Form 5472 and Pro Forma Form 1120: The IRS Reporting Duty of Foreign-Owned LLCs

This is the obligation non-US LLC owners miss most often, and the one with the heaviest penalty. This article explains its nature briefly; it does not replace working with a US tax accountant.

Why must your LLC file this report?

By default, a single-member LLC is treated by the IRS as a "disregarded entity" — not a separate tax entity. However, for an LLC that is 100% foreign-owned (or at least 25% foreign-owned), the IRS requires it to be treated like a US corporation solely for reporting its transactions with the owner. So the LLC must file Form 5472, attached to a "pro forma" Form 1120 (only the identifying information is completed; no tax is computed).

Which transactions must be reported?

Form 5472 reports "reportable transactions" between the LLC and its foreign owner (or related parties) during the year. Common examples:

• Capital contributions to the LLC (including the first money you move into the LLC's bank account).
• Withdrawals, profit distributions or transfers from the LLC to the owner.
• Loans from the owner to the LLC or from the LLC to the owner.
• The LLC paying the owner for services, goods or royalties.

The full list and how to complete each line are in the official Form 5472 instructions on irs.gov. If the LLC had any transaction with its owner that year (almost always, since at least a capital contribution is needed), assume you have to file.

Deadline

For an LLC on a calendar year, the deadline is usually April 15 of the following year. You can request an extension with Form 7004 (usually 6 more months), but an extension to file is not an extension to pay any tax due. Always check the current deadline on irs.gov.

The penalty

The commonly cited penalty is $25,000 for each Form 5472 that is missing, late or incomplete, with a further $25,000 for every 30 days of continued non-filing after the IRS sends a notice. The penalty does not depend on whether the LLC had revenue or owed any tax.

How to file

1. Prepare the pro forma Form 1120: enter the LLC's name, EIN and address, and write "Foreign-owned U.S. DE" at the top as the IRS instructions describe.
2. Complete a Form 5472 for each foreign related party, reporting the year's transactions.
3. Submit through the channel the IRS specifies for this form (historically fax or mail to a processing center; check irs.gov for whether an electronic filing option is available now).
4. Keep a copy and proof of submission with the LLC's records.

Most foreign LLC owners have a US tax accountant do this for a fixed annual fee — usually far cheaper than the risk of the penalty.

This article is general information, not legal or tax advice. Rules and fees change by state and over time — check the official state/IRS pages and consult a professional before you decide.