Form 5472 for a Foreign-Owned LLC: Who Files, When, and the $25,000 Penalty

If you own a US LLC from outside the United States, there is one IRS form that matters more than any other: Form 5472. Most new owners have never heard of it, because nobody mentions it when the LLC is formed. The penalty for missing it is large enough that it is worth ten minutes to understand it now.

What Form 5472 is

Form 5472 is an information return. It reports certain transactions between a US entity and a foreign owner or a related foreign party. It does not calculate tax. Its job is to tell the IRS who owns the entity and what money moved between the owner and the company.

Who has to file it

You file if your US company is "foreign-owned" in the IRS sense and had a reportable transaction during the year. In practice that covers:

• A single-member LLC whose one owner is a non-US person or company.
• A US corporation that is at least 25% owned by a foreign person.

A reportable transaction is broad. Putting money into the company, taking money out, paying the owner for services and the owner paying company bills all count. For a new LLC, the owner's first deposit into the company bank account is usually enough.

Why a single-member LLC also files a Form 1120

A foreign-owned single-member LLC is normally ignored for income tax, so it has no return of its own. The IRS still wants Form 5472 to arrive attached to something, and the rule is that it is attached to a "pro forma" Form 1120. Pro forma means the 1120 is filed only as a cover for the 5472: you fill in the name, address, EIN and a few basics, not a full corporate return. That is why we offer the two together as one filing.

What goes on the form

• The LLC's name, address and EIN.
• The owner's name, address, country and tax ID, if there is one.
• Each type of transaction with the owner, such as capital contributions, loans, distributions and payments for services, with the amount of each.

Keep a simple record of these during the year. The form is easy when the bank statements are tidy and hard when personal and business money have been mixed.

When it is due

For a calendar-year company the pro forma 1120 with Form 5472 is normally due on April 15 of the following year. An extension is available by filing Form 7004 before the deadline, which moves the due date by six months. The extension must be filed on time to count. Check the current dates on irs.gov, since they shift when April 15 falls on a weekend.

The penalty

The IRS charges a penalty of $25,000 for each Form 5472 that is late, missing or incomplete. If the IRS notifies you and you still do not file, a further $25,000 can be added for each 30 days after the notice period. This is a penalty for not telling the IRS, and it applies even when the company owed no tax at all. If you have missed a year, read what to do after a missed Form 5472 deadline.

Common mistakes

• Thinking no income means no filing. The duty comes from the transactions, not from profit.
• Not getting an EIN. The form needs one. See our EIN filing service.
• Counting only income. The owner's own deposits to start the business are reportable.
• Waiting for the state to remind you. The state does not know about this form. Only the IRS does, and it does not remind.

Frequently asked questions

Does an LLC owned by two foreign partners file Form 5472?

No. That is a partnership and files Form 1065 instead. Form 5472 is for a single-member LLC or a foreign-owned corporation. See which tax form fits your company.

I had no transactions. Do I still file?

If there truly were no reportable transactions, the form may not be required for that year. Be careful: owner funding and paying fees on the company's behalf are transactions. If you are unsure, check before you decide.

Do I pay tax with Form 5472?

No. It is a reporting form. A foreign-owned LLC with no US-source business income usually owes no US income tax, though your home country may tax you on what you earn.

How we help

We prepare and file Form 5472 with the pro forma Form 1120 as a single US LLC tax filing. Send us your EIN, the tax year and either a bank statement or a note that the account had no activity, and we do the rest. This post is general information and not tax advice for your situation.