If you own a US company as a non-US person, Form 5472 is one of the most important IRS forms you will encounter. It is not a tax payment form, but failing to file it can result in a $25,000 penalty per year. This guide explains what Form 5472 is, what it requires, and what you need to know to stay compliant.
Form 5472 is an IRS information return titled ‘Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business.’ Despite the formal name, it applies to a broader group than the title suggests, including foreign-owned single-member LLCs that are treated as disregarded entities.
The form’s purpose is to give the IRS visibility into financial transactions between US entities and their foreign owners or related parties. It is part of the IRS’s effort to monitor transfer pricing and prevent profit-shifting between related businesses in different countries.
Form 5472 is an information return, not a tax calculation. Filing it does not automatically mean you owe money. But not filing it can cost you $25,000.
Three categories of taxpayers are required to file:
- US corporations that are 25% or more owned by a foreign person, directly or indirectly
- Foreign corporations that conduct a trade or business in the United States
- Foreign-owned single-member LLCs treated as disregarded entities, which must file a pro forma Form 1120 with Form 5472 attached
The third category is where most international entrepreneurs find themselves. If you are a non-US resident who owns 100% of a US single-member LLC, you fall into this group and must file every year the LLC exists, regardless of income or activity.
The form requires reporting of ‘reportable transactions,’ which is defined broadly. It includes virtually any financial or economic exchange between the LLC and its foreign owner or a related party:
- Sales of goods or inventory
- Provision of services
- Loans and interest payments
- Capital contributions from the owner into the LLC
- Distributions from the LLC to the owner
- Rents, royalties, and license fees
- Non-monetary transactions, such as the use of property without a cash payment
Even a simple capital contribution when you form the LLC is a reportable transaction. This means the very first year of your LLC’s existence almost certainly requires a Form 5472 filing.
For foreign-owned single-member LLCs, Form 5472 cannot be filed on its own. It must be attached to a pro forma Form 1120. Form 1120 is the standard US corporate income tax return, but for this purpose, only a limited portion needs to be completed: the entity name, address, and certain identification sections. You also mark ‘Foreign-Owned U.S. DE’ at the top of both forms.
This can be confusing because single-member LLCs are not corporations. But the IRS has chosen to use the 1120 as the filing vehicle for foreign-owned disregarded entities. The pro forma 1120 is not a full tax return. It is simply the wrapper around your Form 5472.
For calendar-year filers, which is the standard for most LLCs, Form 5472 and the pro forma Form 1120 are due on April 15 each year. A six-month extension can be requested by filing Form 7004 by the original due date, pushing the deadline to October 15.
The forms must be mailed or faxed to the IRS. Electronic filing is not currently available for foreign-owned disregarded entity filings. The mailing address is the IRS office in Ogden, Utah.
Penalties for Non-Compliance
The penalty for failing to file Form 5472, or for filing it late or with incomplete or inaccurate information, is $25,000 per form per year. The penalties can increase by an additional $25,000 for each 30-day period the failure continues after the IRS has notified you.
If the LLC had transactions with more than one related party during the year, a separate Form 5472 is required for each one. Penalties apply per form, so a missed filing involving two related parties could result in $50,000 in penalties.
These two forms are often confused because their names are similar. They have different purposes and apply to different situations:
- Form 5472 is for US entities (including foreign-owned LLCs) that have foreign owners or engage in transactions with foreign related parties. Filed by the US entity.
- Form 5471 is for US persons who own foreign corporations. Filed by the US shareholder.
If you are a non-US person who owns a US LLC, Form 5472 is your form. Form 5471 is not relevant to your situation unless you are a US person owning shares in a foreign company.
What If You Have Not Been Filing?
Many foreign LLC owners discover the Form 5472 requirement years after forming their company. This is common, particularly for entrepreneurs who formed an LLC through an online service without receiving tax guidance at the time.
The IRS has specific procedures for delinquent international information returns. Filing late with a reasonable cause statement can sometimes result in penalty abatement. However, the IRS has become more active in enforcing these obligations, and proactive compliance is nearly always preferable to waiting for an IRS notice.
If you have missed filings, working with a tax professional who understands the IRS’s delinquent filing procedures gives you the best chance of resolving the issue without the full penalty exposure.
- It is an information return, not a tax return. You do not pay tax by filing it.
- It is required every year the foreign-owned LLC exists, even if the LLC had no income or activity.
- The penalty for non-filing is $25,000 per form per year.
- It must be filed with a pro forma Form 1120 and sent by mail or fax to the IRS.
- A separate form is required for each related party that had transactions with the LLC during the year.
Vincenzo Villamena, CPA is Founder and CEO of Online Taxman. Having previously worked at PwC in New York, he has 20 years' experience in expat taxes and regularly appears in the media as a thought leader in accounting and finances for overseas Americans. Vincenzo loves to travel, is fluent in Spanish, Portuguese, and Italian, and currently resides in Rio De Janeiro, Brazil.
Hong Kong
Panama
