Listen up—if you’re a non-US resident with a single-member LLC and you’re not filing Form 5472, you’re sitting on a ticking time bomb worth $25,000 minimum. That’s not a typo. The IRS doubled this penalty a few years back, and they’re not playing around.
I’m Jake Lawson, and I’ve guided over 1,200 business owners through LLC formation and compliance. Today, I’m breaking down the most expensive form you’ve never heard of—until the IRS sends you a bill that makes your eyes water.
Here’s the brutal truth: Every foreign-owned single-member LLC must file Form 5472 annually, even if you made zero dollars, had zero transactions, and your LLC is gathering dust. Miss it? That’s $25,000. File it wrong? Another $25,000. Keep ignoring the IRS notices? They’ll hit you with $25,000 every 30 days until you comply.
Let me show you exactly how to avoid becoming another cautionary tale.
Who’s on the Hook for This Beast of a Form?
The IRS cast a wide net with Form 5472, and if you’re reading this as a non-US resident LLC owner, you’re probably caught in it.
You MUST file if:
- You’re a non-US resident with a single-member LLC (doesn’t matter if it’s dormant)
- Your single-member LLC is owned by a foreign company
- You have a multi-member LLC taxed as a corporation with 25%+ foreign ownership
- Your LLC elected corporate tax treatment and has foreign owners
You’re off the hook if:
- You’re a US citizen or green card holder (congrats, different rules apply)
- Your foreign-owned multi-member LLC is taxed as a partnership (Form 1065 instead)
- You passed the substantial presence test (you’re a resident alien for tax purposes)
Here’s what trips people up: Even if your Wyoming LLC has been sitting idle since formation, if you’re foreign-owned, you still file. I had a client from Germany who formed an LLC in 2021, never used it, and got hit with a $25,000 penalty in 2023. The LLC had zero revenue. Didn’t matter.
The 2017 Rule Change That Caught Everyone Off Guard
Before 2017, foreign-owned single-member LLCs flew under the radar. Then the IRS dropped regulation TD 9796, and suddenly every foreign-owned disregarded entity became a “corporation” for reporting purposes.
Not for taxes—let me be crystal clear—just for information reporting. Your LLC is still pass-through for tax purposes, but now it reports like a corporation. Confused? You’re not alone. This legislative gymnastics caught thousands of foreign owners completely unaware.
The IRS’s logic? They wanted to close loopholes and track money flowing through foreign-owned US entities. Fair enough, but they could have sent a memo to the 500,000+ affected LLCs. Instead, penalties started flying, and accountants started charging premium rates to fix the mess.
What Exactly Is a “Reportable Transaction”?
This is where it gets tricky, and where most people screw up. A reportable transaction isn’t just business income. It’s ANY movement of money or property between your LLC and you (or related parties).
Common Reportable Transactions People Miss:
- That $500 you paid to form the LLC? Reportable.
- The $50 Wyoming registered agent fee you covered personally? Reportable.
- Moving $1,000 into the LLC bank account to meet minimum balance? Reportable.
- Taking $100 out for that business dinner? Reportable.
- Your spouse paid for the LLC’s website? Reportable (and now they’re a related party).
The Related Party Web: The IRS defines “related parties” broadly enough to catch your entire family tree:
- You (obviously)
- Your spouse, parents, children, siblings
- Any company you own (even partially)
- Your foreign company that owns the US LLC
- Your business partner’s dog (kidding, but barely)
One client had his LLC formation paid by his father’s credit card. Guess what? Dad became a related party, requiring a separate Form 5472. That’s right—one form per related party with reportable transactions.
The Form 5472 + Form 1120 Package Deal
Here’s what confuses everyone: You don’t just file Form 5472. It must be attached to Form 1120, even though your LLC isn’t a corporation.
The Form 1120 “Pro Forma” Hack: The IRS only wants minimal info on Form 1120:
- Write “Foreign-owned U.S. DE” across the top (critical—don’t skip this)
- Fill in your LLC name and address
- Add your EIN in Section B
- Check applicable boxes in Section E (like “Initial return” for first filing)
- Sign at the bottom as “Owner”
- Leave EVERYTHING else blank
That’s it. Don’t fill out the income sections, balance sheets, or any other corporate nonsense. You’re not filing a corporate tax return; you’re just using Form 1120 as a delivery vehicle for Form 5472.
