Form 5472 and Amazon Payouts: Foreign-Owned LLC Books

Do marketplace payouts into the LLC's bank account go on Form 5472?

Not by themselves. Form 5472 reports a foreign-owned LLC's dealings with related parties. A marketplace, the payment processor behind an online store or an app store is a related party only if it is related to the LLC or its owner under the tax-code tests (Form 5472 instructions; 26 CFR 1.6038A-1(d)). If the LLC is the seller, the payouts are its sales proceeds, not Form 5472 items. If the seller is you or another company, whether a deposit is a sale or money you put in turns on the facts below.

The LLC files for a year in which it had a reportable transaction with a related party. Money you put in or take out counts, so a year in which you funded the LLC or took money out is generally a filing year even if every sale was to unrelated buyers. The penalty for failing to file or keep records is $25,000, and it grows if the failure continues after an IRS notice (Form 5472 instructions). The form goes in with the LLC's pro forma Form 1120 by the 15th day of the 4th month after its tax year ends, and Form 7004 filed by then extends it (Form 5472 instructions; Form 1120 instructions). The filing rules are in what a foreign-owned single-member LLC files.

Form 5472 reports dealings and pays no tax. Whether the profit is taxed in the US is separate: a nonresident individual with US business income generally reports it on Form 1040-NR (Publication 519).

A case is not simple when:

• the seller account is in your name or another company's name, not the LLC's;
• payouts reach more than one account, a foreign account or a wallet;
• the LLC sells on several platforms, or sells apps as well as goods;
• years are unfiled, or a preparer asks for Form 5472 and you cannot tell which deposits are sales and which are your own money.

Gather first: the seller-account registration, the tax forms you gave each platform, the payout reports, statements for every account that received a payout, and any Form 1099-K or Form 1042-S. The full list is in the records section below.

In any of these cases the deposits have to be sorted into sales and owner transfers before a Form 5472 can be right. That is bookkeeping work first; see the last section.

What does go on Form 5472 when the LLC sells through a marketplace?

Money, property and services moving between the LLC and you, your other companies or your family do. A related party is the owner, anyone related to the owner or the LLC under the tax code's family and control tests, and anyone related under the section 482 rules (Form 5472 instructions). The family test names only an individual's brothers and sisters, spouse, direct ancestors such as parents, and direct descendants such as children (26 U.S.C. 267(c)(4)).

The categories come from the Form 5472 instructions and 26 CFR 1.6038A-2(b). A transaction counts however it is made and whether or not it is written down (26 CFR 1.482-1(i)(7)). If the related company or relative is a US person, Parts IV to VI do not itemize the dealing, but a separate Form 5472 can still be due for that party, and the books still record it (Form 5472 instructions). The log and its fields are in transaction records for a foreign-owned LLC.

Does it matter whose name the seller account is in?

Yes, for the books and the paperwork, though not by itself for whether income is taxable. For income tax, a single-member LLC is disregarded (ignored) as separate from its owner, who is taxed on its income (Form 5472 instructions), and the owner is the payee of a payment made to the LLC (Publication 515). The account's name changes three other things:

1. Form 5472: whether a deposit is the LLC's own sales or a transfer between you and the LLC.
2. The tax form on file and the name on any Form 1099-K or Form 1042-S (see the sections below).
3. The proof: the seller agreement, the stock purchases and the customer-facing records should point to the same party as the sales.

The Form 5472 instructions and regulations do not address seller accounts, so the answer comes from the facts: who signed the seller agreement, who bought and owned the stock, and who deals with the customers. Book each period by the facts that held in it, and keep the evidence for that reading.

What if the seller account is in my name but the payouts land in the LLC's bank account?

Two readings are possible, and the facts decide between them:

• It is the LLC's business under your registration. The LLC buys the stock, ships it and bears the costs. The payouts are LLC sales, nothing passed between you and the LLC, and the name mismatch is a paperwork problem to fix with the platform going forward.
• It is your business and you paid the money into the LLC. The payouts are yours. What you moved into the LLC is a contribution on the Part V statement, and the LLC's sales start only when the LLC itself sells.

