How to file IRS Form 5472: Who must file, deadlines, penalties and exceptions
by Team Devanta Authority
- December 30, 2025
- Bookkeeping & Tax
IRS Form 5472 is one of the most critical compliance requirements for foreign-owned U.S. companies. It applies to U.S. corporations and disregarded entities with significant foreign ownership and is used by the IRS to monitor transactions between U.S. entities and related foreign parties. Failure to file this form correctly and on time can result in substantial penalties, even if the company had no taxable income during the year.
For many foreign founders, Form 5472 is confusing because the obligation is triggered by ownership structure and related-party transactions, not by profitability. As a result, companies often discover the requirement only after missing a deadline or receiving an IRS notice. Understanding who must file, how the filing works, and what exceptions may apply is essential to avoiding unnecessary risk.
This guide explains how to file IRS Form 5472 step by step, who is required to submit it, the applicable deadlines, the penalties for non-compliance, and the limited circumstances under which penalties may be waived. It is designed for foreign-owned U.S. companies, including single-member LLCs treated as disregarded entities, that need clear and practical guidance rather than generic tax explanations.
What is IRS Form 5472 and why it exists
IRS Form 5472 is an information return required by the Internal Revenue Service to disclose certain transactions between a U.S. entity and its foreign owners or other related foreign parties. Its formal title is Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business, and its purpose is reporting transparency rather than tax calculation. The form does not determine how much tax is owed; instead, it allows the IRS to monitor cross-border transactions that could be used to shift profits or avoid U.S. taxation.
The form exists because foreign ownership introduces a higher risk of non-arm’s-length transactions, especially when money, services, intellectual property, or loans move between related parties across borders. By requiring detailed disclosure of these transactions, the IRS can assess whether transfer pricing rules are being followed and whether income is being properly reported in the United States.
Importantly, the obligation to file Form 5472 is based on ownership structure and transaction activity, not on whether the company generated income or owed tax during the year. Even inactive or loss-making foreign-owned U.S. entities may be required to file if reportable transactions occurred. This is why Form 5472 is often overlooked and why noncompliance frequently results in significant penalties despite no underlying tax liability.
What is Form 5472 in the US?
In the United States, Form 5472 is an IRS information return used to report certain transactions between a U.S. entity and its foreign owners or other related foreign parties. It applies primarily to U.S. corporations that are at least 25% foreign-owned, as well as to foreign-owned U.S. disregarded entities, such as single-member LLCs owned by non-U.S. persons. The form is filed annually with the company’s federal income tax return or, in the case of disregarded entities, with a pro forma return.
Form 5472 is not a tax return and does not calculate tax liability. Its function is disclosure. Through this form, the IRS collects detailed information about ownership and related-party transactions, including payments for goods, services, loans, interest, rent, and intellectual property. This allows the IRS to monitor cross-border activity and ensure that transactions between related parties are properly reported and conducted in line with U.S. tax rules.
What is the purpose of Form 5472?
The purpose of Form 5472 is to give the IRS visibility into transactions between U.S. entities and their foreign owners or other related foreign parties. The form is designed to ensure transparency in cross-border dealings that could otherwise be used to shift profits out of the United States or reduce U.S. tax exposure through non-arm’s-length transactions.
By requiring detailed disclosure of ownership structures and related-party transactions, Form 5472 enables the IRS to monitor compliance with U.S. transfer pricing rules and broader international tax regulations. The focus is not on calculating tax, but on identifying whether transactions involving foreign parties are structured and reported appropriately under U.S. law.
In practice, Form 5472 allows the IRS to detect potential tax avoidance risks early, even when no tax is ultimately owed. This is why the filing requirement exists regardless of profitability and why penalties apply strictly for noncompliance.
Who is required to file Form 5472?
Form 5472 must be filed by any U.S. entity that is at least 25% foreign-owned and engaged in reportable transactions with a related foreign party during the tax year. This includes U.S. corporations with one or more foreign shareholders meeting the ownership threshold, as well as foreign-owned U.S. single-member LLCs that are treated as disregarded entities for federal tax purposes. In these cases, the filing obligation exists even if the company had no income or no tax liability for the year.
Foreign corporations that are engaged in a U.S. trade or business are also required to file Form 5472 if they have reportable transactions with related parties. The determining factors are ownership, control, and the existence of related-party transactions, not the size of the business or its profitability. As a result, many small or newly formed foreign-owned U.S. entities fall within the scope of Form 5472 without realizing it, which is why this requirement frequently triggers penalties when overlooked.
