Frequently Asked Questions

May 31 or June 30, 2023, for eFiling.

BE-12 is a survey conducted by the Bureau of Economic Analysis every five years to collect data on foreign investment in the US. US businesses with foreign ownership or control must participate.

In 2022, all companies that have foreign ownership or interests exceeding 10% at the end of the year are required to submit BE-12. This requirement applies to e-commerce platforms involved in digital product distribution as well as partnerships that hold real estate for non-personal purposes.

C Corporations must file Form 7004 on or before the original deadline of their tax return Form 1120, which is by the 15th day of the 4th month after the taxable year ends.

The deadline for C-Corporations following the calendar tax year is April 18, 2023.

Suppose you fail to file a 7004 tax extension or tax return within the appropriate deadline (March 15, 2023, for S-corporations and partnerships and April 18, 2023, for corporations and other businesses). In that case, the IRS will charge interest and penalties on any unpaid Federal taxes.

If you do not file and owe taxes, the failure-to-file penalty is 5% per month (up to 5 months) of the amount due. If your return is over 60 days late, you may be subject to a $135 minimum penalty. The IRS will also impose a failure-to-pay penalty of 0.5% per month (up to 25%) of the amount due if you file a return or extension but don’t pay all your taxes on time.

It's good practice (but not mandatory with Inkle).

In our experience, many founders tend to just "leave it to the deadline" - and then rush or miss the deadline. And they have little visibility into their books at any given time.

If you come to us days before the deadline, it's really tough for us to catch up your books if you have lots of transactions and missing invoices. And almost impossible to use Accrual method. So we'll be forced to used Cash method accounting, which isn't ideal for you.

Many US tax filing services compel you to pay a high monthly bookkeeping charge of more than $500/month and subscribe to Quickbooks, even if you have low activity at the start. We have fair pricing and nudge you for monthly bookkeeping because it's better for you, and it will cost you about half of the total monthly cost over 12 months in terms of annual cleanup anyway. Why not have monthly visibility instead.

Inkle strongly recommends Accrual Method (over Cash Method,) because:

- it's gives a much truer picture of your finances.

- prevents you from getting any nasty surprises.- it is easier for forecasting.

- it is GAAP-standard, and most VCs will ask for it.

- you will eventually have to do Accrual Method anyway after you cross $25mm in revenue (by law) or sooner, so why not start with it.

- the IRS does not permit you to switch to Accrual (from Cash) in the middle of a year.

- restating and translating prior years' Cash books into Accrual method would be a nightmare, if you want to compare later.

‍

Cash Method is possibly OK if you have very little activity, or just started out or have no real revenue operations in US, but consult us for a discussion on this.

Because Accrual Method is more complex, we can only offer this to monthly customers. Trying to do Accrual Method once per year would just be too difficult for you and us, as we would have to discuss every transaction and invoice.

‍

It's best to do a tax consultation with our certified professional tax experts who can help you determine the answer.

As a general rule of thumb: if you don't have a formal physical office, permanent employees in attendance, stock or inventory and business operations, then you won't need to file a State return. This is even if your US company address is located in that state. Basically: it depends on what you're doing in the state.

f you have a Delaware C-Corp which was in existence during any calendar tax year (1st January to 31st December), then yes you must file the Annual Report and pay the Delaware Franchise Tax. This is going to cost you a minimum of $400 tax + $50 government filing fee, and possibly much more if you've raised in the millions.

Just put your new address on your new Tax Filing, and they'll update their systems. Or see here for other methods: https://www.irs.gov/faqs/irs-procedures/address-changes/address-changes

Nil return means your US Corporation has no transactions in the concerned tax year.

Yes if your US corporation had a foreign subsidiary at any time during the concerned tax year.

Required if US corporation did any reportable transactions at any time during tax year AND has any 25%+ foreign shareholder. See here https://www.irs.gov/instructions/i5472

If you have paid a US resident contractor or an LLC as a contractual payment or rent, during the Concerned Tax Year, then yes you must file a Form 1099 by 31st January of the following year annually. One filing per person/LLC. If you've missed the deadline, discuss with us how to proceed.

You may need one, the other, or both. FBAR is filed with the Financial Crimes Enforcement Network (and is based on calendar year), whereas Form 8938 goes to the IRS as part of your federal tax filing (and is based on your chosen tax year). FBAR is judged based on foreign balances controlled by your US entity's foreign accounts or its controlled entities foreign accounts, whereas Form 8938 is judged based on a threshold of specified passive income. See here for more details: https://www.irs.gov/businesses/comparison-of-form-8938-and-fbar-requirements

Your chosen tax year dates are normally Jan-Dec unless you specific asked for it to be something else in your EIN application (SS-4). - for example Apr-Mar is common for those with Indian subsidiaries to match the underlying India tax year. You can check your chosen US dates in your SS-4 (field 12)or your EIN issuance letter (paragraph 3). Depending on your chosen tax year dates, and only if you want a 6-month extension to your corporate tax deadline, you will need to file the Form 7004 either by 15th April (if your tax year is Jan-Dec) or 15th Jul (if your tax year is Mar-Apr). This buys you a 6 month breather.

