As a foreign business operating in the United States, year-end compliance involves navigating multiple federal and state requirements across tax, employment, corporate, and regulatory areas. This checklist provides essential guidance to help you close out the year properly, avoid penalties, and prepare for the year ahead.
Use this checklist to ensure you meet all critical year-end obligations and avoid penalties. Each section includes key action items, government resources, and relevant forms.
1. Tax Filing Requirements
US tax obligations for foreign-owned businesses include federal, state, and international tax compliance. Foreign corporations must understand their US tax obligations whether operating through a subsidiary, branch, or other structure.
- File corporate income tax return (Form 1120 for C-Corps due April 15th, Form 1120-F for foreign corporations with US income)
Resource: IRS Form 1120 | IRS Form 1120-F
- Review transfer pricing documentation for related-party transactions between US subsidiary and foreign parent company
Resource: IRS Transfer Pricing Guide
- File Form 5472 if 25%+ foreign ownership (reports related-party transactions with foreign owners)
Resource: IRS Form 5472
- Review tax treaty benefits if applicable between US and your home country to minimize withholding taxes
Resource: IRS Tax Treaties
- Confirm state tax nexus and filing requirements in all states where you have operations, employees, or significant sales
Deadline Alert: Form 1120 due April 15th; Form 5472 due with tax return (failure to file = $25,000 penalty)
2. Payroll Year-End Processing
Proper payroll year-end processing is critical for employee tax reporting and compliance with IRS and state requirements. Foreign employers must meet the same obligations as domestic companies.
- Verify employee information accuracy including names, Social Security Numbers, and addresses for all W-2 and 1099 forms
- Prepare and distribute W-2 forms by January 31st to employees and file Copy A with Social Security Administration
Resource: SSA W-2 Filing Instructions | IRS Form W-2
- Issue 1099-NEC forms to contractors who received $600+ during the year (due January 31st for nonemployee compensation)
Resource: IRS Form 1099-NEC
- Reconcile quarterly Form 941 filings (Employer’s Quarterly Federal Tax Return) and ensure all FICA deposits were made correctly
Resource: IRS Form 941
- File annual Form 940 for unemployment tax (due January 31st if all FUTA tax was deposited timely)
Resource: IRS Form 940
- Complete state unemployment tax returns and wage reports for each state where you have employees
Deadline Alert: W-2 and 1099-NEC forms must be provided to recipients AND filed with IRS by January 31st
3. Employment Law Compliance
Foreign employers in the US must comply with federal and state labor laws. Year-end is critical for reviewing policies and ensuring full compliance with changing regulations.
- Verify I-9 compliance for all employees and conduct internal audit to identify any gaps (foreign employers are subject to same I-9 requirements)
Resource: USCIS I-9 Central | Form I-9
- Review exempt vs. non-exempt classifications to ensure proper overtime payment under Fair Labor Standards Act (FLSA)
Resource: DOL Wage and Hour Division
- Update required workplace posters (federal and state labor law notices must be prominently displayed)
Resource: DOL Required Posters
- Check state minimum wage increases effective January 1st in many states and adjust payroll systems accordingly
- Review and update employee handbook to reflect changes in federal or state employment laws
Pro Tip: Many states increase minimum wage on January 1st—review requirements and adjust before year-end
4. Corporate Annual Reports & State Filings
Foreign-owned US entities must file annual reports with the state of incorporation and any states where they’re registered as foreign entities. Failure to file can result in administrative dissolution and loss of good standing.
- File annual reports in state of incorporation (due dates vary—some states use calendar year-end, others use anniversary of formation)
- File in all states registered as foreign entity (states where you operate but didn’t incorporate)
State Filing Resources: Delaware Division of Corporations | California SOS
- Pay franchise taxes and renewal fees to maintain good standing (critical for banking relationships and contracts)
- Update registered agent information if there have been any changes to addresses or agent services
- Maintain corporate records including board minutes documenting major decisions and ownership changes
Deadline Alert: Annual report deadlines vary by state—Delaware is March 1st, California is specific to formation date
5. Sales Tax Reconciliation
Sales tax compliance is particularly complex for foreign businesses as the US has no federal VAT. Each state has its own sales tax system, and economic nexus rules mean foreign companies can trigger obligations without physical presence.