Who must file Form 5472?
Form 5472 must be filed by any U.S. reporting entity that meets the IRS ownership threshold and has reportable transactions with a related foreign party during the tax year. This includes U.S. corporations that are at least 25% directly or indirectly owned by a foreign person or foreign entity. The filing obligation applies regardless of whether the corporation is profitable or even active, as long as reportable transactions occurred.
In addition, foreign-owned U.S. single-member LLCs that are treated as disregarded entities are required to file Form 5472. Even though these LLCs are not treated as separate taxpayers for income tax purposes, the IRS requires them to submit Form 5472 together with a pro forma Form 1120 to disclose transactions with their foreign owner.
Foreign corporations engaged in a U.S. trade or business must also file Form 5472 if they engage in reportable transactions with related parties. In all cases, the key factors are foreign ownership, control, and related-party activity, not revenue level, tax liability, or company size.
Form 5472 for foreign-owned LLCs
Foreign-owned LLCs are one of the most commonly affected entity types under Form 5472 rules, particularly when the LLC is owned by a single non-U.S. person. In the United States, a single-member LLC with a foreign owner is generally treated as a disregarded entity for income tax purposes. However, for Form 5472 reporting, the IRS treats the LLC as a separate reporting entity.
A foreign-owned single-member LLC must file Form 5472 if it has any reportable transactions with its foreign owner or other related foreign parties during the tax year. These transactions can include capital contributions, loans, management fees, reimbursements, or any transfer of money or property between the LLC and the foreign owner. Even a single transaction, such as the initial funding of the LLC, can trigger the filing requirement.
In addition to Form 5472, the LLC must submit a pro forma Form 1120, even though it does not file a full corporate tax return. This requirement applies regardless of whether the LLC generated income, had expenses, or owed U.S. tax. As a result, many foreign founders incorrectly assume that an “inactive” or “zero-income” LLC has no filing obligations, when in fact Form 5472 is still required.
Because penalties for noncompliance are significant, foreign-owned LLCs should treat Form 5472 as a mandatory annual compliance step and ensure that all transactions with the foreign owner are properly identified, documented, and reported.
Form 5472 for disregarded entities
Disregarded entities are explicitly subject to Form 5472 reporting when they are owned, directly or indirectly, by a foreign person. Although a disregarded entity is not treated as a separate taxpayer for U.S. income tax purposes, the IRS requires it to be treated as a separate reporting entity solely for Form 5472 compliance. This rule most commonly affects foreign-owned single-member LLCs.
A foreign-owned disregarded entity must file Form 5472 if it engages in any reportable transactions with its foreign owner or other related foreign parties. These transactions include capital contributions, loans, payments for services, reimbursements, interest, or any transfer of money or property, even if no income is generated. The filing requirement applies regardless of business activity level, meaning that dormant or newly formed entities may still be required to file.
To comply, the disregarded entity must submit Form 5472 together with a pro forma Form 1120 by the applicable deadline. Failure to file, or filing an incomplete or inaccurate form, can result in significant penalties. Because the reporting obligation is easy to overlook, foreign-owned disregarded entities should carefully track all transactions with related foreign parties and treat Form 5472 as a mandatory annual filing requirement.
Ownership threshold (25% explained simply)
The 25% ownership threshold is the key trigger for Form 5472 filing obligations. In simple terms, a U.S. entity is required to file Form 5472 if a foreign person or foreign entity owns, directly or indirectly, at least 25% of the company at any time during the tax year. Ownership can be measured by voting power, value, or capital interest, depending on the entity’s structure.
The IRS does not look only at direct ownership. Indirect and constructive ownership rules apply, meaning ownership held through other entities, family members, or related parties may be combined to determine whether the 25% threshold is met. As a result, a foreign owner who appears to hold less than 25% on paper may still trigger the filing requirement once these rules are taken into account.
Once the 25% threshold is met, the obligation to file Form 5472 applies if the entity has any reportable transactions with the foreign owner or another related foreign party. The requirement does not depend on income, profitability, or company size, which is why many foreign-owned U.S. entities fall under Form 5472 rules without realizing it.
What transactions must be reported on Form 5472?
Form 5472 requires the reporting of all reportable transactions between the U.S. entity and its foreign owner or other related foreign parties during the tax year. A reportable transaction generally includes any exchange of money, property, or services, whether paid, accrued, or transferred without full consideration. The IRS focuses on these transactions because they can be used to move value across borders in ways that affect U.S. tax reporting.
