Informational returns: what they are, what they are used for, and why they matter if you operate internationally

Informational returns are a key component of the tax systems of many countries, especially when it comes to commercial operations, third-party payments, and money flows between individuals or companies. Although they do not always involve the direct payment of taxes, their correct filing is essential to ensure transparency, legal compliance, and tax consistency.

If you are considering operating internationally or already have activities in the United States, understanding how informational returns work will help you avoid common mistakes, unnecessary penalties, and issues with tax authorities such as the IRS. In this guide, we explain what they are, when they apply, what information they report, and why they are so relevant in a global tax environment.

What are informational returns?

Informational returns are tax reports designed to inform the tax authority about certain transactions, payments, or economic relationships, without necessarily creating a tax liability at that time. Their main purpose is to allow tax administrations to cross-check information and verify that income and operations are being properly reported by all parties involved.

Unlike a traditional tax return, these filings do not calculate a final tax amount. Instead, they act as a control and transparency mechanism. Through them, tax authorities can identify discrepancies, omissions, or potential noncompliance.

In general terms, this type of return exists in many countries, although the forms, names, and deadlines vary depending on local legislation.
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What are informational returns used for?

Informational returns serve several key functions within modern tax systems. First, they allow tax authorities to identify relevant economic movements that might otherwise go unnoticed.

They also serve as supporting documentation for taxpayers who receive payments, enabling them to compare third-party reported information with their own tax filings. This reduces errors, avoids inconsistencies, and facilitates audit processes.

In the international context, these returns are especially important because they help control cross-border operations, payments to foreign providers, and income flows between different countries.

Informational returns in the U.S. context

In the United States, informational returns are an essential part of the tax system administered by the Internal Revenue Service (IRS). The IRS uses these reports to verify that income is properly reported by both the payer and the recipient.

Common examples of informational returns in the U.S. include:

• Forms that report payments for services
• Reports of interest, dividends, or investments
• Filings related to financial transactions
• Reports of income paid to contractors or third parties
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For foreign companies and entrepreneurs operating in the United States, these returns are particularly relevant, as noncompliance can lead to penalties even if no direct tax is owed.

Who is required to file informational returns?

The obligation to file informational returns generally falls on individuals or entities that make payments, manage funds, or intermediate economic transactions. This may include:

• Companies that pay for third-party services
• Digital platforms that process payments
• Financial institutions
• Employers or hiring parties
• Companies with international operations
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In many cases, the obligation exists regardless of the tax residence of the payment recipient, giving informational returns a global impact.
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What type of information is reported?

Informational returns typically include details such as:

• Identification of the payer and the beneficiary
• Total amount paid during the tax period
• Type of income or payment concept
• Relevant transaction dates
• Tax identification information of the recipient
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In the United States, this data allows the IRS to cross-reference information and detect discrepancies between what a company reports and what the individual or entity receiving the income declares, helping identify omissions, errors, or inconsistencies more efficiently.

This verification mechanism strengthens tax oversight and makes these filings a key element in maintaining compliance and avoiding audits, unexpected adjustments, or future penalties.

Importance of informational returns for international operations

For those operating outside their country of residence or with clients, suppliers, or companies in the United States, informational returns take on special importance. Incorrect filing or omission of these reports can result in:

• Automatic fines
• Requests for additional information
• Tax reviews
• Difficulties in maintaining tax compliance
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Additionally, many tax authorities exchange information across countries, extending the reach of these returns beyond a single jurisdiction. This means reported data may be reviewed and cross-checked by multiple tax administrations, increasing the importance of submitting information that is consistent, complete, and aligned with international compliance standards.

Best practices for managing informational returns

To avoid errors and maintain an organized tax operation, it is recommended to:

• Clearly identify when reporting obligations apply
• Maintain detailed records of payments and contracts
• Verify the tax information of third parties
• Comply with deadlines established in each country
• Seek specialized advice in international taxation
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Proper management of these returns reduces risk and provides greater legal and financial security, as it demonstrates transparency to tax authorities, anticipates potential requests, and improves control over reported information. It also facilitates strategic decision-making and contributes to a more orderly operation, especially when business activities span multiple countries.
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Frequently asked questions about informational returns

Do informational returns always involve paying taxes?
No. Their main purpose is to inform tax authorities, although they may later be used to verify tax obligations.

Can they affect foreign companies operating in the U.S.?
Yes. Many reporting obligations apply even to nonresident companies or individuals.

What happens if I fail to file a required informational return?
In most countries, including the United States, fines and penalties may apply even if no tax is due.

Are informational returns public?
Generally no, but they are accessible to tax authorities and may be shared between government entities.

Conclusion

Informational returns are an essential component of modern tax compliance, especially in a globalized environment. Understanding how they work and when they apply allows you to operate more securely, avoid penalties, and maintain a transparent relationship with tax authorities.

If you plan to operate in the United States or already have activities connected to the country, having proper guidance on informational returns can make the difference between an orderly operation and unnecessary tax issues.

Specialized support from Openbiz helps you identify which reports apply to your situation, meet required deadlines, and avoid errors that could lead to fines, additional requests, or reviews by tax authorities—allowing you to focus on growing your business with greater peace of mind.