Whether you run a US business, are an Indian founder with a US entity, or simply work with US clients, US accounting follows its own rulebook — different standards, different forms and a different tax structure from India. Here is what US accounting actually involves, and what businesses commonly hand to offshore teams.
| Question | Answer |
|---|---|
| What standard does US accounting follow? | US GAAP, set by the Financial Accounting Standards Board (FASB). |
| What is the main US corporate tax form? | Form 1120 for C-corporations (1120-S for S-corps, 1065 for partnerships). |
| Does the US have GST? | No — the US uses state-level sales tax, not a national GST. |
| What must a foreign-owned US entity file? | Form 1120 plus Form 5472 to report related-party transactions. |
| Which software is common? | QuickBooks, Xero, NetSuite and Zoho Books. |
| Why outsource US accounting to India? | Cost savings, US GAAP-trained CAs and a time-zone advantage. |
What Is US Accounting?
US accounting is the practice of recording and reporting financial information under US GAAP (Generally Accepted Accounting Principles), the standards set by the Financial Accounting Standards Board, and filing taxes with the Internal Revenue Service (IRS) and the states.
It covers bookkeeping, financial reporting, payroll, sales tax and federal and state tax compliance for US businesses.
US GAAP vs Indian Accounting
- Standards: the US uses US GAAP; India uses Indian Accounting Standards (Ind AS) and Accounting Standards.
- Indirect tax: the US has state-level sales tax with nexus rules across all 50 states; India has a single GST.
- Tax identifiers: US businesses use an EIN (Employer Identification Number); India uses PAN and TAN.
- Information reporting: the US reports contractor payments on Form 1099; India deducts TDS at source.
- Fiscal year: US businesses commonly use the calendar year; India runs April to March.
Key US Tax Forms
| Form | Used for |
|---|---|
| Form 1120 | C-corporation income tax return |
| Form 1120-S | S-corporation income tax return |
| Form 1065 | Partnership return (with Schedule K-1) |
| Form 1040, Schedule C | Sole proprietor / single-member LLC |
| Forms 941 / 940 | Quarterly payroll tax / annual federal unemployment (FUTA) |
| Forms W-2 / 1099-NEC | Employee wages / contractor payments |
| Form 5472 | Reportable transactions of a foreign-owned US entity |
Foreign-owned US entities should note Form 5472 in particular: failure to file reportable related-party transactions can attract a penalty of USD 25,000 under IRC Section 6038A, and a US entity generally files even with zero income.
Sales Tax and State Filings
Unlike India’s national GST, US sales tax is levied by states (and sometimes counties and cities), with “nexus” rules deciding where a business must register and collect. An e-commerce business selling across states can trigger filing obligations in several of them, plus state income tax, franchise tax and annual reports.
Common US Accounting Software
- QuickBooks Online — the most widely used small-business platform in the US.
- Xero — cloud accounting popular with startups and small firms.
- NetSuite — an ERP for larger and scaling businesses.
- Zoho Books — used by smaller US businesses and by those with India links.
What Businesses Outsource to India
US businesses and CPA firms increasingly delegate the labour-intensive parts of accounting to India, keeping final review and client sign-off in the US.
- Bookkeeping, general ledger and bank and credit-card reconciliations.
- Accounts payable and receivable management.
- Payroll processing and the related W-2 and 1099 preparation.
- Tax return preparation support for Forms 1040, 1065, 1120 and 1120-S.
- US GAAP financial reporting, cash-flow analysis and audit workpaper support.
The draw is a mix of cost savings, a deep pool of US GAAP-trained Chartered Accountants, and a time-zone overlap that lets work continue after US offices close.
Common Mistakes
- Assuming zero income means no filing — penalties. A US entity generally files even with no income, and foreign-owned entities file Form 5472.
- Ignoring sales-tax nexus — unregistered liabilities pile up. Track where sales create a filing obligation.
- Treating US GAAP like Indian standards — misstated reports. Apply US GAAP recognition and disclosure rules.
How These Pieces Connect
US GAAP governs how the books are kept, and those books feed the federal return (such as Form 1120) and the state filings, so a clean ledger underpins both. Sales tax sits alongside income tax rather than replacing it, which is why a US business often files with several authorities — the IRS federally, and one or more states separately.
Key Takeaways
- US accounting follows US GAAP and files with the IRS and the states.
- Form 1120 (C-corp), 1120-S, 1065 and 1040 Schedule C are the core income tax returns.
- The US uses state sales tax with nexus rules, not a national GST.
- Foreign-owned US entities file Form 5472, with a USD 25,000 penalty for default.
- Bookkeeping, reconciliations, payroll and tax-prep support are commonly outsourced to India.
Frequently Asked Questions
What accounting standard does the US use? US GAAP (Generally Accepted Accounting Principles), set by the Financial Accounting Standards Board, which differs from India’s Ind AS and Accounting Standards.
What is the main US business tax form? Form 1120 for C-corporations. S-corporations file Form 1120-S, partnerships file Form 1065, and sole proprietors report on Schedule C of Form 1040.
Does the US have GST like India? No. The US uses state-level sales tax with nexus rules, rather than a single national GST. A business may file sales tax in several states.
What does a foreign-owned US company need to file? Generally Form 1120 plus Form 5472 to report related-party transactions, even with zero income. Form 5472 default can attract a USD 25,000 penalty.
How is US accounting different from Indian accounting? Different standards (US GAAP vs Ind AS), sales tax instead of GST, an EIN instead of PAN/TAN, 1099 reporting instead of TDS, and a calendar fiscal year.
Which software is used for US accounting? QuickBooks Online, Xero and NetSuite are common, and Zoho Books is used by smaller businesses and those with India links.
Why do US firms outsource accounting to India? For cost savings, access to US GAAP-trained Chartered Accountants, and a time-zone overlap that speeds turnaround, while final review stays in the US.
Can an Indian firm handle US accounting? Yes. Many Indian CAs are trained in US GAAP and IRS forms and handle bookkeeping, reconciliations, payroll and tax-prep support for US businesses.
Need US Accounting Support?
US accounting rewards getting the standards, forms and state obligations right from the start. Regikart provides US GAAP bookkeeping and tax-prep support for businesses and founders. Reach us at +91 70444 94804 or [email protected], or read the companion guide at /blog/pan-card-for-foreign-citizens-and-companies.
About the author
CA & CS Team
Regikart at Regikart. Want to discuss this in the context of your business?