Common reportable transactions include sales and purchases of goods, payments for services, management fees, rents, royalties, interest, and loans. Capital contributions and distributions between the U.S. entity and its foreign owner must also be reported, even when no formal payment occurs. In addition, transactions involving the use or transfer of intellectual property, cost-sharing arrangements, and reimbursements of expenses are considered reportable.
Both monetary and non-monetary transactions fall within the scope of Form 5472. This means that transactions conducted at below-market value or without payment must still be disclosed. Even a single transaction during the year can trigger the filing requirement, which is why accurate tracking of all related-party activity is essential for compliance.
What is reported on Form 5472?
Form 5472 reports detailed information about the U.S. entity’s ownership and its transactions with related foreign parties. The form identifies the reporting entity and the foreign owner, including ownership percentages and the nature of the relationship, so the IRS can clearly understand who controls the company and how that control is exercised.
The core of Form 5472 is the disclosure of reportable transactions. These include payments and transfers such as sales and purchases of goods, services, rents, royalties, interest, and loans, as well as capital contributions and distributions. Transactions involving intellectual property rights, cost-sharing arrangements, and expense reimbursements must also be reported. Both cash and non-cash transactions are included, even when they occur without full or fair-market consideration.
In addition to transaction amounts, the form requires information about the type, timing, and nature of each transaction. This level of detail allows the IRS to assess whether transactions between the U.S. entity and its foreign-related parties are properly documented and consistent with U.S. tax rules, regardless of whether any tax is ultimately due.
Related party transactions explained
Related party transactions, for Form 5472 purposes, are transactions between a U.S. reporting entity and a foreign person or foreign entity that has a direct or indirect ownership or control relationship with that U.S. entity. A related party is not limited to the direct foreign owner; it can also include other foreign entities or individuals that are connected through common ownership, control, or constructive ownership rules.
These transactions cover a wide range of activities, not just obvious payments. Any transfer of money, property, or services between the U.S. entity and a related foreign party can qualify, even if it is informal, non-recurring, or conducted without full market consideration. Common examples include capital contributions, loans, management or consulting fees, reimbursements of expenses, interest payments, royalties, and transfers involving intellectual property.
For IRS purposes, the concern is whether value is moving between related parties in a way that could affect U.S. tax reporting. This is why both monetary and non-monetary transactions must be disclosed on Form 5472. Even transactions that seem routine or administrative in nature may be reportable, and a single related party transaction during the year is enough to trigger the filing requirement.
Monetary vs non-monetary transactions
For Form 5472 purposes, the IRS distinguishes between monetary and non-monetary transactions, but both are treated as reportable when they occur between a U.S. entity and a related foreign party. The distinction matters because many taxpayers mistakenly assume that only cash payments must be disclosed, which is not the case.
Monetary transactions involve the direct transfer of money. These include payments for goods or services, management fees, interest on loans, rent, royalties, capital contributions made in cash, and cash distributions to a foreign owner. These transactions are typically easier to identify because they appear clearly in bank statements and accounting records.
Non-monetary transactions involve the transfer or use of property, rights, or services without a direct cash payment or without full market consideration. Examples include the contribution of assets instead of cash, the use of intellectual property without a royalty payment, intercompany services provided at no charge, debt forgiveness, or goods transferred below fair market value. Even though no money changes hands, these transactions still involve the movement of value and must be reported on Form 5472.
From the IRS perspective, non-monetary transactions present the same compliance risk as monetary ones. This is why Form 5472 requires disclosure of both types and why foreign-owned U.S. entities must track all related-party activity, not just cash flows, to remain compliant.
When to file Form 5472 (deadlines & extensions)
Form 5472 must be filed by the same due date as the U.S. entity’s federal income tax return. For most calendar-year entities, this means the form is due on April 15 of the year following the end of the tax year. The form is not filed separately; it must be submitted together with the applicable income tax return, typically Form 1120 for U.S. corporations or Form 1120-F for foreign corporations engaged in a U.S. trade or business.
Foreign-owned U.S. disregarded entities, such as single-member LLCs owned by non-U.S. persons, follow a similar timeline. In these cases, Form 5472 is filed together with a pro forma Form 1120, even though the entity may not otherwise be required to file a corporate income tax return. The deadline is the same as for corporations, and the filing obligation applies regardless of income or activity level.
If additional time is needed, an automatic extension is available. By filing Form 7004 on or before the original due date, the entity can obtain a six-month extension to file Form 5472 along with the associated return. It is important to note that the extension applies only to the filing deadline, not to any tax that may be due. Filing on time, or properly extending the deadline, is critical because penalties for late or missing Form 5472 filings can be substantial.