- Reconcile sales tax collected with amounts remitted in each state where you’re registered and collecting tax
- Review economic nexus thresholds (typically $100,000 in sales or 200 transactions) to identify new state obligations
Resource: Streamlined Sales Tax Governing Board
- File final sales tax returns for the year and ensure all quarterly or monthly returns are current
- Address nexus questionnaires from states regarding your business activities and sales volumes
- Plan for new state registrations if you’ll exceed economic nexus thresholds in additional states next year
Pro Tip: Consider sales tax automation software (Avalara, TaxJar) to manage complex multi-state compliance
6. Immigration Compliance for Foreign Workers
Foreign businesses typically bring key personnel to the US on work visas. Maintaining immigration compliance is critical, as violations can result in denial of future petitions and potential penalties.
- Review visa expiration dates for all foreign workers and begin renewal processes 6+ months before expiration
Resource: USCIS Case Status
- Track days in US for tax residency (183+ days under substantial presence test may trigger US tax residency for foreign nationals)
Resource: IRS Substantial Presence Test
- Maintain I-9 forms properly including reverification when work authorization expires (critical for foreign nationals)
- Plan H-1B visa applications for next fiscal year (registration period typically opens March 1st for April 1st lottery)
Resource: USCIS H-1B Information
- Review L-1 and E-2 visa compliance ensuring transferred employees meet role requirements and investors actively manage business
Deadline Alert: Begin visa renewals 6+ months before expiration to avoid gaps in work authorization
7. Financial Reporting & Accounting
Foreign businesses must maintain proper books and records under US GAAP standards, particularly if consolidated into foreign parent financials. Transfer pricing documentation is critical for related-party transactions.
- Close books for the fiscal year ensuring all transactions are properly recorded under US GAAP principles
- Reconcile intercompany accounts with foreign parent company and document all related-party transactions
- Prepare transfer pricing documentation for all intercompany transactions (management fees, royalties, cost allocations)
Resource: OECD Transfer Pricing Guidelines
- Review foreign currency transactions and record gains/losses from exchange rate fluctuations
- Prepare financial statements (balance sheet, income statement, cash flow) for tax preparation and parent company consolidation
- Document depreciation and amortization according to both US tax rules and GAAP requirements
Pro Tip: Foreign parent companies often need US subsidiary financials in different formats—coordinate requirements early
8. Banking & Treasury Management
Foreign businesses must comply with US banking regulations and reporting requirements, including FBAR filings if foreign accounts exceed thresholds. International fund transfers require proper documentation.
- File FBAR (FinCEN Form 114) if required if US persons (including US entities with foreign owners) have authority over foreign accounts exceeding $10,000 aggregate
Resource: FinCEN FBAR Filing
- Review Form 8938 requirements (FATCA reporting for specified foreign financial assets if thresholds exceeded)
Resource: IRS Form 8938
- Document international fund transfers including purpose, source of funds, and business justification for all transfers to/from parent company
- Update bank signature cards and authorized signers if personnel changes occurred during the year
- Review foreign exchange risk and consider hedging strategies for significant currency exposure in coming year
Deadline Alert: FBAR filing deadline is April 15th (automatic extension to October 15th available)
9. Insurance & Employee Benefits Review
Foreign employers must provide competitive benefits to attract US talent. Review insurance coverage and ensure compliance with Affordable Care Act (ACA) requirements if applicable.
- Review ACA compliance if 50+ FTEs (Applicable Large Employers must offer affordable health insurance or pay penalties)
Resource: IRS ACA Information Center
- File Forms 1094-C and 1095-C if ACA reporting applies (due to IRS by February 28th or March 31st if filing electronically)
Resource: IRS Form 1095-C
- Process 401(k) year-end contributions and ensure employer match is properly calculated and deposited
- File Form 5500 for retirement plans if required (plans with 100+ participants; due July 31st with extensions)
Resource: DOL Form 5500
- Review workers’ compensation insurance and update coverage based on current payroll and employee classifications
- Conduct benefits open enrollment typically in November/December for January 1st effective date
Pro Tip: US healthcare costs typically increase 5-10% annually—budget accordingly for next year
10. Strategic Planning for Next Year
Year-end is ideal for foreign businesses to assess US market performance, evaluate structure, and plan for growth while ensuring continued compliance.
- Assess US subsidiary performance against parent company goals and market expectations
- Evaluate entity structure efficiency and consider changes for tax optimization or operational improvements
- Plan state expansion and understand tax, employment, and regulatory implications before entering new states
- Review staffing and visa needs including timeline for any foreign personnel transfers requiring visa processing
- Renew business licenses and permits that expire in early next year
- Create comprehensive compliance calendar with all filing deadlines, renewal dates, and regulatory requirements for next year
Pro Tip: Schedule quarterly compliance reviews throughout the year to avoid year-end surprises
