Form 5472 for foreign-owned US LLCs: who files, deadlines and penalties

Who must file Form 5472?

Form 5472 is an information return: it tells the IRS about dealings between a company and the people or companies related to it. It's filed by a reporting corporation, which the IRS defines as either a US corporation that is at least 25% foreign-owned or a foreign corporation doing business in the US.

Single-member LLCs owned from outside the US

A US LLC with one owner is normally a disregarded entity: the IRS ignores it for income tax and looks at the owner instead. Since tax years beginning in 2017, there's an exception. If that one owner is a foreign person, whether an individual or a foreign company, the LLC is treated as a corporation for Form 5472 purposes. It files no income tax return of its own, but it must file a pro forma Form 1120 with Form 5472 attached.

Corporations that are 25% foreign-owned

A US corporation, including an LLC that has elected to be taxed as one, is a reporting corporation if at least one foreign person owns 25% or more of its votes or value, directly or indirectly, at any time during the year. It attaches Form 5472 to its regular Form 1120.

Not sure how your LLC is taxed? See single-member vs multi-member LLCs, and US taxes for non-resident LLC owners for the returns a partnership or corporation files.

What counts as a reportable transaction?

A related party includes any 25% foreign owner of the company, people and companies related to it or to that owner under the tax code's ownership rules, and anyone else related under the transfer pricing rules. For a single-member LLC, that's you, and it can include your other companies.

The form collects three kinds of transactions with a related party:

• Money transactions (Part IV): for example sales, rents, amounts borrowed or loaned, interest, and other amounts paid or received.
• Transactions of a foreign-owned single-member LLC (Part V): any other transfer, including amounts paid or received to form, dissolve, acquire or dispose of the LLC, and contributions to and distributions from it. You describe these on an attached statement.
• Non-cash or below-value transactions (Part VI): for example property or services exchanged for something other than full payment.

In practice, that means most everyday money movements count. Paying the state fee to form the LLC, sending money from your personal account to the LLC's bank account, and moving profits from the LLC to yourself are all reportable. File a separate Form 5472 for each related party the LLC had reportable transactions with.

Records you must keep

A reporting corporation must keep permanent books and records that show its tax filings are correct, including records of its related-party transactions. Companies with $10 million or more in US gross receipts face extra record rules, such as keeping records in the US or producing them within 60 days of an IRS request, and the $25,000 penalty also covers breaking those rules. Smaller companies are exempt from the extra rules, but not from keeping records or filing Form 5472. Keep bank statements, invoices and a simple log of every transfer between you and the LLC.

How the pro forma Form 1120 works

“Pro forma” means the Form 1120 is a cover document, not a real corporate tax return. It reports no income or tax. The IRS instructions ask for only a few entries:

1. 1

   Mark the top of Form 1120

   Write “Foreign-owned U.S. DE” across the top of the form.

2. 2

   Fill in the basics only

   Enter the LLC's name and address, its EIN in item B, and item E, for example checking “initial return” in the first year. Leave the income and tax lines blank.

3. 3

   Complete Form 5472

   Part I describes the LLC. In Part II, report the foreign owner as the 25% foreign shareholder. Complete Part III for the related party, even if it's the same owner, then Parts IV and V for the transactions.

4. 4

   Attach the Part V statement

   Describe contributions, distributions and other Part V transactions on an attached statement.

The LLC uses its owner's US tax year or, if the owner has none, the calendar year. It needs an EIN before it can file; see how to get an EIN without an SSN.

When is Form 5472 due, and how do you file it?

Form 5472 is due with the Form 1120 it's attached to: the 15th day of the 4th month after the tax year ends, which is April 15 for a calendar year. If that day is a weekend or legal holiday, you can file on the next business day.

Getting an extension with Form 7004

Form 7004 gives an automatic 6-month extension. File it by the regular due date, enter the code for Form 1120 in Part I, and write “Foreign-owned U.S. DE” across the top. Fax or mail it to the same number or address as the return, not the regular Form 7004 address.

No e-filing

The IRS instructions say a foreign-owned single-member LLC cannot file Form 5472 electronically, and must use the dedicated fax number or mailing address above instead of the addresses in the Form 1120 instructions. Keep your fax confirmation or proof of mailing. A 25% foreign-owned corporation filing a regular Form 1120 follows the Form 1120 instructions, which generally allow e-filing.

What's the penalty for not filing Form 5472?

The IRS treats a substantially incomplete Form 5472 as not filed. According to the Internal Revenue Manual, the $25,000 initial penalty is assessed once per related party per tax year, and the continuing penalty has no upper limit. It can also be charged automatically when a late Form 1120 with Form 5472 attached is processed. Criminal penalties may also apply for failing to submit information or for filing false or fraudulent information.

Can the penalty be removed?

Sometimes. You can ask for relief for reasonable cause with a written statement signed under penalties of perjury. The IRS regulations say reasonable cause is applied liberally to a small corporation that didn't know about the rule, has little presence in the US, and promptly files and provides records when asked. The IRS's usual first-time penalty relief generally doesn't apply to Form 5472, and the manual recommends considering reasonable cause only after all missing returns are filed.

Do you file Form 5472 in a year with no activity?

No revenue isn't the same as no reportable transactions. The IRS instructions exempt a foreign-owned single-member LLC from filing only if it had no reportable transactions of the kinds listed in Parts IV, V and VI during the year.

A quiet year usually still has something to report if, for example:

• It's the year you formed the LLC and you paid the state fee or formation costs.
• You paid the registered agent renewal, annual report fee or state tax for the LLC from your own money.
• You transferred money to the LLC's bank account to cover bank fees or software.
• The LLC paid you anything, or repaid money you lent it.

If truly no money or property moved between you and the LLC, a filing may not be required. Because one small payment changes the answer, confirm with a US CPA before you decide not to file. Form 5472 is also separate from FinCEN's beneficial ownership reports, which US LLCs no longer file.

How we help with Form 5472

Pro includes Form 5472 and the pro forma Form 1120, prepared by our US tax partner, for $999 a year plus the state fee. Both plans include a compliance calendar with reminders, so the April 15 date doesn't sneak up on you. See the full yearly compliance checklist for the state filings that come with it.

We're not a CPA firm. If your LLC has US employees, an office or inventory in the US, more than one owner, or missed filings from earlier years, work with a US CPA on your full tax position as well.

Frequently asked questions