If you're a startup founder, especially one based outside the U.S. with a U.S. entity, you're probably moving fast, wearing multiple hats, and figuring out taxes as you go. You're not alone. At Bookmate, we work with non-U.S. founders every day, and before they come to us, we often see the same mistakes repeated. These issues can cause delays, penalties, and unnecessary IRS headaches.
This article breaks down the most common tax mistakes we see from international founders before they join Bookmate. If you see yourself in this list, it is not too late to fix things. But it is definitely time to get expert help.
1. Not Filing Form 5472 (or Filing It Incorrectly)
One of the biggest repeat offenses is failing to file IRS Form 5472. This form is required when a foreign-owned U.S. LLC has reportable transactions with its foreign owner or other related parties. That includes things like contributions, loans, or reimbursements.
A lot of founders don't know this form exists, or they assume that because their business didn't make money yet, they don't have to file anything. Unfortunately, the IRS still expects a pro forma 1120 with a Form 5472 attached, even for zero-income LLCs owned by non-residents.
Penalties for missing this form start at $25,000. Yes, really. And the IRS has gotten stricter in recent years about enforcing this.
2. Mailing Tax Forms from Outside the U.S.
Many founders think they can simply mail in their tax forms from wherever they are in the world. We see a lot of problems here. International mail can be slow or unreliable, and if the IRS receives your form late, you're on the hook for penalties, even if it was mailed on time.
Plus, tracking international mail can be a nightmare. If you're trying to prove to the IRS that you sent something, good luck if you can't get a reliable tracking number.
Founders often don’t realize they can file electronically or through a U.S.-based tax service. In most cases, electronic filing is safer, faster, and helps you meet the deadline without question.
3. Sending Forms to the Wrong IRS Address
Even when founders try to mail things properly, we often see them sent to the wrong IRS address. The IRS has different mailing addresses depending on what you're filing and where you are located. For foreign-owned single-member LLCs, the address can be different from what's listed for other types of businesses.
Sending a form to the wrong address can mean it never gets processed. Or worse, the IRS may treat it as never received. We've seen clients come to us shocked that they were penalized even though they "sent it in."
4. Missing the Filing Deadline for Form 5472
Form 5472 is due with your pro forma 1120 by April 15 each year, unless you file for an extension. Many founders either forget this date or assume it is tied to the calendar year. It’s not. Missing this deadline triggers that automatic $25,000 penalty. And just to make things harder, the IRS doesn’t always notify you right away. You might not even know you missed it until months later.
When founders come to us in May, June, or even later, it’s often the first thing we check. If you’ve missed the deadline, there may still be a way to reduce or eliminate the penalty, but it requires swift, strategic action.
5. Using the Wrong Entity Type Without Knowing the Tax Impact
Some founders set up a Delaware C Corporation because they think it is what investors expect. Others choose an LLC because it seems easier or cheaper. But very few founders understand the downstream tax consequences of that choice.
A C Corporation is a separate tax-paying entity. That means it pays a flat 21 percent federal income tax on its profits. This applies even if those profits stay in the business. If the corporation then distributes dividends to shareholders, those individuals may also pay tax again at the personal level. This is often referred to as double taxation.
An LLC with a foreign owner, by contrast, is treated as a disregarded entity by default. That means it is not taxed at the entity level. Instead, you file a pro forma 1120 with a Form 5472 to report any reportable transactions between the LLC and its foreign owner, but no corporate tax is due.
Choosing the wrong entity without understanding the full tax impact can create major problems down the line. We have seen founders pick an entity type without talking to any tax professionals, and it leads to messy cleanups later. The earlier you get advice, the better.
6. Not Getting an EIN (or Getting One Improperly)
Your business needs an Employer Identification Number (EIN) to file taxes, open a bank account, and operate in the U.S. Many founders either skip this step or attempt to get one themselves using Form SS-4, which can be confusing and lead to mistakes.
Worse, some founders use third-party services that end up applying for the wrong entity type, or that list incorrect ownership information. This causes issues not just with taxes, but also with compliance and banking.
Getting your EIN done right is one of the first building blocks of a clean U.S. operation.
7. Assuming U.S. Taxes Don’t Apply If the Company Has No Revenue
A common belief among non-U.S. founders is that if your company has not made money yet, there’s no need to file taxes. This is not true. The IRS filing requirements apply even if your business has zero revenue.
In fact, Form 5472 is all about reportable transactions with foreign owners. So even if your startup didn’t earn income, if you paid for expenses on behalf of your company, moved money into the business, or had any related-party activity, you likely need to file.
Skipping the filing because “we’re pre-revenue” is a fast track to penalties.
8. Not Keeping Clear Records of Foreign Transactions
The IRS wants documentation. If your foreign-owned LLC is moving money between international accounts, reimbursing founders, or taking in capital, you need to be able to explain and prove it.
Too many founders treat early startup expenses casually. They forget what money came from where or fail to separate personal and business accounts. Later, when a tax professional asks for a breakdown, it’s a scramble.
You don’t need to be perfect, but you do need a clean trail. At Bookmate, we help clients put systems in place that scale with them.
9. Waiting Too Long to Ask for Help
Perhaps the most universal mistake we see is waiting until things go wrong before reaching out. Founders come to us after receiving scary IRS letters, or when they’re applying to YC or 500 Global and realize their financials are a mess.
Tax compliance is not something you can ignore and clean up in a weekend. The earlier you get professional help, the more options you have and the fewer penalties you’ll face.
10. Thinking a U.S. Bank Account or Stripe Setup Means You’re Compliant
Just because you successfully opened a U.S. bank account or got approved for Stripe does not mean your company is tax compliant. These tools often only require basic verification steps like an EIN and U.S. address. That is not the same thing as filing with the IRS.
We regularly see founders who assume their business is in good standing because their Stripe account works fine. But behind the scenes, the IRS may be waiting for filings you never submitted. The result can be surprise penalties, account holds, or rejected funding applications when investors ask for your compliance records.
Being compliant means filing the right forms on time and keeping proper documentation, not just having working tools. Bookmate helps ensure your operational setup matches your legal and tax responsibilities.
Think Any of These Sound Familiar?
If you saw yourself in any of these scenarios, you are not alone. These are the exact problems we solve at Bookmate every day for non-U.S. founders building in the U.S.
Each tax situation is unique and deserves expert attention. We’ll help you figure out what needs to be filed, how to correct past mistakes, and how to stay compliant going forward.
Book a free consultation to get clarity and peace of mind. Let’s take tax stress off your plate so you can focus on building your business.