When to file Form 5472?
Form 5472 must be filed by the same deadline as the U.S. entity’s federal income tax return. For entities using a calendar tax year, this means the form is due on April 15 of the following year. The form is not filed on its own; it must be submitted together with the applicable return, such as Form 1120 for U.S. corporations or Form 1120-F for foreign corporations engaged in a U.S. trade or business.
Foreign-owned U.S. disregarded entities, including single-member LLCs owned by non-U.S. persons, are also required to meet this deadline. In these cases, Form 5472 is filed together with a pro forma Form 1120, even if the entity had no income or business activity during the year.
If the original deadline cannot be met, the filing date can be extended by up to six months by submitting Form 7004 on or before the due date. The extension applies to the filing of Form 5472, but it does not extend the time to pay any tax that may be due. Timely filing or proper extension is essential, as late submission can trigger significant penalties.
What happens if I don’t file by April 15th?
If you do not file Form 5472 by April 15 and you have not requested an extension, the IRS may immediately assess a penalty of $25,000 for each year the form is late or missing. This penalty applies even if the company had no income, no tax liability, or only a single reportable transaction during the year. The IRS treats Form 5472 as a strict compliance requirement, not a discretionary filing.
If the IRS issues a notice and the form is still not filed within 90 days of that notice, additional penalties of $25,000 can be imposed for each subsequent 30-day period the failure continues. These penalties can accumulate quickly and are assessed separately from any income tax penalties that may apply.
Filing Form 5472 late also increases the risk of IRS scrutiny, as noncompliance can prompt further review of related-party transactions and record-keeping practices. For this reason, entities that miss the April 15 deadline should act quickly to file the form as soon as possible or consult a tax professional to determine whether reasonable cause relief may be available.
Can Form 5472 be extended?
Yes, Form 5472 can be extended, but only if the extension is properly requested. The filing deadline for Form 5472 is automatically extended when the entity files Form 7004 on or before the original due date of the return, which is typically April 15 for calendar-year entities. This extension provides an additional six months to file Form 5472 together with the associated return.
The extension applies only to the filing deadline, not to any tax that may be due. Even though Form 5472 itself does not calculate tax, it must still be attached to a timely filed or properly extended return to avoid penalties. If Form 7004 is not filed on time, the IRS may treat the Form 5472 as late and assess penalties accordingly.
For foreign-owned disregarded entities, the same extension rules apply. Filing Form 7004 extends the deadline for submitting the pro forma Form 1120 with Form 5472 attached. Because penalties for late filing are significant, requesting an extension when needed is an important safeguard for compliance.
Filing with Form 7004
Form 7004 is used to request an automatic extension of time to file Form 5472 by extending the due date of the related income tax return. To be effective, Form 7004 must be filed on or before the original filing deadline, which is generally April 15 for calendar-year entities. When filed correctly, it grants a six-month extension to submit Form 5472 together with the applicable return.
The extension requested through Form 7004 applies only to filing, not to payment. While Form 5472 itself does not calculate tax, it must still be attached to a timely filed or properly extended return to avoid penalties. If Form 7004 is not submitted by the original due date, the IRS may treat the Form 5472 as late, even if it is eventually filed within the extension period.
For foreign-owned disregarded entities, filing Form 7004 extends the deadline to submit the pro forma Form 1120 with Form 5472 attached. Because penalties for late or missing filings are significant, using Form 7004 correctly is an important step for entities that need additional time to complete their compliance obligations.
Another major advantage is credibility. A US LLC signals legitimacy and professionalism, especially when dealing with international partners or customers who are more comfortable contracting with a US-based entity. This often shortens sales cycles and reduces friction in negotiations.
From a legal standpoint, an LLC provides liability protection by separating personal assets from business obligations. For non-residents operating internationally, this separation is critical and offers a level of protection that sole proprietorships or informal setups do not provide.
Flexibility is also a key benefit. LLCs have fewer formal requirements than corporations, are easier to manage remotely, and allow owners to adapt the structure as the business evolves. For founders who want to scale globally without relocating, this flexibility is often decisive.
How to file and submit Form 5472
Form 5472 is filed as an attachment to the U.S. entity’s federal income tax return and is not submitted as a standalone form. The exact filing method depends on the type of entity, but in all cases the form must be completed accurately and submitted by the applicable deadline to avoid penalties.
