Form 5472 instructions are available from the IRS. But, the information provided can still be rather confusing.
So in this free guide, we’re going to be answering commonly asked questions and help you navigate the step-by-step process to meet your Form 5472 filing requirements.
This article is part of our free series on banking for US LLCs, including the steps for opening a business bank account for an LLC, which you can access using this link.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- Form 5472 Instructions
- What Transactions Are to Be Reported on Form 5472?
- What Is the Difference Between Filing IRS Form 5471 and Form 5472?
- Instructions on How a Foreign Person Files Form 5472
- Frequently Asked Questions
- Ready to Open Accounts With Banks in the USA?
Form 5472 Instructions
Form 5472 instructions are available from the IRS. Any US corporation or disregarded entity with 25% or more foreign ownership that has a reportable transaction during a tax year must file Form 5472. Importantly, it is almost guaranteed that every foreign-owned US LLC will have a reportable transaction in every tax year.
To be clear, Form 5472 is an informational filing that gets submitted to the IRS. According to the IRS, the “trigger” for filing Form 5472 is “when reportable transactions occur during the tax year of a reporting corporation with a foreign or domestic related party.”
There is some confusion over what constitutes a “reportable transaction.” But, in most cases, all foreign-owned US LLCs have reportable transactions every tax year. This is true whether it’s during the year of formation or any subsequent year.
The reason that foreign-owned US LLCs have reportable transactions each year is that they will pay (at the very least) local registered agents, annual reports, business licenses, and other minimum requirements to maintain their US LLC, which constitute reportable transactions.
US LLCs are also required to file a document with the Commercial Mail Receiving Agency (CMRA), known as Form 1583. We share everything you need to know about Form 1583, including what it is, how to fill out the form, and why it’s important to submit it at the link above.
If you’re interested in understanding the fees associated with a US LLC, specifically how much it costs to start an LLC, use this link to uncover the factors that impact the costs of starting an LLC.
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What Transactions Are to Be Reported on Form 5472?
The transactions that are to be reported on Form 5472 include both income and expense-related transactions. Below you can see a breakdown of most transactions that need to be reported. However, for a complete list, you should review Part IV on Page 2 of Form 5472 from the IRS.
Reportable Transactions Related to Income
- Sales inventory
- Sales of tangible property
- Rental income
- Royalty income
- Sales income
- Income from providing services
- Commissions received
- Interest income
- Premiums received from insurance
- Other amounts received
Reportable Transactions Related to Expenses
- Inventory purchases
- Purchases of tangible property
- Purchases of intangible property
- Rent expenses
- Royalties paid
- Payments for services
- Commissions
- Insurance expenses
- Other amounts paid
As you can see, this is a relatively broad list of transactions. And, this is not the complete list. So, be sure to review Form 5472 and the Instructions for Form 5472, available directly from the IRS.
What Is the Difference Between Filing IRS Form 5471 and Form 5472?
The main difference between filing IRS Form 5471 and Form 5472 is that Form 5471 is for US persons while Form 5472 is for foreign corporations.
Foreign Corporation
Foreign corporations include US corporations with 25% or more foreign ownership. However, it’s important to note that disregarded entities for tax purposes are also considered foreign corporations when 25% or more is owned (directly or indirectly) by a foreign person.
Instructions on How a Foreign Person Files Form 5472
The instructions on how a foreign person files Form 5472 can be found by visiting the IRS website. Also, it’s important to note that the Instructions to Form 5472 are a separate document from the actual form that will be filed. With this in mind, if you are planning on filing Form 5472 yourself, you should review the Instructions document carefully before proceeding.
Frequently Asked Questions
Below are three of the most common questions that we receive from people looking for filing form 5472 instructions. If you have further questions you would like answered, don’t hesitate to get in touch with us directly.
What Are the Requirements to File 5472?
The requirements to file Form 5472 include (a) whether a US corporation (or disregarded entity) has 25% or more (direct or indirect) foreign ownership and (b) whether the US corporation has reportable transactions. Importantly, any foreign-owned US LLC will have reportable transactions by virtue of paying for fees related to the maintenance of the LLC.
Is Form 5472 Required If No Reportable Transactions?
Form 5472 is not required if no reportable transactions take place during the tax year. However, it is highly unlikely that a foreign-owned US LLC does not have reportable transactions during a tax year. In fact, by simplifying maintaining a US LLC, reportable transactions will take place. This is because reportable transactions include the payment of services, like those provided by registered agents.
How to File a Final Form 5472?
To file a final Form 5472, you can follow the instructions available on the IRS website, which outline the specific information that is required. That said, in most cases, foreign-owned US LLCs select to hire a qualified tax professional to help them navigate the filing process.
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