for everything from launching eCommerce brands to managing investment portfolios.

But here’s the twist: while it’s easy to set up a U.S. LLC online, U.S. tax compliance for foreign-owned LLCs is anything but simple. One missed form or misunderstood rule could cost you tens of thousands of dollars in penalties or worse, get you taxed on 100% of your revenue.

And trust us. We’ve worked with dozens of savvy entrepreneurs just like you who were bombarded with vague, contradictory advice from various tax preparers, international accountants, or the occasional Reddit comment thread.

If you’re confused about Form 1120-F, Form 5472, FBAR filing, or the difference between having ECI and not. This guide is your roadmap to clarity.

Let’s walk through how to file U.S. taxes the right way in 2025 for your foreign-owned LLC and avoid IRS penalties, overpaying taxes, and stress-inducing audits.

The Problem: Conflicting Advice and Costly Missteps

You’re not imagining it. The moment you formed a U.S. LLC as a non-resident, you entered a maze of forms, deadlines, and terminology that U.S.-based entrepreneurs rarely encounter.

Some tax professionals near you may tell you not to file anything at all. Others say you need a Schedule C or a Form 1120, neither of which are correct if you’re a non-resident owner.

The most common filing errors we see include:

• Not filing Form 1120-F for a foreign-owned LLC generating U.S. income
  
  
• Skipping Form 5472 when required
  
  
• Failing to file FBAR (Foreign Bank Account Report) when the LLC holds overseas assets
  
  
• Assuming there are no tax filings due because the LLC had no activity
  
  

Here’s the reality in 2025:

• Form 1120-F is critical if your LLC is engaged in a U.S. trade or business.
  
  
• Form 5472 is required even if your LLC had no income but had any reportable transactions.
  
  
• The IRS is using automated systems to detect non-filing, especially from foreign-owned disregarded entities.
  
  

Ignoring these filings is not a small mistake. Penalties start at $25,000 per form, per year. Add in late interest and IRS attention, and that simple LLC can become an expensive liability.

Who This Applies To

If you meet the following criteria, this blog is for you:

• You’re not a U.S. citizen or resident (no green card, no substantial presence).
  
  
• You own a single-member LLC or multi-member LLC in the United States.
  
  
• Your LLC does any business with U.S. clients, holds U.S. assets, or receives U.S.-sourced payments.
  
  
• You’re unsure whether your LLC’s income is taxable in the U.S.—and how to report it.
  
  

Whether you’re running an Amazon FBA, a SaaS platform, a U.S. investment fund, or simply using the LLC to collect client payments, it’s time to ensure you’re compliant.

The Solution: A Strategic, Step-by-Step Filing Plan for 2025

We’ve helped countless international founders turn their tax confusion into clean, confident compliance. Here’s how we guide our clients and how you can approach filing your U.S. taxes properly.

Step 1: Determine If Your LLC Has Effectively Connected Income (ECI)

ECI (Effectively Connected Income) refers to income that is connected to a trade or business in the United States. If your LLC sells goods or services in the U.S., delivers services to U.S. clients, or maintains a U.S. office or employees, your income is likely ECI.

What happens if you have ECI?

You must file Form 1120-F, the U.S. Income Tax Return of a Foreign Corporation. This allows you to:

• Report your U.S. income
  
  
• Claim legitimate deductions (COGS, advertising, software, contractor fees, etc.)
  
  
• Apply any tax treaty benefits between the U.S. and your home country
  
  

If you don’t file, the IRS may disallow all deductions and assess tax on gross receipts at a flat 30%.

Common Mistake:

Foreign owners filing a Schedule C (a form meant for U.S. citizens and residents) instead of 1120-F. Don’t do this. It’s inaccurate and may flag your return.

Step 2: If No ECI Exists—File a Protective 1120-F

Not sure if the IRS would classify your income as ECI? Play it safe. File a protective Form 1120-F by the due date (including extensions), and you preserve your right to deductions if the IRS later decides your income was taxable.

Without this filing, you may lose the ability to challenge the IRS or claim deductions, even if you acted in good faith.

Step 3: File Form 5472 + Pro Forma 1120

This one trips up even experienced tax pros.

Since 2017, the IRS has required foreign-owned single-member LLCs to file Form 5472, even if the LLC had no income. If there were any “reportable transactions” between the LLC and its foreign owner like capital contributions, loans, reimbursements, or management fees, you must file Form 5472 along with a pro forma 1120.

What counts as a “reportable transaction”?

• You transferred money to your LLC as a capital investment
  
  
• You paid yourself from the LLC
  
  
• You reimbursed yourself for expenses
  
  
• You loaned money to or borrowed from the LLC
  
  

Penalties: $25,000 per year, per form. Not including interest.

