How a business can file US tax forms accurately and on time

The most reliable way for a business to file US tax forms on time is to keep clean records through the year, work out early which forms apply, and decide in advance whether software or a qualified preparer will do the filing. Filing is rarely hard in itself. The trouble comes from gathering numbers in a rush and discovering late that a form was missed. This guide covers a routine that avoids that, written for a business owner in the Gulf whose company has a link to the United States.

First, find out which forms apply

US obligations depend on how the business is organised and where it operates. A US corporation, a US partnership, a single-member company owned by a non-resident and a foreign company with US sales do not all file the same returns. The US tax authority, the Internal Revenue Service, publishes the forms and instructions for each. Before you collect any numbers, ask a US-qualified tax adviser to confirm:

• which income tax return your entity files;
• whether you have to file information returns about foreign owners, foreign accounts or related companies;
• whether payroll, sales tax or state returns apply as well as federal ones;
• the due dates for each, including any extension rules.

Do not assume that having no US profit means no filing. Some forms are required even when no tax is due, and late penalties can apply to missing information returns.

Keep records as you go

Tax preparation is much easier when the books are current. Set a monthly routine rather than a once-a-year scramble.

1. Record every sale and expense in an accounting system, with a receipt or invoice attached.
2. Keep business and personal money in separate bank accounts.
3. Reconcile bank and card statements each month against your books.
4. Record the currency of each transaction, and keep your method for converting to dollars consistent.
5. Store payroll, contractor and loan documents in one folder for the year.

Software or an adviser

Tax software can work well for a simple, domestic business with straightforward income and expenses. It guides you through the form, checks arithmetic and can file electronically. It is less suitable where the structure is cross-border, where there are foreign owners or accounts, or where several entities are involved. Software follows the answers you give it. It does not tell you that you chose the wrong form or missed a related filing.

A qualified preparer, such as a CPA or enrolled agent, is worth paying for if:

• the business has owners or operations in more than one country;
• you have received a notice from the tax authority;
• you are unsure how income should be classified;
• you have not filed in prior years and need to catch up.

Check a preparer's credentials and ask who signs the return. Be wary of anyone who promises a particular refund before looking at your records.

A pre-filing check

1. Names, tax identification numbers and addresses match the official records exactly.
2. Income reported agrees with your books and with any forms others have issued to you.
3. Deductions are supported by records and are business expenses, not private ones.
4. Totals carry correctly between schedules and forms.
5. Signatures and dates are present, and the correct filing method is used.
6. Any tax due is paid by the due date, even when an extension to file has been granted, since an extension to file is generally not an extension to pay.

The Gulf angle

Many Gulf-based business owners find their US obligations by accident, for example through a US subsidiary, a US customer base, a rental property or a US-citizen owner. Points to raise with your adviser:

• Foreign accounts and entities. US persons, including US-citizen owners living in the Gulf, can have to report foreign bank accounts and foreign companies they own or control, even where the local country charges little or no tax.
• Time zones and deadlines. Submit electronically well before the due date, as filing on the last day leaves no room for rejection or technical problems.
• Local tax too. Several Gulf countries now have their own corporate tax or VAT rules, which are separate from US obligations. Check the position with your local tax authority or a licensed adviser, because meeting one regime does not satisfy the other.
• Currency. Local currency pegged to the dollar simplifies conversion for some businesses, but you should still document the rate you use.

If you miss a deadline

Act quickly rather than waiting. File as soon as you can and pay what you owe, because penalties and interest generally grow with time. If you have missed several years, speak to a qualified adviser about the tax authority's programmes for catching up before you file anything. Respond to any official letter within the stated time, and keep copies of everything you send.

A business that records transactions monthly, confirms its forms early and files electronically with time to spare removes most of the stress and nearly all of the avoidable penalties.