For U.S. corporations, Form 5472 is filed together with Form 1120. Foreign corporations engaged in a U.S. trade or business file Form 5472 with Form 1120-F. The form must be completed for each related foreign party with whom the entity had reportable transactions during the tax year, meaning multiple Forms 5472 may be required.
Foreign-owned U.S. disregarded entities follow a slightly different process. These entities must file Form 5472 together with a pro forma Form 1120, even though they do not file a full corporate income tax return. The pro forma Form 1120 typically includes only the entity’s name, address, and EIN, with Form 5472 attached to disclose the related-party transactions.
In most cases, Form 5472 is submitted electronically through the IRS Modernized e-File system along with the associated return. However, certain foreign-owned disregarded entities may be required to file by mail, depending on current IRS filing rules. Because submission methods and technical requirements can change, it is important to confirm the correct filing process each year and ensure that the form is properly attached and accepted by the IRS.
How to file Form 5472
To file Form 5472 correctly, it must be prepared and submitted together with the appropriate U.S. tax return for the entity. Form 5472 is not filed on its own, and filing it separately will not satisfy IRS requirements. The process begins with identifying all foreign owners and related foreign parties and determining whether any reportable transactions occurred during the tax year.
Once the reporting obligation is confirmed, the form must be completed with accurate information about the U.S. entity, the foreign owner or related party, and the nature and amounts of all reportable transactions. A separate Form 5472 is required for each related foreign party. For U.S. corporations, the completed form is attached to Form 1120. For foreign corporations engaged in a U.S. trade or business, it is attached to Form 1120-F.
Foreign-owned U.S. disregarded entities, such as single-member LLCs owned by non-U.S. persons, must file Form 5472 together with a pro forma Form 1120. In this case, the pro forma return generally includes only basic identifying information, with Form 5472 providing the substantive disclosure. The combined filing must be submitted by the applicable deadline, either electronically or by mail, depending on current IRS filing rules.
Filing is complete only when the return and all required Forms 5472 are properly submitted and accepted by the IRS. Errors, omissions, or failure to attach the form correctly can result in penalties, which is why careful preparation and review are essential when filing Form 5472.
How to submit Form 5472
Form 5472 is submitted as part of the entity’s federal tax filing and cannot be sent to the IRS on its own. The form must be properly attached to the relevant return and submitted using the correct method for the entity type. Submission is considered valid only if the associated return and all required Forms 5472 are received and accepted by the IRS.
For most U.S. corporations and foreign corporations engaged in a U.S. trade or business, Form 5472 is submitted electronically through the IRS Modernized e-File system together with Form 1120 or Form 1120-F. When filed electronically, the form must be included in the same submission as the return to avoid being treated as missing or incomplete.
Foreign-owned U.S. disregarded entities, such as single-member LLCs owned by non-U.S. persons, generally submit Form 5472 together with a pro forma Form 1120. Depending on current IRS rules, these filings may be required to be mailed to a designated IRS address rather than filed electronically. Because submission requirements for disregarded entities have specific technical rules and may change, it is important to confirm the correct method before filing.
Regardless of the submission method, Form 5472 is considered filed only when it is properly attached, complete, and submitted by the applicable deadline or extension. Incorrect submission, missing attachments, or filing the form separately can result in penalties even if the information itself is accurate.
Can I file Form 5472 electronically?
In many cases, yes, Form 5472 can be filed electronically, but this depends on the type of entity and how the form is being submitted. For U.S. corporations and foreign corporations engaged in a U.S. trade or business, Form 5472 is typically filed electronically as part of the complete tax return through the IRS Modernized e-File system. In these situations, the form is included as an attachment to Form 1120 or Form 1120-F and submitted in the same electronic filing.
However, the rules are different for foreign-owned U.S. disregarded entities, such as single-member LLCs owned by non-U.S. persons. In many cases, the IRS requires these entities to submit Form 5472 together with a pro forma Form 1120 by mail to a designated IRS address, as electronic filing may not be accepted for this specific structure. Filing the form electronically when mailing is required can result in the form being treated as not filed.
Because electronic filing rules for Form 5472 can vary based on entity type and may change over time, it is important to confirm the correct submission method before filing. Ensuring that Form 5472 is filed using the approved method for your entity is essential to avoid penalties for noncompliance.
Filing with Form 1120 / 1120-F
Form 5472 must always be filed together with the appropriate U.S. income tax return and is never submitted on its own. The specific return it is attached to depends on whether the entity is a U.S. corporation or a foreign corporation engaged in a U.S. trade or business.