Step 4: Consider FBAR Filing Obligations

Did your U.S. LLC have more than $10,000 USD combined across foreign bank accounts at any point in the year? Then you may need to file an FBAR (FinCEN Form 114).

This is required under U.S. anti-money laundering laws even if your LLC owes no tax. FBAR is not filed with the IRS, but with the Financial Crimes Enforcement Network (FinCEN).

Missing FBAR deadlines can result in non-willful penalties of $10,000 per violation, and willful penalties up to $100,000 or 50% of the account balance.

A qualified certified public accountant near you with FBAR experience is essential here. Most tax preparation services near you or general tax offices don’t handle this correctly for foreign-owned entities.

Why You Need a Specialist Tax Advisor or CPA in 2025

The U.S. tax code is complicated enough for locals. For foreign business owners? It’s a labyrinth.

Here’s what a specialized CPA near you or tax advisor in Austin will help with:

• Evaluate whether your income is ECI
  
  
• Determine the correct filing requirements (1120-F, 5472, FBAR)
  
  
• Optimize tax treaty benefits
  
  
• File forms accurately and on time
  
  
• Avoid IRS notices, penalties, and audits
  
  

Many tax accountants near you and online tax services won’t touch Form 1120-F or understand the reporting nuances for foreign owners. Choose someone who’s done this many times before.

Ongoing Tax Planning, Not Just a One-Time Filing

Once your LLC is compliant, we shift from reactive to proactive. At Insogna CPA, we support global clients with:

• Quarterly check-ins to avoid surprises
  
  
• Strategic planning for expanding into the U.S. market
  
  
• Guidance on hiring U.S. contractors or employees
  
  
• Support with FBAR, 5472, and 1120-F compliance
  
  
• Annual tax preparation services tailored to international owners
  
  

We’re not your typical tax preparer near you. We’re your long-term tax strategy partner

Let’s Make U.S. Tax Compliance Simple for Your Foreign-Owned LLC

If you’ve read this far, you’re already ahead of the curve. Most foreign LLC owners don’t realize these requirements exist until the penalties start rolling in. You’ve got a real business to run. You don’t need to wrestle with the tax code.

Whether you’re in your first year or cleaning up past mistakes, now is the time to get it right. Especially with expert help from a certified public accountant in Austin who gets it.

Let Insogna CPA guide your global business with clear, compliant tax strategies. Book your consultation with one of the top-rated CPA firms in Austin, Texas today.

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Summary of What This Blog Covers:

• What IRS Form 1120-F Is and Why It Matters
  Learn how Form 1120-F helps foreign-owned U.S. LLCs report U.S.-connected income, claim deductions, and avoid being taxed on gross revenue.
  
  
• Who Needs to File and What Happens If You Don’t
  If you’re a non-resident running a U.S. LLC, you may be required to file Form 1120-F, even if you had minimal or no income. Skipping it or filing the wrong form, can lead to 30% taxation on gross income and loss of tax treaty protections.
  
  
• The Overlooked Forms: Form 5472 and FBAR
  Many non-resident LLC owners don’t know about Form 5472 or FBAR (FinCEN Form 114). This blog explains when these forms are required, how they’re triggered by common activities like capital contributions or holding foreign bank accounts, and what penalties apply.
  
  
• How Insogna CPA Simplifies Compliance for Global Founders
  Discover how our team helps international entrepreneurs navigate U.S. tax compliance with filing 1120-F, 5472, FBAR, and more. We offer year-round strategy, timely filings, and structure guidance, so you can grow your U.S. presence with confidence.

You’ve made the smart move: setting up a U.S. LLC as a non-resident entrepreneur to tap into one of the world’s most robust markets. You’ve got the branding, the payments rolling in, and your eye on growth. But then… tax season hits.

Suddenly, your inbox is full of emails with terms like Form 1120-F, Form 5472, and FBAR. Your tax software draws a blank. One tax preparer near you says you don’t need to file anything. Another says you need a Schedule C (spoiler alert: wrong). Now you’re left asking:

“What am I actually supposed to file and what happens if I don’t?”

Take a breath. We’ve walked this path with countless entrepreneurs just like you. At Insogna CPA, we make it our mission to guide global founders through U.S. tax filing with clarity and confidence especially when it comes to IRS Form 1120-F.

Let’s walk through what it is, who needs to file it, the risks of getting it wrong, and how we make it incredibly manageable.

What Is IRS Form 1120-F?