Breaking Down Form 5472 (Without Losing Your Mind)
Let me walk you through each section so you don’t accidentally trigger an audit:
Part I: Your LLC’s Basic Info
Straightforward stuff—LLC name, EIN, address, formation date, principal business activity. The tricky question: “Principal country where business is conducted.”
If you’re sitting in Berlin running an Amazon FBA business, the answer is Germany, not the US (even if all your customers are American). It’s where YOU work, not where your customers are.
Part II: The 25% Foreign Shareholder
This is you (or your foreign company if it owns the LLC). Include:
- Full legal name
- Foreign address
- Country of citizenship/incorporation
- Your foreign tax ID (if applicable)
No US address? No problem. Use your actual foreign address.
Part III: Related Party Information
Each related party with reportable transactions gets listed here. If multiple related parties had transactions, you need multiple Form 5472s. Yes, it’s as annoying as it sounds.
Part IV: Monetary Transactions
This section captures actual business transactions between your LLC and foreign related parties. If you’re just reporting formation costs and capital contributions, you might leave this blank.
Part V: The Disregarded Entity Catch-All
This is where most foreign-owned LLCs report their transactions. Check the box and attach a statement describing:
- Formation costs paid by owner
- Capital contributions (money you put in)
- Distributions (money you took out)
- Any other owner-LLC transactions
Pro tip: Your “attachment” is just a typed page listing these transactions. Nothing fancy—just clear descriptions and amounts.
Part VI: Non-Monetary Transactions
Usually blank unless you transferred property or provided services at below-market rates.
Part VII: Yes/No Questions
Most people check “No” to everything here unless you’re importing goods or have complex international tax structures.
The Timeline That Matters
Your Form 5472 deadline depends on your LLC’s tax year, but 99% of LLCs use the calendar year:
Calendar Year Timeline:
- LLC formed anytime in 2024 → File by April 15, 2025
- Need more time? File Form 7004 by April 15 for 6-month extension (to October 15)
- Remember: Extension is for filing, not paying (if you owe taxes)
Critical point: Even if your LLC was formed December 31, 2024, you still file by April 15, 2025. The IRS doesn’t prorate based on partial years.
Where to Send This Paperwork Nightmare
You have two options, and I recommend the first:
Fax (Faster, Trackable): 855-887-7737
Mail (Slower, Riskier): Internal Revenue Service 1973 Rulon White Blvd. M/S 6112, Attn: PIN Unit Ogden, Utah 84201
Critical tips:
- Always keep proof of submission (fax confirmation or certified mail receipt)
- The IRS won’t confirm receipt—silence is golden here
- Double-check current addresses on IRS website (they occasionally change)
The $25,000 Penalty Breakdown (How It Really Works)
Let me paint the nightmare scenario:
Stage 1: You miss the April 15 deadline
- IRS assesses $25,000 penalty
- You get a CP215 notice with 90-day warning
Stage 2: You ignore the 90-day notice
- Another $25,000 penalty
- Total now: $50,000
Stage 3: Continue ignoring
- $25,000 every 30 days
- No maximum cap
- Can exceed your LLC’s lifetime revenue
The Mercy Rule: If your LLC has less than $20 million in revenue and limited US presence, you might get penalties reduced for “reasonable cause.” Key word: might. Don’t count on IRS sympathy.
Common Disasters I’ve Witnessed
The Zero Activity Trap: “My LLC did nothing, so I filed nothing.” Client from Japan, formed LLC in 2020, never used it. 2023 penalty notice: $25,000. Formation itself is a reportable transaction.
The Family Credit Card Fiasco: UK resident had his mom pay the formation fees. Didn’t report her as a related party. IRS wanted a separate Form 5472 for mom’s transaction. Penalty notice arrived two years later.
The Wrong Form Disaster: Canadian filed only Form 1120 thinking it covered everything. It doesn’t. Form 5472 must be attached. $25,000 lesson learned.