U.S. corporations that are at least 25% foreign-owned are required to file Form 5472 as an attachment to Form 1120, the U.S. Corporation Income Tax Return. The form is submitted as part of the same filing package and must be completed for each related foreign party with whom the corporation had reportable transactions during the tax year.
Foreign corporations that are engaged in a U.S. trade or business file Form 5472 with Form 1120-F, the U.S. Income Tax Return of a Foreign Corporation. In this case, Form 5472 serves the same disclosure function, reporting transactions between the foreign corporation’s U.S. activities and related foreign parties.
In both cases, Form 5472 is considered filed only if it is properly attached to Form 1120 or Form 1120-F and submitted by the applicable deadline or under a valid extension. Failure to attach the form correctly, even when the main return is filed on time, can result in penalties as if Form 5472 were not filed at all.
Penalties for not filing Form 5472
Failing to file Form 5472, or filing a substantially incomplete or incorrect form, can result in severe penalties imposed by the IRS. The standard penalty for each failure to file is $25,000 per tax year, and this applies even if the company had no income, no tax liability, or only minimal activity during the year. The penalty is assessed per form, meaning that multiple failures can increase exposure.
If the IRS issues a notice requesting the missing or corrected Form 5472 and the entity does not comply within 90 days, additional penalties may apply. In such cases, the IRS can impose an additional $25,000 penalty for each 30-day period the failure continues after the initial notice. These penalties can accumulate quickly and may far exceed any tax that would otherwise be owed.
Penalties for noncompliance are separate from other potential penalties related to income tax filings or record-keeping failures. Because Form 5472 is treated as a strict reporting requirement, the IRS enforces these penalties aggressively. For foreign-owned U.S. entities, timely and accurate filing is essential to avoid costly consequences that can arise solely from missed or incomplete disclosures.
What is the penalty for not filing Form 5472?
The penalty for not filing Form 5472 is $25,000 per tax year for each required form that is missing, late, or substantially incomplete. This penalty applies even if the company had no income, no taxable activity, or no tax due for the year. The IRS treats Form 5472 as a strict reporting obligation, not a discretionary filing.
If the IRS issues a notice and the form is still not filed within 90 days, additional penalties of $25,000 may be assessed for each subsequent 30-day period the failure continues. These additional penalties can accumulate quickly and significantly increase the total amount owed.
The penalty applies separately to each Form 5472 that should have been filed, meaning companies with multiple related foreign parties may face multiple penalties. Because of the size and structure of these penalties, failure to file Form 5472 can result in substantial financial exposure even when no U.S. tax liability exists.
Form 5472 failure to file penalty
The failure to file penalty for Form 5472 is one of the strictest penalties imposed by the IRS for information reporting. If a required Form 5472 is not filed, is filed late, or is considered substantially incomplete, the IRS can assess an initial penalty of $25,000 per form, per tax year. This penalty applies regardless of whether the company had income, owed tax, or conducted only limited activity.
If the IRS issues a notice requesting the missing or corrected form and the entity does not comply within 90 days, the penalty can escalate. In that case, the IRS may impose additional $25,000 penalties for each 30-day period the failure continues after the initial 90-day window. These additional penalties are assessed separately and can quickly exceed the original amount.
The penalty applies to each required Form 5472, meaning entities with multiple related foreign parties may face multiple penalties for a single tax year. Because the IRS treats Form 5472 as a critical transparency requirement, penalties are enforced even in cases where no U.S. tax liability exists, making timely and accurate filing essential for foreign-owned U.S. entities.
Ongoing penalties explained simply
When Form 5472 is not filed and the IRS issues a formal notice, the penalty does not stop at the initial $25,000. If the required form is still not submitted within 90 days of the IRS notice, the IRS can impose additional penalties on an ongoing basis. These are often referred to as “continuation” or ongoing penalties.
For each additional 30-day period that the failure continues after the 90-day window, the IRS may assess another $25,000 penalty. There is no automatic cap on how many times this penalty can be applied, which means the total amount can grow rapidly if the issue is not resolved.
In simple terms, the longer Form 5472 remains unfiled after the IRS intervenes, the more expensive the mistake becomes. This is why it is critical to respond promptly to any IRS notice and file the missing or corrected form as soon as possible, rather than waiting and allowing penalties to accumulate.
Reasonable cause for Form 5472 penalties
Reasonable cause is one of the few ways a penalty for failing to file Form 5472 may be reduced or waived, but it is applied narrowly and at the IRS’s discretion. To qualify, the reporting entity must be able to demonstrate that the failure to file was due to circumstances beyond its control and that it acted in good faith, rather than simple oversight or neglect.
