Who Must File Form 5472 With the IRS?
Learn the IRS reporting obligations for corporations with foreign ownership concerning transactions with related parties to maintain compliance.
Form 5472 is an informational filing required by the Internal Revenue Service (IRS) to provide visibility into transactions between U.S. entities and their foreign affiliates. This reporting helps ensure compliance with U.S. tax laws by monitoring the flow of funds and property between related parties. The form itself is a disclosure document and does not create a tax liability.
Who Must File Form 5472
The requirement to file Form 5472 applies to entities defined as “reporting corporations.” One category is a U.S. corporation that is at least 25% foreign-owned. This threshold is met if a foreign person or entity owns, directly or indirectly, 25% or more of the corporation’s total voting power or stock value.
The other category is a foreign corporation engaged in a trade or business within the United States. This also includes foreign-owned U.S. disregarded entities, such as single-member LLCs, which are treated as corporations for this reporting purpose.
Information Required for Form 5472
The form requires basic identifying information, such as the company’s name, address, and principal business activity. It also requires detailed information about each 25% foreign shareholder, including their name, address, and U.S. taxpayer identification number, if any.
A portion of the form is dedicated to disclosing the monetary value of all “reportable transactions” conducted with foreign related parties. These transactions can include a wide range of activities, such as sales of inventory, rents, royalties, commissions paid and received, and interest on loans.
Filing the Form and Associated Penalties
Form 5472 must be attached to the corporation’s annual income tax return, such as a Form 1120 for domestic corporations or Form 1120-F for foreign corporations. It must be filed by the same due date, including any approved extensions. For foreign-owned U.S. disregarded entities that may not have a tax return filing obligation, a pro forma Form 1120 must be filed with Form 5472 attached.
Failure to file a complete and accurate Form 5472 on time or to maintain adequate records carries a penalty of $25,000 per required form. If the failure continues for more than 90 days after the IRS provides notification, an additional penalty of $25,000 is assessed for each 30-day period the failure continues.