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Are you required to file IRS Form 5472? For many expat business owners, the answer is yes. In this guide, we’re looking at the instructions for Form 5472—and everything else you may need to know about this complex issue.
Form 5472 is an IRS tax form used to report certain transactions. Many foreign-owned businesses are required to file this form annually.
The IRS requires each of the following types of businesses to file Form 5472:
In addition to this, various other “related parties” may be required to file their own copy of Form 5472 if they engage in any reportable transactions with the corporation. Those reportable transactions include:
The rules for what qualifies as a “related party” can be tough to interpret. The same is true for determining whether a corporation is 25% foreign-owned. To learn the details of your own situation, consult a tax professional.
Most businesses that fit the above categories are required to file Form 5472 every year. However, there are some exceptions, such as if:
Those aren’t the only exceptions—just a few common ones. Consult a qualified tax professional for further information.
To better understand what businesses should file Form 5472, let’s look at some examples.
Matt, Sarah, and Jack each own an equal stake in Company A, a US domestic corporation. Matt and Sarah are both US citizens, while Jack is an Australian citizen.
Because Jack is a foreign owner who owns more than 25% of the company (roughly 33%), Company A would be required to file Form 5472.
Company B is a US-based LLC that has elected to be taxed as a disregarded entity. Company B is owned by Company C, a foreign corporation based in Mexico.
Because Company B is a disregarded entity owned by a foreign company, it would be required to file Form 5472.
Company D is a corporation based in South Korea that has a presence in the US and sells products primarily to the US market.
Because Company D is a foreign corporation deemed to be “engaged in a trade or business inside the US,” it must file Form 5472.
In all three examples, other “related parties” connected to each company would likely also have to file their own copies of Form 5472.
Form 5472 is used to disclose a range of information about the reporting company and its transactions, including:
Form 5472 is due at the same time as your company’s income tax return (Form 1120). For tax year 2022, that would mean April 18.
However, if you file a six-month extension for your Form 1120, Form 5472 will also be postponed to the same date—October 17 for tax year 2022. The consequences of filing your taxes late can be severe
You must file a new Form 5472 every year your company meets the filing requirements.
The standard penalty for failing to file a Form 5472 on time is a $25,000 fine. There is an additional fine of $25,000 if you fail to file a Form 5472 within 90 days of being notified by the IRS.
Note: Filing an incomplete or inaccurate Form 5472 is considered a failure to file.
Filing Form 5472 is a complicated process with plenty of opportunities to make mistakes. Even deciding whether you’re required to file Form 5472 can be complex.
We recommend enlisting a qualified tax professional to help you rather than attempting to file Form 5472 alone.
To learn more about how to file Form 5472, see the Form 5472 instructions provided on the IRS website.
We hope this guide has helped you understand the requirements and instructions for Form 5472. However, if you still have questions, we have answers. In fact, we can even fill out and file your expat tax return on your behalf. At Greenback Expat Tax Services, we help expats around the world file their US taxes accurately and on time.
Filing expat taxes doesn’t have to be a hassle. Start your filing process with Greenback today.