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International business

Cross-border businesses need a different body of knowledge: foreign-currency accounting, related-party transactions, information returns with penalties that apply even when no tax is due, withholding on payments abroad, and anti-deferral regimes for foreign subsidiaries.

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  • 3 book rules
  • 5 tax rules
  • 8 forms identified
  • Stated as at November 2026
Two sets of rules

How the books treat it, and how the return treats it.

Books Book accounting · US GAAP

  • Foreign currency

    Each entity determines its functional currency. Transactions in other currencies are remeasured, with gains and losses in income; foreign operations are translated, with differences in other comprehensive income.

    ASC 830

  • Consolidation and intercompany

    Intercompany balances and transactions are eliminated on consolidation; loans, management fees and royalties among affiliates are documented on both sides.

    ASC 810

  • Income taxes across jurisdictions

    Current and deferred taxes are measured by jurisdiction, and uncertain tax positions are recognized only when more likely than not to be sustained.

    ASC 740; ASC 740-10-25

Tax Tax accounting · Internal Revenue Code

  • Foreign-owned US companies (inbound)

    A US corporation with a 25% foreign shareholder, and a foreign-owned US single-member LLC, report related-party transactions on Form 5472. The penalty for failure to file is $25,000 per form per year.

    IRC §6038A; Treas. Reg. §1.6038A-1, §301.7701-2(c)(2)(vi)

  • Withholding on payments to foreign persons

    Certain US-source payments to foreign persons — such as interest, dividends, royalties and some services income — are subject to withholding and annual reporting, reducible under a treaty with proper documentation.

    IRC §§1441, 1442, 1471–1474; Forms 1042, 1042-S, W-8BEN-E

  • US companies with foreign subsidiaries (outbound)

    US shareholders of controlled foreign corporations report on Form 5471 and may include Subpart F income and net CFC tested income (formerly GILTI). Those regimes, and the deduction for foreign-derived income, were amended for tax years beginning after 31 December 2025.

    IRC §§951, 951A, 250, 6038 (as amended by P.L. 119-21)

  • Transfer pricing

    Transactions among related parties must be consistent with arm’s-length results; contemporaneous documentation can protect against penalties on adjustments.

    IRC §482; §6662(e); Treas. Reg. §1.482-1

  • Foreign accounts and treaty positions

    Foreign financial accounts may require FBAR and Form 8938 reporting; a return position that relies on a treaty generally must be disclosed.

    31 U.S.C. §5314 (FinCEN 114); IRC §6038D; §6114 (Form 8833)

The differences between the two are Schedule M-1 adjustments.

And they are where examinations tend to look first.

In development
Specialist knowledge

What the agents load for this industry

Each industry has a knowledge pack that sits in the stable, cached part of every prompt, so most of its cost is incurred once per return rather than on every round. Knowledge packs are in development.

  • Entity classification and check-the-box elections
  • Related-party definitions and constructive ownership
  • Form 5471 filer categories and schedules
  • Treaty rates and documentation requirements
  • Functional currency and exchange-rate sourcing
Forms commonly involved
  • Form 1120 (or pro forma)
  • Form 5472
  • Form 5471
  • Form 1118
  • Forms 1042 and 1042-S
  • Form 8833
  • FinCEN 114
  • Form 8938
Examiner agent

Questions it raises first

  • Who are the 25% foreign shareholders, directly and constructively?
  • List every related-party transaction and its amount.
  • Is the intercompany pricing documented and arm’s length?
Valuation

Often required to support related-party transfers of intangibles and intercompany pricing.

Stated as at November 2026 for general information only; not tax, legal or accounting advice. Rules change and their application depends on facts. NGTAX.AI currently prepares Form 1120 only; other forms listed are identified for the reviewing professional and may not yet be prepared by NGTAX.AI. See the disclaimer.

Bring us your hardest 1120.

Founding firms get their first three returns free and help decide what we build next. Email us with your name, your firm and roughly how many business returns you prepare each year, and whether you want our US-licensed CPAs and Enrolled Agents to prepare some of them for you. Do not include any client information.

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