What Is Form 5472?

What Form 5472 is, in one paragraph

Form 5472 — Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business — reports the existence and amounts of transactions between a US reporting entity and parties related to it. It is an information return, not an income tax return. Nothing on the form calculates tax.

Why the requirement exists

Regulations finalised in 2016 extended the reporting rules to foreign-owned US disregarded entities, effective for tax years beginning on or after 1 January 2017. The purpose is transparency: a single-member LLC owned by a nonresident previously had no federal filing footprint at all, which made cross-border flows invisible to the IRS.

Who may need to file it

Three conditions generally have to be considered together:

• The entity is a US entity treated as a disregarded entity for federal tax purposes.
• It is wholly owned, directly or indirectly, by one foreign person.
• It had at least one reportable transaction during the tax year.

A 25% foreign-owned US corporation can also be a reporting corporation under its own set of rules. Most owners reading this page are in the first situation — see who needs to file Form 5472 for the decision path.

Foreign-owned US disregarded entities

A domestic single-member LLC that has not elected corporate treatment is disregarded as separate from its owner. For income tax purposes the owner reports the activity; for the Form 5472 rules, the LLC is treated as if it were a domestic corporation, purely so the information reporting can attach to something.

This is the source of most confusion. Disregarded for income tax does not mean disregarded for information reporting.

What is a reportable transaction?

For a disregarded entity, the reportable transaction categories are broader than a typical trading relationship. Alongside sales, rents, royalties, interest and service payments, the instructions treat amounts paid or received in connection with the formation, dissolution, acquisition and disposition of the entity — including contributions to and distributions from it — as reportable.

Frequently overlooked examples:

• Owner transfers money into the LLC bank account to fund it
• Owner withdraws funds from the LLC
• Owner pays LLC formation or registered agent fees from a personal account
• LLC pays a personal expense of the owner
• Payments to the owner or a related entity for services, rent or interest

More detail: how contributions and distributions are treated.

The pro forma Form 1120

A foreign-owned disregarded entity does not file a normal corporate income tax return. It submits a pro forma Form 1120 — a cover return completed only to the extent needed (identifying information, plus the notation the instructions require) — with Form 5472 attached. The two documents travel together. See Form 5472 vs. Form 1120.

The pro forma Form 1120 is the document that contains the applicable signature and paid preparer information.

Deadline

The filing is due when the pro forma Form 1120 is due. For a calendar-year LLC that is generally 15 April of the following year, moving to the next business day when it falls on a weekend or legal holiday. An extension can be requested on Form 7004 by the original due date. Full detail: Form 5472 deadline.

Penalty exposure

Failure to file Form 5472 when required, or filing a substantially incomplete form, can result in a $25,000 penalty per form per tax year, subject to the applicable rules and circumstances, with additional amounts possible if the failure continues after IRS notice. Penalties are not automatic in every case and reasonable-cause relief may be available. See the penalty guide.

Common misconceptions

What information is needed to prepare it

• LLC legal name, EIN, formation state and date, and addresses
• Owner identity, country of tax residence and any tax identification numbers
• Principal business activity and country where business is conducted
• A record of every money movement between the owner (or related parties) and the LLC
• Supporting documents: EIN confirmation letter, formation document, bank statements

How 5472forYOU can help

We prepare Form 5472 with the required pro forma Form 1120 for foreign-owned US LLCs, and submit the completed package to the IRS via online fax. Each filing is prepared and reviewed by a US tax professional; the applicable paid preparer information appears on the pro forma Form 1120. There is no upfront payment — you pay once the filing is prepared, then review the documents and sign the pro forma Form 1120 before we submit it.

Frequently asked questions