Form 5472: The Tax Obligation With a $25,000 Penalty (That Almost Nobody Knows)
It is the most unfair IRS penalty: $25,000 for failing to file a form most foreign owners do not even know exists. This article saves you that nasty surprise.
Who does Form 5472 affect?
All US LLCs whose single owner is a foreigner (an individual or company outside the US). For the IRS your single-member LLC is a «disregarded entity»: transparent, but with informational duties whenever money or assets move between you and your LLC.
What exactly must be filed?
Two documents, together, every year: Form 5472 (report of related-party transactions) and a cover page of Form 1120 marked as a «Foreign-owned domestic disregarded entity». Both are filed by fax or mail to the IRS, due by April 15 of the following year.
Which transactions must be reported
- Capital contributions from the owner to the LLC.
- Money the LLC pays you (distributions, reimbursements).
- Loans between you and your LLC in either direction.
- Payments from the LLC to your other foreign company.
- Purchases of goods or services between you and your LLC.
Even if your LLC bills zero, if you moved $100 between your personal account and the company, Form 5472 is mandatory.
The penalties
Non-compliance is penalized at $10,000 per form per year, which the IRS periodically adjusts to roughly $25,000 today. And the penalty repeats every year you keep failing to file. IRS scrutiny of these entities has increased sharply since 2020: this is not a lottery worth playing.
How to comply without headaches
You need a clear record of every movement between your pocket and the LLC (a spreadsheet is enough) and both forms filed on time. In our annual plan, the 5472 and pro forma 1120 filing is included: we remind you, prepare it and submit it every year.
Conclusion
Form 5472 is neither optional nor difficult, but ignoring it is brutally expensive. If your LLC has a single foreign owner, this year it must be filed — and we can take care of it.
Have you filed your 5472 this year?
It is included in the annual plan: reminder, preparation and filing with the IRS every year.
See the full plan