Form 5472 and pro forma 1120: deadline, filing and penalties

Who has to file?

For this reporting requirement, the IRS treats a single-member LLC wholly owned by a foreign person (a foreign-owned U.S. disregarded entity) as a separate US corporation. Even though it has no income tax return to file, it must file a pro forma Form 1120 with Form 5472 attached.

What gets reported are transactions with the owner and other related parties. Contributing capital, withdrawing money and paying formation or dissolution costs all count. So even in a year with no sales, you may need to file if you put money into the LLC or took money out of it.

• On the pro forma Form 1120, complete only the LLC's name and address and items B (EIN) and E (initial/final return, address change) on page 1.
• Write "Foreign-owned U.S. DE" across the top of Form 1120.
• The tax year is the owner's US tax year or, if the owner has no US filing requirement, the calendar year.

Deadline and extension (Form 7004)

How to file

The IRS instructions are explicit: a foreign-owned U.S. disregarded entity cannot file Form 5472 electronically. You must use the dedicated fax number or mailing address below. Do not use the regular Form 1120 filing addresses.

• Keep the fax transmission report or the tracking receipt for your mailing. It is the simplest way to prove you filed on time.
• Links to the official PDFs of the forms are in the sources list at the end of this article.

How large is the penalty?

The penalty applies whether or not the company owes any tax. According to the instructions, criminal penalties may also apply in some cases.

Reasonable cause and requesting penalty relief

The IRS may remove or reduce some penalties if you acted in good faith and can show reasonable cause. For international information return penalties, the IRS looks for evidence that you acted responsibly before and after the failure and that there were significant mitigating factors or events beyond your control. The IRS also notes that not every international information reporting penalty qualifies for reasonable cause.

• Generally not reasonable cause: not knowing about the requirement, relying solely on a tax professional, simple oversight, or lack of funds on its own.
• Factors that may help: filing the form for the first time, a good compliance history, an error by the IRS or a third party, and events such as fire, disaster or serious illness.
• How to ask: call the number on your penalty notice, or send a signed letter explaining your reasons, with supporting documents, to the address on the notice. If you have already paid, you can request a refund and abatement on Form 843.
• If the notice gives a deadline for disputing the penalty, meet it. Missing it can narrow your options.
• First Time Abate: the IRS page on this administrative waiver does not list the Form 5472 penalty among the eligible penalties. Discuss it with your tax professional before relying on it.

What to do if you are late

• Identify the missing years: check every year since formation in which money moved between you and the LLC.
• Prepare complete forms. A substantially incomplete form can be treated as not filed at all.
• Decide with a tax professional whether to attach a reasonable cause statement to a late filing.
• If you have received an IRS notice, do not miss the 90-day window. The continuation penalty starts after it ends.

When to involve a professional

Which transactions Form 5472 covers, how to bring prior years up to date and how to write a reasonable cause statement all depend on your facts. Before you file, we recommend consulting a licensed US tax professional (a CPA, an enrolled agent or a tax attorney).