Form 5472 for Foreign-Owned Single-Member LLCs

What Form 5472 actually is

Form 5472 is an information return, not a tax return. It does not calculate tax. It reports transactions between a US entity and its foreign owner or other related parties, so the IRS can see money moving across the border.

The part that surprises people came in with regulations finalised in 2016 and effective for tax years beginning on or after 1 January 2017. Before that, a US single-member LLC owned by a non-US person was a disregarded entity for federal purposes — invisible, with nothing to file. Since then, such an LLC is treated as a domestic corporation purely for these reporting rules. It must obtain an EIN, keep records of its dealings with its owner, and file Form 5472 every year.

Who has to file

• A US LLC treated as a disregarded entity that is wholly owned, directly or indirectly, by one non-US person.
• A US corporation that is 25% or more foreign-owned, by vote or value, at any point in the year.
• A foreign corporation engaged in a US trade or business, which files for its own reportable transactions.

“Foreign person” means a non-resident alien individual, a foreign corporation or partnership, a foreign estate or trust. If you are a US tax resident — a citizen, a green card holder, or someone who meets the substantial presence test — this particular form is not triggered by your ownership.

One form per related party

Form 5472 is filed per related party, not per entity. An LLC that transacted with its owner and with two affiliated companies abroad files three forms in the same package. Each one carries its own penalty exposure.

What counts as a reportable transaction

For a foreign-owned disregarded LLC the definition is deliberately broad. It covers essentially any exchange of money or property with a related party, including:

• Capital contributions — money you put into the LLC, in any amount
• Distributions — money you take out
• Loans in either direction, and interest on them
• Sales, purchases, rents, royalties, commissions, and service fees
• Amounts paid or received on the LLC's formation, dissolution, acquisition or disposition

There is no de minimis threshold. A single $500 transfer is reportable.

Deadline, extension, and how it is filed

For a calendar-year entity the package is due 15 April. Filing Form 7004 on time extends that to 15 October. An entity with a non-calendar tax year files by the 15th day of the fourth month after year end.

The 5472 does not travel alone. It is attached to a pro forma Form 1120 — a mostly empty corporate return whose only job is to carry the 5472. On the 1120 you complete the identifying information at the top and leave the income and deduction lines blank.

The penalty, and what to do if you are already late

Failure to file a timely, complete and accurate Form 5472 carries a penalty of $25,000 per form, per year. If the failure continues more than 90 days after the IRS issues a notice, an additional $25,000 applies for each 30-day period that follows. Failure to keep the underlying records carries the same penalty.

The penalty applies per form, so an entity with three related parties and three unfiled years is looking at a figure well into six digits.

Being late is not the end of it. Reasonable-cause relief exists, and delinquent returns filed before the IRS contacts you are treated very differently from returns filed after a notice arrives. If you have unfiled years, the sequence and the wording of the reasonable-cause statement matter a great deal. Talk to us before you file anything.

What we need from you

• The LLC's EIN — if it has none, we obtain one first (see EIN without an SSN)
• Articles of organisation and the formation date and state
• The owner's full legal name, address, and country of citizenship or organisation
• The owner's US taxpayer ID if one exists — and it is fine if none does
• A ledger of every transfer between the LLC and the owner or any related party, with dates and amounts
• Bank statements for the LLC's US account for the year
• Any IRS notices already received

If your bookkeeping is thin, say so. Reconstructing a year of related-party transfers from bank statements is routine work for us and is far cheaper than a penalty.

Key facts at a glance