Form 5472: who files, what to report and the deadline

What Form 5472 is

Form 5472 is titled "Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business". It exists because of sections 6038A and 6038C of the Internal Revenue Code, which let the IRS see dealings between a US company and the foreign people or companies that control it.

The form does not produce a tax bill. It lists who owns the company, who the related parties are, and what passed between them during the year. The IRS uses it to check that those dealings are priced and reported properly.

Who has to file

The IRS calls the filer a "reporting corporation". There are three kinds.

• A US corporation that is at least 25% foreign owned. A corporation counts if it has at least one foreign person who owns, directly or indirectly, 25% or more of its voting power or of the value of its stock at any time in the tax year.
• A foreign-owned US disregarded entity. This is a US entity that is ignored for income tax and wholly owned by one foreign person. The usual example is a single-member LLC whose owner lives abroad. For tax years beginning on or after January 1, 2017, these entities are treated as corporations for the limited purpose of this reporting rule.
• A foreign corporation engaged in a trade or business in the United States.

A "foreign person" includes an individual who is not a US citizen or resident, and any company, partnership or association that was not created or organized in the United States.

Being a reporting corporation is only half the test. A reporting corporation files Form 5472 for a year in which it had a reportable transaction with a related party. It files a separate Form 5472 for each related party it dealt with.

What counts as a reportable transaction

Related parties include any direct or indirect 25% foreign shareholder, plus people and companies related to the reporting corporation or to that shareholder. For a single-member LLC, the obvious related party is the owner.

The form sorts reportable transactions into three groups.

Part V is the reason most foreign-owned single-member LLCs have to file, even in a quiet year. These are all reportable:

• The owner transfers $1,000 to open the LLC's bank account. That is a contribution.
• The owner pays the state filing fee or the registered agent from a personal card on the LLC's behalf.
• The LLC sends profit to the owner's personal account. That is a distribution.
• See how non-residents take money out of a US LLC for the full picture.
• The owner lends money to the LLC, or the LLC repays it.

When there is nothing to file

A reporting corporation does not have to file if it had no reportable transactions of the kinds listed in Parts IV and VI and, for a foreign-owned disregarded entity, none of the kind listed in Part V either. An LLC that was formed in an earlier year and had no money or property pass between it and its owner in the current year can fall into this exception. Keep the bank statements that prove it. See what a dormant LLC still has to file.

The other exceptions in the instructions, such as the one for companies whose controlling US person files Form 5471, do not apply to foreign-owned disregarded entities.

Contributions and loans are both reportable. See capital contributions vs loans to your own LLC.

The pro forma Form 1120

A corporation attaches Form 5472 to its income tax return. A foreign-owned disregarded entity has no income tax return of its own, so the IRS requires it to file a "pro forma" Form 1120 as a cover sheet, with Form 5472 attached.

Very little of the Form 1120 is completed. The instructions ask for only:

• the name and address of the LLC,
• item B, the employer identification number, and
• item E, the checkboxes for an initial return, final return, name change or address change, where one applies.

Write "Foreign-owned U.S. DE" across the top of the Form 1120. Leave the income, deduction and tax lines blank.

The LLC uses the same tax year its owner uses for US tax filings. If the owner has no US filing requirement, the LLC uses the calendar year.

Deadline and extension

Form 5472 is due with the Form 1120 it is attached to, by that return's due date including extensions. For a company using the calendar year, Form 1120 is due on April 15 of the following year. When that date falls on a weekend or a legal holiday, the deadline moves to the next business day.

To get more time, file Form 7004 by the regular due date. That gives a six-month extension, to October 15 for calendar-year filers. A foreign-owned disregarded entity follows three extra rules on Form 7004:

• Enter the form code for Form 1120 in Part I, line 1.
• Write "Foreign-owned U.S. DE" across the top.
• Fax or mail it to the same dedicated number or address used for the Form 5472 itself, not the address in the Form 7004 instructions.

Where and how to file

How you send the form depends on which kind of filer you are.

A foreign-owned disregarded entity must not use the mailing addresses given in the Form 1120 instructions. If you fax the forms, keep the transmission confirmation with your records as proof of the filing date.