Booking an owner contribution as sales overstates the LLC's sales and drops a reportable transfer; booking LLC sales as contributions does the reverse. If both readings apply, because the LLC sells some products and you sell others, split the deposits by the platform's report for each listing or period, not by bank amount. A fix going forward does not change earlier payouts: each past period stands on its own facts.

What if the payouts go to my foreign bank account or a wallet?

If the LLC is the seller, its sales are the LLC's wherever the platform sends the money. If the platform pays your own account, the books show LLC sales and money paid to you. Classify it by purpose: a distribution; a repayment of a documented amount the LLC owes you, which lowers that balance and is not a new distribution; or a loan to you, only if there are repayment terms you can document. Money you later send back for stock or ads is a contribution or a loan repayment. Record each leg as its own transfer, because each transfer of money is a transaction on its own (26 CFR 1.482-1(i)(7)).

The account holder is the person whose name and ID are on the account, not the app's brand. If it belongs to a relative or a company you control, the payout may be a dealing with a related party. If it belongs to an unrelated supplier paid directly, the books show a supplier payment funded by the payout.

If the LLC holds or signs on a foreign account, it may have its own FBAR duty: see FBAR for company accounts abroad. If years of payouts went to personal or foreign accounts, each year's transfers need rebuilding before late forms can be filed: see rebuilding books for missed foreign-owner filings.

Which tax form do I give the marketplace, and who is the payee?

You give it, not the LLC. The payee of a payment made to a disregarded entity is its owner (Publication 515). A foreign owner gives a W-8 form, and a foreign person may not give a W-9 (W-9 requester instructions).

A W-9 filled in with the LLC's name and EIN for a foreign-owned LLC is not what these instructions call for. An online questionnaire follows the same rules. A payer with no valid form must apply the IRS presumption rules, and if it fails to withhold tax due on a payment to a foreign person, both the payer and the foreign person are liable for it, with interest and penalties (Publication 515).

Why don't the 1099-K, the sales report and the bank deposits match?

They measure different things. The Form 1099-K shows the gross amount of payments, counted on each transaction's date, before fees, refunds, shipping or other adjustments (Form 1099-K instructions). The bank deposit is the net after fees, refunds and any reserve (money the platform holds back against refunds), and it arrives after the sale. So gross sales, less refunds, fees and held reserves, plus or minus timing across period ends, equals deposits. The line-by-line match is in reconciling sales and payouts.

A foreign-owned seller may see a different form from a US seller:

• A marketplace or payment app must report payments on Form 1099-K when they total more than $20,000 in more than 200 transactions, and may send one below that. The threshold does not apply to card payments, such as checkout on your own online store (IRS: Understanding your Form 1099-K).
• A US payer need not file for a payee with a foreign address when it pays outside the US into an offshore account and holds documentation, such as a W-8, before payment. It may still need to file if there is a US address or standing instructions to a US bank account, unless it does not know the payee is a US person and collects a W-8 within 90 days of the seller agreement. The instructions do not address an LLC paid into a US bank account, so such a seller may still receive a Form 1099-K: ask the platform which form it files and keep the answer (Form 1099-K instructions).
• Payments subject to withholding on foreign persons (chapter 3), such as a US-source royalty, are reported on Form 1042-S (Publication 515).

A Form 1099-K reports payments. The IRS says to use it with other records to work out taxable income (IRS: Understanding your Form 1099-K); it does not decide whether income is taxed in the US or reportable on Form 5472. If it shows the wrong payee or amount, ask the platform to correct it.

How do I record sales, fees, refunds and the payout so owner transfers stay separate?

Book the platform's gross sales as revenue, fees and refunds on their own lines, and the payout as the cash that settles them. Move owner money only through owner accounts.

1. Set up the owner, and each related company or relative, as its own contact, with equity accounts for contributions and distributions and a separate account for money meant to be repaid.
2. For each settlement period, enter from the platform's report the gross sales, refunds, fees and charges, and any reserve held back. The net must equal the deposit. Never post the net deposit as sales.
3. Tag every deposit as a platform payout or an owner transfer, and every outflow as a supplier, a platform charge or an owner item such as a distribution or a personal bill. Money from your own account never goes to sales.
4. Log every owner transfer with its date, amount, currency and proof. Each month, tie every settlement to a deposit and the owner accounts to the log.

Fuller steps are in bookkeeping for a foreign-owned US company and monthly seller bookkeeping.