The Address Mismatch: Australian used different addresses on Form 5472 and EIN application. IRS couldn’t match records. Filing got lost in the system. Penalty notice was the first sign something went wrong.
The Million-Dollar Question: Do You Owe US Taxes Too?
Form 5472 is just information reporting, but you might also owe US taxes. The factors:
You likely owe US taxes if:
- You have US-source income
- You’re engaged in US trade or business (USTB)
- You have effectively connected income (ECI)
- You have US employees or dependent agents
You might escape US taxes if:
- Your LLC has no US-source income
- You’re not engaged in US trade or business
- Your country has a favorable tax treaty with the US
- All business activities occur outside the US
Warning: “Engaged in US trade or business” is intentionally vague. Selling on Amazon FBA? Gray area. Dropshipping to US customers? Another gray area. This is where you need an accountant who specializes in international tax.
Your Compliance Action Plan
Here’s exactly what to do, depending on your situation:
If You’re Current on Filings:
- Mark April 15 in your calendar with multiple reminders
- Track every LLC transaction throughout the year
- Keep documentation for all reportable transactions
- File on time, every time
If You’ve Never Filed:
- Don’t panic (yet)
- Gather all LLC financial records since formation
- Hire an international tax accountant immediately
- File all missing years ASAP
- Request penalty abatement for reasonable cause
If You Got a Penalty Notice:
- Do NOT ignore it
- You have 90 days to respond
- File the missing forms immediately
- Work with a tax professional on penalty abatement
- Set up a payment plan if needed
The Other Forms in Your Foreign-Owner Toolkit
Form 5472 is just the beginning. Depending on your situation, you might also need:
Form 1040NR: If you have US-source income
Form W-8BEN: To claim tax treaty benefits
Form 8804/8805: For multi-member LLCs with foreign partners
FBAR: If your LLC bank account exceeds $10,000
Form 1042-S: For certain types of US income
Each has its own deadlines, penalties, and requirements. Miss one, and the dominoes start falling.
When to Throw in the Towel and Hire a Pro
I’m all for DIY when it makes sense, but Form 5472 isn’t the place to learn by making mistakes. Hire an international tax accountant if:
- This is your first time filing
- You have multiple related parties
- You’re already late on filing
- You received a penalty notice
- You’re unsure about US tax obligations
- Your time is worth more than the accounting fees
Expect to pay $500-2,000 for professional Form 5472 preparation. Expensive? Sure. But compare that to a $25,000 penalty, and it’s the bargain of the century.
The Bottom Line: Compliance Isn’t Optional
Here’s my brutal honesty: If you can’t commit to Form 5472 compliance, don’t form a US LLC as a non-resident. The IRS has information-sharing agreements with 60+ countries. They will find you, and they will penalize you.
But if you stay compliant, a US LLC can still be a powerful business tool. Just remember:
- File Form 5472 + Form 1120 every year by April 15
- Report ALL related party transactions
- Keep meticulous records
- Don’t assume “no activity” means “no filing”
- When in doubt, file anyway
The IRS doesn’t care that you didn’t know. They don’t care that your LLC made no money. They care that you follow their rules and file their forms.
Welcome to the world of US tax compliance, where a two-page form can cost you $25,000 if you forget to file it. Consider this your wake-up call—one that hopefully saves you from learning this lesson the expensive way.
Jake Lawson has saved over 1,200 business owners from costly compliance mistakes, including more than 400 international entrepreneurs navigating the US tax maze. When he’s not translating IRS regulations into plain English or calculating penalty risks, he’s probably wondering why the IRS can’t just send reminder emails like everyone else in 2025. Need help navigating Form 5472 and international LLC compliance? Visit llciyo.com for resources that might save you $25,000.
Don’t Let Form 5472 Become Your $25,000 Mistake
The clock is ticking toward April 15. If you’re a foreign-owned LLC that hasn’t filed Form 5472, every day you wait increases your risk. Download our free Form 5472 compliance checklist, complete with filing deadlines, required documentation, and red flags that trigger IRS scrutiny. Because when it comes to the IRS, ignorance isn’t bliss—it’s expensive.