Form 5472 for Foreign Owned US LLCs

Your LLC may file no tax return at all and still owe this form. That is the part nobody warns about. A single member US LLC owned by one foreign person is invisible to the IRS for income tax, and visible to it for this one report. Miss the report and the penalty starts at $25,000.

Ask three questions. Is the entity a US LLC. Is it wholly owned by one person or company that is not a US person. Was there any reportable transaction during the year, including money you put in or took out.

Three yes answers means you file. Your income does not enter into it. A company that earned nothing, invoiced nobody, and simply received the cash you used to open its bank account has had a reportable transaction.

For income tax your LLC is disregarded. It has no return of its own and the IRS looks straight through it to you.

For this one purpose the rule flips. Since tax years beginning on or after January 1, 2017, a foreign owned US disregarded entity is treated as a separate entity and classified as a corporation, but only for the reporting duties in section 6038A. The regulations are 1.6038A-1(c)(1) and 301.7701-2(c)(2)(vi).

So the same company is transparent for tax and opaque for reporting. Two different rulebooks, one LLC. That contradiction is why founders who correctly worked out that they owe no US income tax still walk into a five figure penalty.

Form 5472 cannot travel alone. It rides attached to a Form 1120, and the IRS calls that one a pro forma return because you leave nearly all of it blank.

The IRS instructions are unusually generous here. The only information required on the 1120 is the name and address of the entity and items B and E on the first page. You do not compute income. You do not fill in the schedules.

Part IV of the form covers the ordinary money, sales, rents, royalties, interest, amounts paid to or received from your foreign owner or a related party.

Part V is where people get caught. It is the part built for disregarded entities, and the instructions say it covers amounts paid or received in connection with the formation, dissolution, acquisition and disposition of the entity, including contributions to and distributions from the entity.

Read that again. Funding your own company is a reportable transaction. Taking your own money back out is a reportable transaction. Forming it was one. So was closing it.

Paid a company bill personally? Treat it as a contribution and describe it on the attached statement. It is your money going into the entity, whatever the bank memo says.

There is a second layer. If the failure continues more than 90 days after the IRS notifies you, another $25,000 applies for each related party, for each 30 day period or part of one, while it stays unfixed. The meter runs monthly.

Missed years stack. Each year is its own form and its own $25,000.

It travels with the pro forma 1120. So the deadline is that return's own, including extensions, which for a calendar year filer is the ordinary spring date.

You can extend with Form 7004, filed by the regular due date. Enter the Form 1120 code in Part I line 1 and write Foreign-owned U.S. DE across the top.

Now the part that goes wrong. A foreign owned disregarded entity cannot file this electronically, and the IRS gives these filers a dedicated address that is not the usual 1120 address.

The entity needs its own EIN to file, even though it pays no income tax. Apply on Form SS-4, and our EIN application guide walks the form itself.

The SS-4 instructions tell you exactly how. Check the Other box on line 9a and write Foreign-owned U.S. disregarded entity-Form 5472. On line 10 enter Foreign-owned U.S. disregarded entity filing Form 5472.

If the responsible party has no SSN or ITIN and cannot get one, enter foreign on line 7b. The field cannot be left empty. Owners with no US residence or US place of business cannot use the online EIN application and must apply another way.

The EIN is rarely the last wall. The bank account usually is, and it turns on your country of residence rather than your paperwork. Our guide to a US business bank account for non residents carries the published eligibility lists for Mercury, Relay and Bluevine side by side.

Closing the company does not end this. Part V names dissolution outright, so the year you shut down is a year with a reportable transaction in it, and the final distribution of whatever was left is a second one. An LLC that traded for eight weeks and then folded still owes a form for its last year.

The final period is not yours to pick. The instructions say a foreign owned US disregarded entity uses the same tax year its owner uses for US tax filing, or the calendar year if the owner has none. Most non resident owners have none, so the last period runs from January 1 to the day the state cancels the company, and the pro forma 1120 carrying the form is due on that return's ordinary date, extensions included.

Needing more time does not change the route. Form 7004 still works for the final year, and it still goes to the dedicated fax number or the Ogden address rather than the regular 7004 one. It has to be in by the regular due date, not the extended one.

One form you are probably not sending. Form 966 reports a plan of dissolution and it is written for corporations, including LLCs that elected corporate treatment. A foreign owned disregarded entity elected nothing, and the regulation that makes it look like a corporation, 301.7701-2(c)(2)(vi), is scoped to the reporting duties in section 6038A and nothing wider. If you did elect corporate treatment at some point, that changes and Form 966 is back on your list.

The state side, the creditor window and the rest of the federal closing steps are in our guide to dissolving an LLC.

This page explains a filing duty. It is not tax advice and it cannot see your facts.

The cost of an hour with someone who does cross border work is small next to $25,000.

Yes, if it had a reportable transaction, and most do. Income is not the test. Funding the LLC, paying a bill from your own pocket, taking money out, forming it, and closing it are all reportable for a disregarded entity. Only an entity with no reportable transactions at all across Parts IV, V and VI is excused.

No, and the instructions say so plainly. A foreign owned US disregarded entity cannot file Form 5472 electronically. You fax the pro forma Form 1120 with the 5472 attached to 855-887-7737, or mail it to the dedicated Ogden address the instructions give for these filers, which is not the address in the Form 1120 instructions.

Each year is its own form. Each carries its own $25,000, so three missed years is $75,000 of exposure before any continuation penalty. If the IRS has already written to you, a further $25,000 can apply for each 30 day period past the 90 day mark. This is the point to hire someone rather than quietly file and hope.

Not for the entity itself. The LLC needs an EIN, and the SS-4 instructions say to write Foreign-owned U.S. disregarded entity-Form 5472 when applying. If you have no SSN or ITIN and cannot obtain one, you enter foreign as the responsible party number on line 7b rather than leaving it blank.

No, they are unrelated. This is a US information return about transactions between your LLC and you or your related parties. It says nothing to your home tax authority and it does not satisfy anything you owe there. Many countries have their own reporting for a foreign company you control, and those run in parallel.

Yes. Part V covers amounts paid or received in connection with dissolving the entity, so the closing year contains a reportable transaction by definition, and the final distribution is another. The final pro forma Form 1120 goes to the same dedicated fax number or Ogden address, and the IRS will not deactivate the EIN until it is in.