IRS Form 1120-F is the U.S. Income Tax Return of a Foreign Corporation. Think of it as your official U.S. handshake with the IRS. If you’re a non-resident owner of a U.S.-based LLC, especially a single-member disregarded entity, and you’re doing business in the U.S. or earning U.S.-source income, this is the form you must file to report that income.

It allows you to:

• Report your effectively connected income (ECI)—i.e., income tied to U.S. business activity
  
  
• Claim business deductions, such as advertising, contractors, cost of goods sold, and software
  
  
• Apply S. tax treaty benefits from your home country
  
  
• Avoid the IRS taxing gross revenue at a flat 30% (without deductions)
  
  

This form isn’t just a box to check. It’s a protective strategy that saves you money and avoids future problems.

Who Must File Form 1120-F?

If you’re not a U.S. citizen or resident (no green card, no substantial presence) and you own a U.S. LLC that is:

• Selling goods to U.S. customers,
  
  
• Delivering services to U.S. clients,
  
  
• Operating via a U.S. office, warehouse, server, or contractor,
  then you are engaged in a U.S. trade or business.
  
  

That means you have ECI, and the IRS expects to see your Form 1120-F.

Even if you’re not sure whether your activities count as “effectively connected,” it’s smart to file a protective 1120-F. Why? Because if the IRS decides years later that you were engaged in a U.S. trade or business, you’ll lose the right to claim deductions if you didn’t file.

If you’d rather be safe than sorry and keep more of your money, you need a qualified CPA tax accountant who handles foreign-owned entities regularly.

The Big Mistake: Skipping the Filing (or Filing the Wrong Form)

Let’s talk about what we see far too often:

• Business owners filing Schedule C (meant for U.S. individuals, not non-residents)
  
  
• LLCs reporting income on Form 1120 instead of 1120-F
  
  
• Skipping Form 1120-F entirely because “there was no income” or “I only made $5K”
  
  
• Assuming that Stripe, Amazon, or Shopify’s reporting satisfies the IRS
  
  

Here’s what happens when those mistakes go unchecked:

• The IRS may tax your gross income at a flat 30%, with no deductions allowed
  
  
• You lose the ability to claim treaty benefits, which could lower or eliminate your U.S. tax burden
  
  
• You face IRS penalties and interest, especially if you also miss Forms 5472 or FBAR
  
  

If your current tax preparer near you or tax services near you haven’t asked about 1120-F, 5472, or your international bank accounts, that’s your sign to find someone who understands global compliance.

Form 5472: The Form You Didn’t Know You Had to File

If your U.S. LLC is foreign-owned (that’s you) and you’ve had any reportable transactions with your foreign owner like a capital contribution, loan, reimbursement, or even a transfer of funds, you must file IRS Form 5472.

And here’s the kicker: even if your LLC had zero income, you’re still required to file Form 5472 with a pro forma Form 1120.

Failing to file = $25,000 penalty per year, per entity.

This is one of the most misunderstood requirements. Many entrepreneurs rely on a tax consultant near them or online tax software that doesn’t flag it at all. But at Insogna CPA, we’ve filed thousands of these forms. Correctly, on time, and without the drama.

FBAR (FinCEN Form 114): The Hidden Risk in Your Bank Account

Let’s talk about foreign accounts. If your U.S. LLC or you (the owner) had more than $10,000 USD combined across foreign bank accounts at any time during the year, you may be required to file an FBAR. A Foreign Bank Account Report.

It’s not filed with the IRS, but with FinCEN (the Financial Crimes Enforcement Network). However, the IRS enforces the penalties.

And they’re steep:

• $10,000 per violation for non-willful failure
  
  
• Up to $100,000 or 50% of the account balance for willful violations
  
  

This is not a form you want to forget or get wrong. Most general tax accountants near you don’t deal with FBARs unless they specialize in international compliance.

At Insogna CPA, we handle FBAR filing for entrepreneurs across more than 25 countries and we make it easy.

So Why Can’t I Just Use My Regular Tax Person?

It’s a great question and one we hear often.

Most certified public accountants in the U.S. are trained in domestic tax law. They’re fantastic with 1040s, payroll, and local S Corps. But when it comes to foreign-owned LLCs? That’s a different ballgame entirely.

If your CPA near you, tax accountant, or tax professional near you hasn’t mentioned:

• Form 1120-F
  
  
• Form 5472
  
  
• FBAR filing
  
  
• Tax treaty benefits
  
  
• Protective filings
  
  

Then you’re working with someone who may be excellent but not equipped for your needs.

What you need is a licensed CPA or chartered professional accountant who deals in international entity compliance, understands the IRS’s systems, and can communicate these complexities clearly.

