The 5472
Form 5472 needs to be filed by foreign-owned Single Member LLCs as well as foreign-owned Corporations who have an owner (with more than 25% ownership) that is a foreign individual (defined below). Form 5472 is a component of your federal income tax filing to the IRS, and is most likely accompanied by a form 1120 as well (a pro-forma 1120 in the case of Single Member LLCs.
Failure to file your form 5472 on time can result in a $25,000 fine assessed to your entity.
Form 5472 is an informational form that is reported to the Internal Revenue Service (IRS) to report any and all reportable transactions between related parties of a foreign owned US entity. Related parties are typically owner’s of the company, or anyone with frequent transactions or connections to the company.
Reportable Transactions
A reportable transaction can be viewed a few ways as well, including “Property or money exchanged, which include rental income, payments, remuneration, sales transactions, commission payments, capital contributions, and reductions.”
Also, “When a U.S. company property, such as real estate, is used by a foreign owner or related party,” or “Loans and/or interest payments carried out between the corporation and the foreign owner.”
Foreign Individuals Defined
The IRS defines a foreign individual as:
- A person that is not a US citizen or resident.
- An individual who is a resident or citizen of the US possession, but not a US citizen.
- A foreign corporation, company, or foreign partnership that was not organized or created in the United States.
- A foreign trust or estate explained in IRC section 7701(a)(31).
Bookmate would love to help you file your federal taxes! We specialize in tax filings for foreign owned U.S. entities. Contact us during tax season (January - April of every year) and we can file all the forms necessary for your entity at a reasonable cost.
Next steps?
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