NewsTax and LegalFeb 24, 2024

5472 Form: A Short Guide With Examples

Every tax season, thousands of US-registered foreign-owned companies (and presumably their owners or accounting departments) are carefully looking through the US tax code to figure out which exact tax forms they need to file or risk the full might of the IRS. One of those forms that regularly comes up is the 5472 form.

In this article, we’ll tell you all there is to know about the IRS 5472 informational form. We’ll talk about what this form is and who is obligated to file it, as well as the penalties and fees that those who don’t file this form are eligible to face. We’ll also go through some of the 5472 form filing requirements and exceptions and will share with you a couple of real-life examples to make this form easier to comprehend.

Let’s begin. 

What Is Form 5472?

The 5742 form is an information return used by single-member LLCs (Disregarded Entities) or multi-member LLCs (Partnerships) that have foreign ownership, and foreign corporations that do business in the States. The IRS introduced the 5472 form in their action plan called “Final Regulations” on December 13, 2016.

The main purpose behind this form is to fulfill the federal reporting obligations for sections 6038A and 6038C of the Internal Revenue Code (IRC). Form 5742 helps the IRS keep track of foreign-owned entities and prevent tax evasion by ensuring these foreign entities accurately report all of their transactions in the US.

One important thing to note here is that the 5472 form is not used for tax purposes. This form aims to help the IRS prevent tax evasion, fraud, money laundering, and similar offenses.

Failure to file the 5472 form up to its due date (15th of April for the year 2024), failing to provide accurate information on it, or providing the Internal Revenue Service (IRS) with an incomplete 5472 form will result in a $25,000 penalty. There’s also an additional penalty of $25,000 issued for those companies that don’t rectify the issues with the 5472 form within 90 days from receiving the request from the IRS.

who should file 5472 form

Who Must File Form 5472?

5472 form is a type of US tax return that the following entities must file each tax year:

  • Single-member Limited Liability Companies (LLCs) that are owned by foreigners and are engaged in business in the US. These types of LLCs are also known as disregarded entities. 
  • Foreign corporations that are involved in trade or business in the US
  • Companies that are at least 25% foreign-owned and operate in the US.

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Form 5472: Filing Requirements

All entities that are required to file the 5472 form should:

  • Have an EIN — Before filing the 5472 form, all newly opened LLCs must get an EIN by filing the SS-4 form.
  • Get an ITIN — Before filing the 5472 form and an EIN, it’s a good idea for all newly opened LLCs to get an ITIN by filing the W-7 form. This is not mandatory, and getting an EIN without ITIN is possible. But, we must mention that having an ITIN can be helpful in many situations. 

When Should You File 5472 Form?

You should use the 5472 form if your company was involved in any of the following types of transactions:

  • Any business arrangement that includes an exchange of money 
  • Any amount of payments made to a foreign entity
  • Any kind of sale or purchase of any type of goods
  • Loan payments
  • Interest payments
  • Any type of transaction between the company and any foreign entity that is not mentioned/covered in the 5472 form
  • Any amount of money received or paid for rent
  • Any amount of money received or paid for royalties
  • Any types of sales or purchases of leases, licenses, property rights, trademarks, and similar 

a woman calculating and filing her taxes

How to send the 5472 Form to IRS?

There are two ways to file the form 5472. They are:

  • Via fax with a resolution of at least 300 DPI (Dots per inch) to the number 855-887-7737
  • Via regular mail to the following IRS address:  Internal Revenue Service, 1973 Rulon White Blvd, M/S 6112 Attn: PIN Unit, Ogden, UT 84201

5472 Form: Filing Exceptions 

Companies, corporations, or entities that must file form 5472 can be exempt from doing so if one of the following sets of circumstances is true:

  • A foreign-owned multi-member LLC is not viewed as a corporation but is instead categorized as a partnership and doesn’t have to file the 5472 form.
  • Company, corporation, or entity had no reportable transactions during a single tax year.
  • A US citizen who has controlling shares or acts as a controlling figure of a company, corporation, or entity files the 5471 form
  • The company, corporation, or entity is a foreign sales corporation and files the 1120-FSC form.
  • The company, corporation, or entity has no permanent establishment (fixed place of business ) in the US and files the 8833 form
  • If a company, corporation, or entity is foreign-owned and their entire gross income qualifies for tax exemptions under the 883 section while also adhering to all of the requirements of the IRC 883 and 887 sections.
  • If the company, corporation, or entity does not operate in the US, and any transaction they are involved in does not end up generating income, expenses, losses, or has any deductions from US-based sources.

Form 5472: Examples

Here are four examples of people and situations where filing the form 5472 is mandatory. 

Form 5472: Example 1

Akash is a developer from India who owns an LLC in Delaware. He offers IT services to clients that do not live in the US. Because of that, his company’s income is not considered US-sourced income, and he doesn’t have to file taxes in the US (e.g., the 1040NR tax form). But he must fill out the 5472 informational form or risk paying the $25,000 penalty.  

Form 5472: Example 2

Lucas is a Canadian citizen who owns 42% of a US-based corporation. Because he is a foreigner and owns more than 25% of the corporation, his company must file the 5472 form and report any transactions with foreign or domestic parties during a single tax year.  

Form 5472: Example 3

Any foreign corporation that engages in business activities (e.g., commercial, marketing, trade, investing, etc.) in the US must file the 5472 form and report all of their transactions with foreign and domestic parties (entities, companies, etc.). 

What Is Form 5472 Penalty?

All legal entities that must file the 5472 form but fail to do so in a timely manner or submit an incorrect or incomplete form will be fined $25,000. After the first fine, these reporting corporations will be given an extra 90 days to file the 5472 form for the first time or rectify the mistakes in the original filing. If, by the end of those 90 days, reporting corporations fail to comply with the IRS, they will be charged an additional penalty of another $25,000.

Apart from monetary chargers, entities that must file 5472 forms but fail to do so can also be liable for criminal penalties under the following sections of the tax crimes handbook:

  • 7203, 
  • 7206, 
  • 7207 

Need Help Filing International Taxes? 

NRI offers counseling and tax filing services to international clients who must file taxes in the US. In our team, we have a Certified Public Accountant (CPA) who specializes in working with non-US citizens. One of their areas of expertise is filing the 5472 form. For this particular form, we charge a fixed fee of $400

Looking for help to file the 5472 form or need counseling on US taxes for nonresidents? Book a free call to find out what NRI can do for you!

Founder & CEO
Luka Malkovich is a serial entrepreneur with years of experience in international real estate investing. As the CEO of Nonresident Investor, Luka’s mission is to educate foreign nationals about the US real estate market and help them secure funding and buy property in America. That’s why he’s using his expertise to turn the NRI blog into a knowledge hub for anyone interested in learning about US real estate. This article was written by a professional content writer in conjunction with Luka Malkovich. Luka has thoroughly reviewed this article and has given his final approval before publishing.

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