Running a business involves dealing with various accounting issues that may arise, including the challenges when conducting international transactions. In addition to handling multiple currency conversions, you may face various tax implications associated with a global transaction. The best way to avoid issues and roadblocks is to learn as much as possible about the process. If you still need assistance handling international transactions, Clear Accounting offers professional bookkeeping services in Vermont to help!
International Transaction Best Practices
Expanding your business internationally allows you to increase sales by reaching more customers. With your latest expansion comes the need to understand international business law, how to handle these types of transactions, and the tax implications that go with them. Our top best practices include the following:
- Understands any costs or fees associated with an international transaction, including transaction fees, currency conversion fees, and any fees charged from intermediary banks.
- Stay on top of the latest international currency exchange rates because as the rates continue to fluctuate, it could impact the cost and ease of accepting international payments.
- Learn the regulatory compliance laws for different countries to help avoid legal consequences and costly fines.
- Maintain thorough and accurate records of all international transactions, have them readily available during audit or regulatory compliance checks, and maintain effective financial management systems.
- Before sending an international payment, it is best to double-check the recipient details to avoid payment delays due to errors in account numbers, routing numbers, and addresses.
- Utilize secure and reliable payment methods through a reputable payment service provider that uses extensive security measures and offers customer support if there is a problem.
- Clearly outline payment terms in contracts, including the currency of payment, who pays for transaction fees, deadlines, and penalties for late payments.
- Be aware and prepared to handle any potential fraud, including phishing attempts and fake invoice scams. Train your staff to recognize and handle a potential scam before finalizing and closing the translation.
Tax Implications
As with any transaction, the money paid to your business or you settle for service is typically included in your tax filing paperwork as income or expenses. However, there is more to filing taxes associated with money accepted from abroad, and understanding the basics of international money transfer and payment laws can help keep your business compliant.
If you complete transactions for more than $10,000, you are responsible for reporting this payment or money transfer to the Internal Revenue Service (IRS). Failure to report the transaction to the IRS could lead to fines and other legal repercussions. Suppose you don’t report your account to the IRS for large international financial transactions. In that case, you may face civil or criminal charges, which could include the payment of fines, restitution orders, and incarceration. If the paperwork is not filed with the IRS, it is possible you could incur $10,000 in penalties for every 30 days you don’t report it.
How Can Professional Accounting Services Help?
Hiring a professional accountant to help with international transactions ensures your business remains compliant and helps with any potential issues you may encounter. Hiring an international business account can benefit your business with the following:
- Read financial statements
- Verify reports and statements are accurate
- Communicate with clients and vendors in other countries
- Complete transactions using foreign currency
- Recommend ways to improve business health through international transaction
- Stays up to date with international transaction law
- Stays up to date with laws and regulations of other countries
- Prepare financial statements to share with foreign partners
- Complete standard accounting duties, including tax preparation, filing, and audits
When taking your business to the next level by expanding practices to foreign countries, it is vital to consult with an attorney to ensure you are handling foreign transactions properly. Clear Accounting Firm is one of the best accounting firms in New Hampshire, and we are here to help you with all of your business accounting needs. Call us today to schedule a consultation and learn how we can assist.