What US tax rate and withholding apply to a nonresident's marketplace or app store payouts?

For goods you buy and resell, US tax generally falls on the profit, not on the payout. App and digital income depends on how the sale is classified. A treaty can change either result. For an individual owner, effectively connected income (income tied to a US trade or business) is taxed on profit after deductions at graduated rates. US-source fixed or determinable income not connected with one (passive-type income such as royalties) is taxed at a flat 30% of the gross, or a lower treaty rate (Publication 519).

The label on an app store payout does not settle its classification: the regulation says the form the parties adopt is not determinative (26 CFR 1.861-18(g)), and a copy that must be destroyed or deactivates itself after a set period can be a lease (26 CFR 1.861-18(f)). It turns on the store's contract and the facts. A treaty claim for a lower withholding rate is made on the owner's Form W-8BEN, Part II (an owner company uses Form W-8BEN-E), and a treaty position that reduces the tax on the owner's return is generally disclosed on Form 8833 attached to it (Publication 519). A US office or fixed place of business can also change the source of a sale (Publication 519). The owner's own return is separate from the LLC's information filing: see when foreign owners owe US tax and a nonresident's return for business income.

Which records show whose income it is?

Keep the papers that show who sold, who was paid and who owns the account. The regulation requires records that are permanent, accurate and complete and that clearly establish income, deductions and credits, including records relevant to dealings with related parties (26 CFR 1.6038A-3(a)). For marketplace and app store sales, keep:

• the seller agreement and registration page showing the legal name, country and tax ID on the account;
• each W-8 or W-9 given, with the date and the name used;
• every payout or settlement report, and any Form 1099-K or Form 1042-S;
• statements for each receiving account, showing the account holder's name;
• supplier invoices and proof of who paid, and where the stock sat when it was sold;
• the transfer log for you, your other companies and your family, and any contract with a related company that supplies stock or services.

Example

Illustrative amounts in US dollars.

The account is in the LLC's name

A seller in Shenzhen owns a Wyoming single-member LLC. The account is in the LLC's name. For the year, the platform report shows $150,000 of sales, $10,000 of refunds and $20,000 of fees, and it pays $120,000 into the LLC's US bank account. The LLC sends $30,000 to her account in China. She has lent the LLC nothing.

The books show sales of $150,000, refunds of $10,000 and fees of $20,000; the $120,000 of deposits settle the net. The platform is unrelated, so none of those lines is a Form 5472 item. The $30,000 is a distribution on the Part V statement.

The account is in her own name

The same seller opened the account in her own name, and $50,000 of payouts land in the LLC's bank account. If the LLC bought the stock and ships it, the $50,000 settles LLC sales: the books show the report's gross sales, refunds and fees separately. If she sells under her own name and moved the cash into the LLC, it is a $50,000 contribution on the Part V statement. Her stock invoices, the seller agreement and who deals with customers decide it, and the books must record which reading the evidence supports.

An app developer pays rent from the LLC

A developer in Lisbon owns a Delaware LLC. His W-8BEN names him, with the LLC's name and account number in the reference line. The app store pays the LLC $40,000, and the LLC pays $5,000 of his personal rent. The $40,000 comes from an unrelated payer, so it is not a Form 5472 item. The $5,000 is money paid for him: a distribution in the log and on the Part V statement, not a business expense.

Different for you?

• Your seller account is in your own name or a mix, payouts land in several accounts, or you cannot tell which deposits are sales and which are your own money: the account facts decide how each deposit is booked and which years need a Form 5472. Sorting them is bookkeeping work before it is a filing: get bookkeeping help.
• Years went unfiled, or you received a notice: see missed foreign-owner filings and penalties and rebuilding books for missed foreign-owner filings. The filings are cross-border tax help; rebuilding each year's transfers is bookkeeping help.
• A company abroad, not an individual, owns the LLC: the platform asks for Form W-8BEN-E, and the owner's own US filing is different; see a foreign company's US tax return.
• You are deciding how to take money out of the LLC: see paying yourself as a foreign owner.
• A platform wants a US address or bank account: see US address and bank account from abroad.
• The LLC has two or more owners, or elected to be taxed as a corporation: it files differently. See foreign partners and withholding or a foreign-owned C corporation's filings.