Form 1120 is a crucial tax document utilized by corporations in the United States to disclose their income, gains, losses, deductions, and credits for federal income tax goals. In Delaware, corporations are expected to submit Form 1120 if they are operating within the state or have obtained income from sources within its boundaries.

C corporations conducting business in Delaware must pay an annual fee known as the Delaware state franchise tax, a privilege fee for operating within the state's jurisdiction.

A Delaware C Corporation (C Corp) is a type of business entity formed under the laws of Delaware and is taxed separately from its owners. A C Corp is considered a separate legal entity from its shareholders, meaning it can enter into contracts, own assets, and conduct business in its name.

The Delaware Franchise Tax is an annual tax imposed on businesses incorporated in Delaware or have a presence there. It is not a tax on income but on the privilege of conducting business in Delaware.

Not paying the Delaware Franchise Tax and failing to file the Annual Report for two consecutive years will lead to the State of Delaware's automatic administrative dissolution of the corporation.

Delaware is tax-friendly due to no sales tax, business-friendly tax laws, and favourable corporate income tax rates.

Filing Form 926 is crucial because it allows the IRS to monitor and track investments made by C corporations in foreign entities, ensuring compliance with tax laws.

C corporations can electronically file Form 926 through the IRS's Modernized e-File (MeF) system.

C corporations use Form 926 to report property transfers to foreign corporations.

Form 5471 is filed by U.S. taxpayers, while Form 5472 is for foreign corporations in U.S. business or U.S. corporations with 25% foreign ownership.

Detailed reporting on foreign corporation ownership, finances, operations, including key data, related-party transactions, and essential info.

Yes, there are exceptions based on ownership thresholds and specific circumstances. It's essential to review the IRS guidelines to determine if you meet the criteria for exemption from filing Form 5471.

Yes, both Form 8938 and FBAR might be necessary since they serve different purposes and have separate reporting thresholds. While FBAR has its requirements, Form 8938 is part of your annual tax return and may need to be filed, even if you're already submitting FBAR.

Form 8938 includes various foreign financial assets like bank accounts, investments, foreign entity ownership, etc. For a complete list of reportable assets, refer to IRS instructions.

Consider your residency status (U.S. or abroad) and the value of foreign financial assets on the last day of the tax year and at any time during the year. If thresholds are exceeded, file Form 8938.

Obtain a 409A valuation before issuing your initial common stock options, after completing a round of venture financing, annually or after a significant event, and when approaching an IPO, merger, or acquisition.

Companies for IRS compliance and impartiality often prefer external appraisals, as independent experts ensure accurate evaluation of complex factors. This results in well-supported reports, reducing inaccuracies and conflicts with tax authorities.

Yes, a 409A valuation can and should be updated if there are material changes in your company's financial situation or other significant events.

Yes, based on the complexity of a corporation's finances, additional schedules like Schedule R, Schedule K, and others might be required with Form 100.

Foreign corporations conducting business in California must file Form 100 if they earn income from sources within the state.

Corporations must provide detailed financial data, including gross receipts, deductions, credits, and other pertinent details essential for calculating net income and tax liability.

Businesses, individuals, and nonprofits may need to file Form 1099 when specific payment thresholds are met, such as payments to independent contractors, rent, or interest.

You can get Form 1099 from the IRS website, request it from the IRS, or use tax software like Inkle for assistance.

Yes, you can electronically file through the FIRE system, often extending the deadline to March 31. Many tax software providers and e-filing services offer this option.

FBAR requires reporting on various foreign financial accounts, including bank and investment accounts, and certain foreign retirement or pension accounts if they meet the reporting threshold.

Some exceptions and rules may apply, especially for entities like trusts and tax-exempt organisations. Consult Inkle today for entity-specific guidance.

Generally, foreign real estate isn't reported on an FBAR except when held through a foreign financial account like a foreign bank account, where exceptions may apply.

Form 5472 is needed for specific reportable transactions, not all foreign-related ones. Consult IRS guidelines or Inkle to determine what to report.

Some specific exceptions and exemptions exist for certain types of transactions and entities. For example, certain de minimis transactions may be exempt from reporting.

Yes, IRS permits electronic filing using the Electronic Tax Administration system, offering convenience and extended deadlines.