Faxing from outside the US, couriers and proof of filing are covered in filing US forms from abroad.

Completing the form, part by part

Part I: the reporting corporation

Enter the LLC's name, address and EIN, its total assets, and a description of its main business activity with the matching activity code from the Form 1120 instructions. Other lines that matter for a small LLC:

• Line 1f is the total value in US dollars of the foreign related party transactions reported on this Form 5472.
• Line 1g is the number of Forms 5472 you are filing for the year, and line 1h is the total value across all of them.
• Line 1j is ticked in the first year the company files a Form 5472.
• Line 1o lists the main countries where the business operates. Do not write "worldwide".
• Line 3 is the box that says the filer is a foreign-owned US disregarded entity. Tick it.

Part II: the 25% foreign shareholder

A foreign-owned LLC reports its owner here. The form asks for the owner's name, address, countries of business, citizenship or organization, and tax residence. It also asks for identifying numbers:

• US identifying number. An SSN or ITIN for an individual, or an EIN for an entity, if the owner has one.
• Reference ID number. Required only when no US identifying number is entered. You make this number up yourself. It can contain letters and numbers, up to 50 characters, with no spaces or special characters, and you must use the same one every year for that owner.
• Foreign taxpayer identification number. A foreign-owned disregarded entity enters the owner's tax number from their home country. If the owner has none, enter "None" or "N/A".

Part III: the related party

Every filer completes Part III, even when the related party is the same person already listed in Part II. For most single-member LLCs that means entering the owner's details a second time.

Part IV: monetary transactions

Report amounts received from and paid to the foreign related party, line by line. State everything in US dollars and attach a schedule of the exchange rates you used. Two rules make this easier:

• Where the exact figure cannot be determined, a reasonable estimate is accepted. The instructions define that as between 75% and 125% of the actual amount.
• Where the actual amount for a transaction or series of transactions is $50,000 or less, you may report it as "$50,000 or less".

Part V: formation, contributions and distributions

A foreign-owned disregarded entity ticks the box in Part V if it had any transaction not already entered in Part IV, such as contributions and distributions, and describes them on an attached statement. List each type with its amount and date.

Parts VI to IX

Part VI covers non-monetary and below-value transactions, described on an attached schedule. Part VII asks additional yes or no questions that every filer must answer, although lines 43a and 43b are not completed by a foreign-owned disregarded entity. Parts VIII and IX deal with cost sharing arrangements and base erosion payments, which rarely apply to a small LLC.

Penalties

The IRS assesses a $25,000 penalty on a reporting corporation that fails to file Form 5472 when due and in the manner required. Three points are easy to miss:

• A substantially incomplete Form 5472 counts as a failure to file.
• The same $25,000 penalty applies for failing to keep the records the regulations require.
• If the failure continues for more than 90 days after the IRS notifies the company, another $25,000 applies for each related party, for every 30-day period or part of one that the failure continues.

Criminal penalties can also apply for failing to submit information or for filing false information.

If a deadline has already passed, see late Form 5472: the penalty and how to ask for relief.

Records to keep

A reporting corporation must keep books and records that are enough to show its return is correct, including records relevant to transactions with related parties. For a small foreign-owned LLC, that means keeping:

• every bank and payment account statement for the LLC,
• a running log of each contribution from the owner and each distribution to the owner, with dates and amounts,
• invoices and agreements between the LLC and the owner or the owner's other companies, and
• copies of each filed Form 5472 and pro forma Form 1120, with the fax confirmation or postal receipt.

Common mistakes

• Skipping the form because the LLC made no profit. The test is reportable transactions, not income. Funding the LLC is reportable.
• Sending it to the ordinary Form 1120 address. Foreign-owned disregarded entities use the dedicated fax number or the Ogden address.
• Leaving "Foreign-owned U.S. DE" off the top of the Form 1120.
• Leaving Part III blank because the owner is already in Part II.
• Ticking Part V without attaching the statement that describes the contributions and distributions.
• Assuming more time is automatic. The extension exists only if Form 7004 is filed by the original due date.

This guide is general information. It is not tax or legal advice for your situation.