Examples of situations that may support a reasonable cause claim include serious illness, natural disasters, or documented technical failures that prevented timely filing. In some cases, reliance on incorrect professional advice may qualify, but only if the entity can show that it provided complete and accurate information to a qualified tax professional and reasonably relied on that advice. A lack of awareness of the Form 5472 requirement, by itself, is generally not considered reasonable cause.
To request relief, the entity must file the missing or corrected Form 5472 as soon as possible and provide a clear written explanation detailing the facts and circumstances that led to the failure. Supporting documentation is critical. Even then, there is no guarantee that the IRS will grant relief, which is why preventing penalties through timely compliance is always preferable to relying on reasonable cause after the fact.
What is reasonable cause for Form 5472?
Reasonable cause for Form 5472 exists when a company can show that its failure to file was due to circumstances beyond its control and that it acted responsibly and in good faith. The IRS evaluates reasonable cause on a case-by-case basis and expects clear evidence that the noncompliance was not the result of willful neglect or simple inattention.
Situations that may qualify as reasonable cause include serious illness or death of a key person responsible for compliance, natural disasters, or documented technical or administrative failures that prevented timely filing. In some cases, reliance on incorrect professional advice may be accepted, but only if the company can demonstrate that it fully disclosed all relevant facts to a qualified tax advisor and reasonably relied on that advice.
Not knowing about the Form 5472 requirement, misunderstanding the rules, or assuming that no filing was required due to lack of income generally does not meet the reasonable cause standard. To seek relief, the company must file the missing or corrected Form 5472 promptly and provide a detailed written explanation supported by evidence. Even then, penalty relief is not guaranteed, which is why proactive compliance is always the safest approach.
What constitutes a reasonable cause?
A reasonable cause exists when a company can demonstrate that it exercised ordinary business care and prudence but was still unable to file Form 5472 on time due to circumstances beyond its control. The IRS looks at the specific facts and context of each case and evaluates whether the failure resulted from unavoidable events rather than negligence or disregard of the rules.
Circumstances that may constitute reasonable cause include serious illness, death, or incapacitation of the individual responsible for tax compliance, natural disasters or other events that disrupted normal business operations, and documented technical failures that prevented timely filing despite good-faith efforts. In some cases, reliance on incorrect professional advice may qualify, but only if the company can show that it provided complete and accurate information to a qualified advisor and reasonably relied on that guidance.
By contrast, simple oversight, lack of awareness of the filing requirement, or assumptions that no filing was necessary because the company had no income generally do not meet the reasonable cause standard. To support a reasonable cause claim, the company must file the missing or corrected Form 5472 promptly and provide a clear, well-documented explanation demonstrating good faith and diligence.
Can penalties be waived?
Yes, penalties for Form 5472 can be waived, but only in limited circumstances and at the discretion of the IRS. A waiver is not automatic and is granted only when the reporting entity can demonstrate reasonable cause and show that it acted in good faith. The IRS applies a strict standard, particularly because Form 5472 is considered a critical international reporting requirement.
To have penalties waived, the entity must first file the missing or corrected Form 5472 as soon as possible. It must then provide a written explanation detailing the facts that led to the failure, explaining why the situation was beyond its control and describing the steps taken to comply once the issue was identified. Supporting documentation is essential, as unsupported statements are unlikely to be accepted.
Penalties are generally not waived when the failure results from lack of awareness of the requirement, misunderstanding of the rules, or simple oversight. Because relief is not guaranteed and the process can be complex, relying on penalty waiver after the fact is far riskier than ensuring timely and accurate filing from the outset.
What happens if you don’t report foreign assets?
Failing to report foreign assets or foreign-related transactions when required can lead to serious IRS consequences, even if no tax is ultimately owed. From the IRS perspective, non-reporting undermines transparency and raises concerns about potential tax avoidance, which is why penalties and enforcement measures are applied strictly.
If foreign assets or transactions that should have been disclosed on Form 5472 are not reported, the IRS may assess the standard $25,000 penalty per year for failure to file or for filing an incomplete form. If the omission continues after the IRS issues a notice, additional penalties of $25,000 can be imposed for each 30-day period of continued noncompliance. These penalties apply independently of income level or tax liability.
Beyond monetary penalties, failure to report foreign assets can trigger increased IRS scrutiny, including audits and requests for supporting documentation related to ownership structures and cross-border transactions. In more serious cases, continued noncompliance can expose the entity to broader enforcement actions and extended examination of other international reporting obligations. This is why accurate and complete reporting of foreign-related activity is essential for maintaining compliance and avoiding escalating consequences.
