A business tax compliance checklist for a foreign-owned company runs in order: entity, forms, then clocks. Below: what the Internal Revenue Code requires, with 2026 numbers and penalties.
What the law requires
| Requirement | In plain words | Source |
|---|---|---|
| S election | Form 2553 within 2 months and 15 days of the year start | IRC 1362(b) |
| Foreign ownership | Form 5472 goes with Form 1120, pro forma for a foreign-owned LLC, which cannot e-file it | IRC 6038A |
| Method and deductions | One accounting method; Section 179; bonus depreciation; domestic research costs; up to 20 percent of qualified business income | IRC 446, 179, 168(k), 174A, 199A |
| Foreign payees | Withhold 30 percent on U.S.-source dividends, interest and royalties unless a treaty or exemption applies | IRC 871, 881, 1441, 1442 |
Key numbers and dates
| Item | Amount or date | Year |
|---|---|---|
| Section 179 limit | $2,560,000; phase-out starts at $4,090,000 | 2026 |
| Returns due | Partnerships and S corporations Mar. 16, 2026; C corporations Apr. 15, 2026 | 2025 returns |
| Form 1040-NR due | Apr. 15, 2026 if U.S. wages were withheld; June 15, 2026 otherwise | 2025 returns |
| Forms 1042 and 1042-S due | March 15, 2027 | 2026 payments |
| Form 5472 penalty | $25,000 per form, plus $25,000 per 30 days after 90 days from IRS notice | 2026 |
Source: IRC 6651, 6662, 6663
Recent and pending changes
- July 4, 2025 (final): Public Law 119-21 made the qualified business income deduction permanent, set 100 percent bonus depreciation for qualifying property acquired after January 19, 2025, and added Section 174A research expensing.
- October 2025 (final): Revenue Procedure 2025-32 set the 2026 figures.
The named checklist: a business tax compliance checklist
The Banyan-and-Birch Entity Walk, from entity to filing:
- Confirm each entity's IRS class and ask your Canadian CPA or Indian CA for the home-country view.
- Check every owner: a nonresident alien cannot hold S corporation stock.
- Test the 25 percent rule and list related-party items for Form 5472.
- Before paying a foreign payee, collect Form W-8 and set withholding.
- Diary return dates; keep records 3 years, 6 if over 25 percent of income was left out, 4 for payroll.
Common mistakes
- Assuming no income tax means no filing: Form 5472 depends on related-party transactions.
- Filing Form 2553 with a nonresident alien shareholder.
- Using $600 instead of $2,000 as the 1099-NEC threshold for 2026 payments.
- Paying a foreign payee before collecting Form W-8.
When to bring in an attorney
- Choosing or restructuring an entity where ownership, liability or investor agreements matter.
- An IRS fraud or criminal inquiry, summons, or statute-extension request.
- Visa limits on working in the business, an immigration attorney's question.
How we can help
We handle the U.S. tax, payroll and accounting side from the Aurora area, alongside your attorney, Canadian CPA or Indian CA. See business tax returns and planning and cross-border tax.
Frequently asked questions
How long can the IRS assess more tax?
Usually 3 years from filing, 6 if over 25 percent of gross income was left out, and unlimited with no return or fraud. Other cases exist: a missing Form 5472 can keep a year open until 3 years after the IRS receives it. See time limits by country.
Does a loss year cancel Form 5472?
No. The test is related-party transactions, such as owner contributions, not profit.
Can a nonresident alien own an S corporation?
No. The Code bars nonresident alien shareholders; foreign owners often choose an LLC or C corporation.
Can my U.S. LLC be treated differently in Canada or India?
Yes. Each country applies its own rules; your Canadian CPA or Indian CA confirms the home-country result.
Official sources
- IRS: Instructions for Form 5472
- IRS: Revenue Procedure 2025-32
- IRS: Publication 509, Tax Calendars (2026)
- IRS: Instructions for Form 1040-NR (2025)
- GovInfo: Public Law 119-21
This page summarizes public guidance in plain language. If anything here differs from the official source, the official source controls.