Hi,
If you are the foreign owner of a US LLC, one missed form can cost you $25,000. Three missed years is $75,000, and if it sits unresolved after the IRS notices, another $25,000 every 30 days.
This is the Form 5472, and the filing requirement has nothing to do with income. No revenue, no customers, no profit – it’s still due.
If any of these describe your entity, the action needs to be taken NOW:
- A US single-member LLC owned by a non-US person or company – even with $0 of income
- A US corporation that is 25% or more foreign-owned, directly or indirectly
- A foreign corporation engaged in a US trade or business
- Any of the above that had a reportable transaction with the owner or a related party during the year
The trigger is a reportable transaction, and that’s much broader than people expect. When you wire money in to cover a state filing fee – it counts. Put the money in at the start, paid a company bill from your personal card, took a loan, in either direction, pulled money back out – it all counts. Even without cash moving: the company used your property, you did work for it – still counts. A dormant LLC that did nothing all year except get funded has a reportable transaction.
Here’s how the penalty works:
- $25,000 per form, per year. Not a percentage of anything – there’s no tax at stake on this form, so the penalty is a flat number.
- It applies equally to a form that is late, incomplete, or incorrect. A filed-but-wrong form carries the same $25,000 as no form at all.
- A separate form is required for each related party. Three related parties, three forms, three penalties.
- After the IRS notifies you, an additional $25,000 for every 30 days the failure continues. A single missed year that sits unresolved for six months after notice reaches $100,000.
- And there is no statute of limitations on an unfiled 5472. A missed 2018 filing is still fully open today.
The catch is that almost nothing about this filing works the way the rest of your compliance does. A disregarded entity that owes no tax and files no 1040 or 1120 still has to file – Form 5472 attached to a pro forma Form 1120, which exists only as a cover sheet. The entity needs an EIN before it can file at all. It cannot be e-filed.
The deadline is April 15, extendable to October 15 on Form 7004. And records supporting every reportable transaction have to be kept permanently, not for the usual three years.
That’s why we put everything under one roof:
- Form 5472 and pro forma 1120 prepared and filed correctly, for every related party
- EIN applications for foreign owners without an SSN or ITIN
- Reportable transaction review, including the non-cash items most people miss
- Late and missed-year filings with reasonable cause statements
- Transfer pricing documentation where intercompany pricing is at issue
- Form 5471, 8865, 8858 and FBAR where the same structure triggers more than one obligation
- State registration and franchise tax filings for the US entity
- Personal and business tax returns handled by the same team
Reply to this email by Wednesday and we’ll set up a free 15 minute call with our senior tax advisor to go over your structure. Bring your formation documents, your ownership chart, and a list of every transfer between you and the entity – so we can tell you exactly how many forms are due and whether any prior years need fixing.
Sincerely,
—
George Dimov, CPA
Licensed and Insured
(833) 829-1120 toll free
(212) 994-8081 Fax