If a non-U.S. person owns a U.S. LLC on their own, the LLC is usually ignored for income tax, but it still has to file an annual information return with the IRS. That return is Form 5472 attached to a pro forma Form 1120, and missing it carries a $25,000 penalty per form. This guide explains who has to file, what counts as a reportable transaction and how to avoid the penalty.
Who must file Form 5472
The IRS requires Form 5472 from a "reporting corporation" that had reportable transactions with a related party. For LLC owners that includes a U.S. single-member LLC owned by one foreign person and treated as a disregarded entity for income tax. For these foreign-ownership reporting rules, the IRS treats that LLC as a domestic corporation, so it can have a filing obligation even if it earned nothing.
- A U.S. LLC with one foreign owner, such as a non-resident founder who formed a Delaware or Wyoming LLC.
- A U.S. corporation with at least one direct or indirect foreign shareholder owning 25% or more.
- A foreign corporation engaged in a U.S. trade or business.
A multi-member LLC taxed as a partnership follows different rules and generally files Form 1065 instead. Check which tax treatment applies before you decide what to file.
What counts as a reportable transaction
Reportable transactions are dealings between the LLC and its foreign owner or other related parties. The most common ones for small LLCs are simple:
- The owner contributes money to the LLC to start or fund it.
- The LLC repays the owner or distributes money to the owner.
- The owner lends money to the LLC, or the LLC pays the owner for services, rent or royalties.
Even a small capital contribution counts. A quiet year does not automatically mean there is nothing to file, so review the year's transactions before you decide.
How and where to file
A foreign-owned disregarded LLC does not have a normal Form 1120 to attach the form to. The IRS instructions tell it to prepare a pro forma Form 1120 with the entity information filled in, attach Form 5472 and send both to the IRS. According to the current instructions, a foreign-owned disregarded entity cannot e-file the form and has to use the fax number or mailing address listed in the Form 5472 instructions.
Addresses and fax numbers change, so always copy them from the current instructions on irs.gov rather than from an older guide.
Deadline
Form 5472 is due on the same date as the reporting corporation's income tax return, including extensions. For an LLC on a calendar year that is generally April 15 of the following year. Confirm the date for your tax year before you file.
The $25,000 penalty
The IRS assesses a $25,000 penalty on a reporting corporation that fails to file Form 5472 when due or does not complete it correctly. If the failure continues for more than 90 days after the IRS sends a notice, an additional $25,000 can apply for each 30-day period. Because these amounts are large compared with a small LLC's income, this is the filing most worth getting right.
Common mistakes
- Assuming that an LLC with no income and no U.S. tax due has nothing to file.
- Sending Form 5472 without the pro forma Form 1120, or the other way around.
- Leaving out small contributions or owner payments.
- Waiting for an IRS notice before filing late.
- Using an old fax number or mailing address.
Frequently Asked Questions
Do I have to file Form 5472 if my LLC had no income?
A foreign-owned single-member LLC can still have to file, because the requirement comes from the foreign ownership and any reportable transactions, not from the amount of income.
Is Form 5472 the same as a U.S. tax return?
No. It is an information return that tells the IRS about the LLC and its transactions with the foreign owner. Whether the owner owes U.S. income tax is a separate question that depends on the facts.
Can I file Form 5472 online?
Not for a foreign-owned disregarded LLC. According to the IRS instructions, those entities file by fax or mail together with the pro forma Form 1120.
What if I missed the deadline?
File as soon as you can and get professional advice about penalty relief. The penalty is assessed per form and can grow if the IRS notifies you and the failure continues.
Not sure what your LLC has to file? See our LLC tax preparation service or ask the team.