That’s our specialty at Insogna CPA, right here in Austin but with a client base that spans the globe.

How Insogna CPA Makes It Easy for You

Here’s what working with us feels like:

• You tell us how your LLC operates, what kind of income it generates, and what country you live in
  
  
• We evaluate whether your income is effectively connected or not
  
  
• We determine your requirements: 1120-F, 5472, FBAR, and any other state or federal filings
  
  
• We file everything on time, accurately, and in plain English
  
  
• We advise you on how to structure your entity for maximum tax efficiency
  
  

This isn’t just compliance. It’s a strategy. You don’t want to pay more tax than you need to. And you definitely don’t want to find out in three years that you were out of compliance the whole time.

We’re Your Year-Round Tax Strategy Partner

Filing 1120-F once a year is just the beginning. When you work with us, you gain a partner who’s thinking about your business all year.

We offer:

• Quarterly reviews to catch changes in income, structure, or transactions
  
  
• Help onboarding new U.S. clients, contractors, or fulfillment services
  
  
• State tax registration and compliance where required
  
  
• Advice on when and how to convert your LLC into a C Corp, if needed for scale or fundraising
  
  
• A responsive, smart, and truly global tax team that knows the value of great service
  
  

Let’s File It Right And Build for What’s Next

You didn’t build your business to stress about IRS forms, penalties, or confusing treaty rules. You built it to create freedom, growth, and opportunity. That’s why we do what we do so you can keep your focus where it belongs.

We’ve helped hundreds of entrepreneurs just like you file their 1120-Fs, fix past mistakes, avoid audits, and grow confidently in the U.S. market.

Get proactive with a tax team that understands the global landscape.

Book a consultation with Insogna CPA—Austin’s trusted international CPA firm—today.

Let’s get it done right, the first time.

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Summary of What This Blog Covers

• Five signs it’s time to replace your tax preparer.
  
  
• Issues include poor communication, errors, slow work, and no planning.
  
  
• Feeling like just a number means you’re missing tailored advice.
  
  
• Switch to a proactive CPA or tax advisor for better results.
  
  

Finding the right tax preparer is like finding the right business partner. You want someone who listens, understands your goals, and supports you through both challenges and opportunities. The wrong one? They can slow you down, cost you money, and keep you from making informed decisions.

Here’s the reality: if every tax season leaves you anxious, chasing answers, or wondering if you’re missing opportunities, that’s not something to tolerate. It is a sign you need a preparer who provides more than the bare minimum.

Switching to a new tax preparer near you, a tax advisor in Austin, or a small business CPA in Austin can completely change the way you think about taxes. This is not just about filing paperwork. It’s about building a year-round tax strategy that serves your business and personal goals.

Let’s talk about the five signs that it is time to make the move, and what a better tax relationship can look like.

1. They Don’t Follow Up or Communicate Clearly

Your tax preparer should make you feel confident, informed, and in control. If you are the one constantly chasing them for updates, sending reminder emails, or leaving multiple voicemails without a response, it’s not just frustrating. It’s risky.

A proactive certified public accountant or tax professional near you keeps communication lines open all year, not only during filing season. They reach out when tax laws change. They follow up when they are waiting on information from you. They confirm deadlines well in advance and make sure you understand exactly what needs to be done next.

Consider this: one business owner came to Insogna after missing an important estimated tax payment deadline. Their prior preparer never reminded them the payment was due. As a result, they owed penalties and interest. A simple reminder could have prevented the entire problem. That is the cost of poor communication.

The right Austin tax accountant or CPA office near you makes you feel supported. You should never have to wonder if your taxes are on track. Your preparer should tell you before you even think to ask.

2. You Keep Finding Mistakes

Mistakes on a tax return are not minor inconveniences; they can create significant financial and legal consequences. An incorrect Social Security number can trigger a rejected return. A missed deduction can cost you thousands. A calculation error can lead to an IRS notice, audit, or unnecessary payment.

If you are the one catching your preparer’s errors, you are essentially paying for incomplete work and taking on unnecessary risk. A reliable tax accountant near you, licensed CPA, or chartered professional accountant has strict quality control measures in place, often including:

• Multiple reviews of your return by different team members.
  
  
• Use of professional-grade tax software combined with manual verification.
  
  
• Checklists to ensure every deduction, credit, and compliance requirement is addressed.
  
  

At Insogna, we have seen many cases where a client’s prior preparer missed common deductions, like business mileage or eligible retirement contributions. For example, a small marketing agency owner came to us after noticing their travel expenses had never been included in their return. We reviewed their prior three years of filings, amended them, and recovered more than $8,000 in overpaid taxes.