Form 5471 vs Form 5472 – what’s the difference?
Form 5471 and Form 5472 are both IRS information returns used in international tax reporting, but they apply to very different situations and ownership structures. The key distinction lies in what is owned and where the company is based.
Form 5471 is used to report ownership in foreign corporations. It applies primarily to U.S. persons who own or control shares in a non-U.S. corporation. The purpose of Form 5471 is to give the IRS visibility into foreign companies that are owned or controlled by U.S. taxpayers, including their financial activity, income, and corporate structure.
Form 5472, on the other hand, applies to U.S. entities with foreign ownership or to foreign corporations engaged in a U.S. trade or business. It is focused on reporting transactions between a U.S. entity and its foreign owners or other related foreign parties. Rather than reporting the operations of a foreign company, Form 5472 is concerned with how value moves between related parties across borders involving a U.S. entity.
In simple terms, Form 5471 looks outward from the U.S. to foreign companies owned by U.S. persons, while Form 5472 looks inward at U.S. companies that have foreign owners or foreign-related transactions. Although both forms address international tax transparency, they serve different compliance purposes and are not interchangeable.
What is the difference between Form 5471 and 5472?
The difference between Form 5471 and Form 5472 lies in the direction of ownership and the type of entity being reported. Although both forms are used in international tax compliance, they apply to opposite scenarios and serve different reporting purposes.
Form 5471 is required when U.S. persons own or control a foreign corporation. It is used to report information about non-U.S. companies in which U.S. individuals or entities have significant ownership or control. The focus of Form 5471 is on the foreign corporation itself, including its structure, ownership, and financial activity, so the IRS can monitor offshore operations connected to U.S. taxpayers.
Form 5472, by contrast, applies when a U.S. entity has foreign ownership or when a foreign corporation is engaged in a U.S. trade or business. Its purpose is to report transactions between the U.S. entity and its foreign owners or other related foreign parties. Rather than reporting the operations of a foreign company, Form 5472 discloses how value moves between related parties across borders involving a U.S. entity.
In practical terms, Form 5471 looks outward from the United States to foreign corporations owned by U.S. persons, while Form 5472 looks inward at U.S. entities with foreign ownership or foreign-related transactions. Because they address different ownership structures, the two forms are not interchangeable and may apply in different situations for the same business group.
When do you file one vs the other?
You file Form 5471 when the ownership relationship points outward from the United States. This form is required when a U.S. person or U.S. entity owns or controls a foreign corporation. If you are a U.S. taxpayer with significant ownership in a non-U.S. company, Form 5471 is used to report that foreign company’s structure and activity to the IRS.
You file Form 5472 when the ownership relationship points into the United States. This form applies when a U.S. entity has foreign ownership or when a foreign corporation is engaged in a U.S. trade or business. Form 5472 is required to report transactions between the U.S. entity and its foreign owners or other related foreign parties.
In short, Form 5471 is filed to disclose foreign companies owned by U.S. persons, while Form 5472 is filed to disclose U.S. companies owned by foreign persons or involved in foreign-related transactions. In complex international structures, it is possible for different entities within the same group to have obligations under both forms, depending on how ownership and transactions are structured.
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Frequently Asked Questions about US LLCs for nonresidents
Starting and running a US LLC as a non-resident often raises practical and legal questions. Below you’ll find clear answers to the most common concerns around ownership, taxes, residency, and compliance, so you can move forward with confidence and avoid costly mistakes.
Any U.S. entity that is at least 25% foreign-owned and had reportable transactions with a related foreign party must file Form 5472. This includes foreign-owned U.S. corporations and single-member LLCs treated as disregarded entities.
Form 5472 is due with the entity’s federal tax return, typically April 15 for calendar-year filers. The deadline can be extended by filing Form 7004 on time.
Failure to file Form 5472 can result in a $25,000 penalty per year, even if no tax is owed. Additional penalties may apply if the form is not filed after an IRS notice.
In many cases, yes. U.S. corporations and foreign corporations generally file electronically, while some foreign-owned disregarded entities may be required to file by mail.
Reasonable cause may apply when the failure to file was due to circumstances beyond the company’s control and not willful neglect. Each case is reviewed individually by the IRS.
Form 5471 is used to report foreign companies owned by U.S. persons, while Form 5472 reports U.S. companies with foreign ownership or foreign-related transactions. They apply to opposite ownership directions.