The bottom line: accuracy is not optional. Your preparer should be catching potential issues before your return ever leaves their office.

3. Turnaround Times Are Unreasonably Slow

Your time is valuable, and in business, timing is everything. If it takes weeks to get a simple answer from your preparer or months to receive your completed return, you are losing more than patience. You may be losing opportunities.

A responsive CPA in Austin, Texas or Austin small business accountant delivers work when promised and provides realistic timelines from the start. They plan their workload to avoid last-minute bottlenecks. They also understand that certain financial decisions like whether to invest in equipment this year or next depend on timely tax projections.

We once worked with a client who waited almost six weeks for their prior preparer to finalize a return. During that time, they were unable to secure financing for a major expansion project because their lender required the completed return. The delay cost them a chance at a favorable loan rate and slowed their growth plan.

When you choose the right chartered public accountant or CPA near you, you are choosing someone who respects deadlines as much as you do.

4. They Don’t Offer Strategic Guidance

Filing taxes is reactive. Tax planning is proactive. If your preparer’s involvement starts and ends with gathering documents and filing your return, you are missing the bigger picture.

A forward-thinking tax consultant near you or tax advisor in Austin will help you:

• Adjust estimated tax payments mid-year to prevent surprises.
  
  
• Plan purchases or investments to maximize deductions.
  
  
• Review your business structure to ensure you are taxed in the most advantageous way.
  
  
• Coordinate personal and business tax strategies to optimize your overall position.
  
  

Without this guidance, you are stuck learning about opportunities after they’ve expired. We had a client who had been operating as a sole proprietor for years. Their prior preparer never suggested an S-Corp election, even though it would have significantly reduced self-employment tax. We implemented the change mid-year, adjusted payroll, and saved them more than $15,000 in the first year alone.

Strategic advice is not extra. It is a core part of what you should expect from a taxation accountant or certified professional accountant who truly understands your goals.

5. You Feel Like a Number, Not a Client

Taxes are deeply personal. Your preparer should know more than just the numbers on your balance sheet. They should understand your business model, your challenges, and your long-term goals. If they treat you like a transaction instead of a relationship, it is time to make a change.

An engaged tax pro or certified accountant near you will:

• Learn the specifics of your industry.
  
  
• Notice changes in your income or expenses and ask questions about them.
  
  
• Offer solutions tailored to your circumstances instead of generic advice.
  
  

One of the most common things we hear from clients who switch to Insogna is that they feel seen and understood. That matters. When your preparer cares enough to understand your world, they are far better equipped to identify tax-saving opportunities that others might overlook.

The Risks of Staying Too Long

Keeping a preparer who is not meeting your needs costs you more than frustration. The risks include:

• Overpaying taxes due to missed deductions or lack of planning.
  
  
• Paying unnecessary penalties and interest.
  
  
• Losing opportunities because of delayed responses or late filings.
  
  
• Making business decisions without accurate, timely financial data.
  
  

Each year you delay switching is another year you may be leaving money on the table.

Why Clients Choose Insogna

When clients make the switch to Insogna, they often tell us the change is immediate and noticeable:

• Communication improves. They get answers quickly and clearly.
  
  
• Accuracy increases. Errors vanish thanks to rigorous review processes.
  
  
• Deadlines are met. Turnaround times are predictable and reliable.
  
  
• They gain a strategy. We look beyond the return to help them plan for the future.
  
  
• They feel valued. Every meeting reinforces that their success matters to us.
  
  

Our team blends the technical skill of a CPA certified public accountant with the proactive mindset of a true partner.

Making the Switch Smoothly

Changing preparers is easier than many people think. Here’s how:

1. Request your records from your current preparer. You are entitled to copies of your prior returns and supporting documents.
   
   
2. Schedule a consultation with a CPA in Austin, Texas or tax preparation services near you to review your situation.
   
   
3. Transfer your files securely to your new preparer.
   
   
4. Set clear expectations about communication, timelines, and planning from the beginning.
   
   

Switching mid-year is often the best choice, as it allows your new preparer to review your progress and adjust your strategy before year-end.

Ready for a Better Tax Experience?

If you recognize any of these five signs, you are not overreacting. You are identifying real obstacles to your financial success. Your taxes should be a source of clarity, not confusion.

At Insogna, we combine the precision of a tax accountant, the strategic foresight of a tax advisor, and the personal care of a partner who is invested in your future. Whether you need fbar filing, tax help, or ongoing planning from an Austin accounting service, we are here to help you turn tax season into an advantage.

Let’s create a tax strategy that works as hard for your business as you do.

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