Form 5472 & 1120 for Foreign-Owned Single-Member LLCs: A Complete Guide

If you're a non-US resident owning a single-member US LLC, navigating the IRS tax forms can feel like traversing a minefield. Two forms, in particular, cause a lot of confusion and anxiety: Form 5472 and Form 1120. This comprehensive guide will break down everything you need to know, step-by-step, with the most up-to-date information for the 2024-2025 tax year. We'll cover who needs to file, what information is required, deadlines, penalties, and common pitfalls to avoid.

Why This Guide Is Essential

The IRS has specific reporting requirements for foreign-owned US LLCs, even if you don't owe any US tax. Failure to comply can result in significant penalties – starting at $25,000 per form! This guide aims to demystify the process and help you stay compliant. Many online resources are outdated or incomplete, and even professional advice can be inconsistent. This guide consolidates the most current information from IRS publications, tax professional insights, and common questions from online communities like Reddit.

1. Who Needs to File Form 5472 and Form 1120?

This guide primarily focuses on Foreign-Owned Single-Member LLCs (Disregarded Entities). This is the most common structure. You are the sole owner of the LLC, and you are not a US citizen or resident. For tax purposes, the LLC is "disregarded," meaning its income and expenses are treated as your own.

Key Terms:

• Disregarded Entity (DE): An LLC with only one owner that is not recognized by the IRS as an entity separate from its owner for federal income tax purposes.

• Reportable Transaction: Any exchange of money or property between the foreign owner and the LLC. This includes contributions, distributions, sales, loans, rent, royalties, and payments for services.

• Foreign Person: An individual who is not a US citizen or resident, or a foreign corporation, partnership, trust, or estate.

• 25% Foreign Shareholder: A foreign person who owns, directly or indirectly, at least 25% of either the total voting power or the total value of all classes of stock of a corporation at any time during the tax year.

You MUST file Form 5472 and a pro forma Form 1120 if:

• Your LLC is a foreign-owned US disregarded entity (DE). This is regardless of whether you have any income or activity.

2. What is Form 5472?

Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business, is used to report "reportable transactions" between the LLC and its foreign owner(s) or other related parties. It's an information return, not a tax return that directly calculates tax owed.

3. What is Form 1120 (Pro Forma)?

For a foreign-owned disregarded entity, you don't file a full Form 1120 (U.S. Corporation Income Tax Return). Instead, you prepare a pro forma Form 1120. This means you only fill out:

• The name and address of the LLC.

• Page 1, lines 1a, 1c, 2, 3, and check box E(9) at the top of the form.

• Write "Foreign-owned U.S. DE" across the top of the form.

• Attach Form 5472 to this pro forma Form 1120.

The purpose of the pro forma 1120 is simply to act as a "cover sheet" for Form 5472.

4. What are "Reportable Transactions" on Form 5472?

Form 5472 is all about tracking the movement of money and property between you (the foreign owner) and your LLC. Common reportable transactions include:

• Capital Contributions: Money or property you put into the LLC.

• Distributions: Money or property you take out of the LLC.

• Sales: If you sell goods or services to your LLC, or vice versa.

• Rents: If you rent property to or from your LLC.

• Royalties: If you receive royalties from your LLC (e.g., for intellectual property).

• Loans: Money loaned between you and your LLC (both principal and interest).

• Interest: Paid or received on loans.

• Commissions: Paid or received.

• Service fees: For instance management and bookkeeping.

• Amounts paid and/or received for intangible property rights: These are the reportable transaction types such as copyrights or trademarks.

Important Note: You report the total amount for each type of transaction, not individual transactions. For example, if you contributed $10,000 to your LLC in January and another $5,000 in June, you would report $15,000 as the total capital contribution.

5. Step-by-Step Guide to Completing Form 5472 (2024-2025)

The Form 5472 has changed slightly, so make sure you are using the December 2023 revision, which would apply to the 2024 tax year.

• Part I: Reporting Corporation: Information about your LLC (name, address, EIN, etc.).

• Part II: 25% Foreign Shareholder: Information about you, the foreign owner (name, address, US taxpayer identification number (if you have one), country of citizenship/residence).

• Part III: Related Party: Information about the related party. Since you are the sole owner, you repeat your information here.

• Part IV: Monetary Transactions: This is where you report the total amounts of the various reportable transactions (see section 4 above). You'll need accurate records of all financial interactions between you and your LLC.

• Part V: Report any nonmonetary and less-than-full-consideration transactions.

• Part VI: This section deals with certain nonmonetary transactions and those with less than full consideration. If you only have straightforward monetary transactions, you might leave this blank (but always double-check the instructions).

• Part VII: Provides additional information.

• Part VIII: Includes the total number of Forms 5472 being filed, which will be "1" for a single-member LLC.

• Part IX: Includes Base erosion payments.

6. Completing a Pro Forma Form 1120

• Obtain a copy of Form 1120 (U.S. Corporation Income Tax Return).

• Write "Foreign-owned U.S. DE" across the top of the form.

• Fill in the LLC's name and address.

• Fill in lines 1a, 1c, 2 and 3 of page 1. Report total gross receipts (1a), total income(1c, if applicable), subtract, to get total.

• Check box E(9).

• Do not fill out any other sections of Form 1120.

• Attach Form 5472 to it.

7. Filing Deadlines and Extensions

• Standard Deadline: The deadline for filing Forms 5472 and 1120 is typically April 15th for calendar year filers. If your LLC's tax year ends on a date other than December 31st, the deadline is the 15th day of the 4th month following the end of your tax year.

• Automatic Extension: You can request an automatic six-month extension to file using Form 7004 (Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns). Important: This extends the time to file, not the time to pay any tax due.

• 2024 Filing Clarification: Due to recent legal challenges to the Corporate Transparency Act (CTA), there has been some confusion. However, the IRS and FinCEN have clarified that the filing requirements for Form 5472 and 1120 remain in effect for foreign-owned disregarded entities. The court injunctions related to the CTA do not impact these specific filing obligations.

8. Penalties for Non-Compliance

The penalties for failing to file Form 5472, or for filing it late or inaccurately, are severe:

• Minimum Penalty: $25,000 per form.

• Additional Penalties: If the failure continues for more than 90 days after the IRS notifies you, additional penalties can accrue.

• Criminal Penalties: In extreme cases of willful failure to file, criminal penalties are possible.

9. Common Mistakes and How to Avoid Them

• Thinking "No Income = No Filing": Even if your LLC had zero income or activity, you must still file Form 5472 and the pro forma Form 1120 if you are a foreign-owned disregarded entity.

• Missing Reportable Transactions: Carefully review all financial interactions between you and your LLC. Even small loans or contributions must be reported.

• Using the Wrong Form Version: Always use the most current version of Form 5472 (check the IRS website).

• Failing to File an Extension: If you can't meet the deadline, file Form 7004 to get an automatic extension.

• Incorrectly Completing the Pro Forma 1120: Remember, it's just a cover sheet. Only fill out the specified lines.

• Using the wrong address: Use only your business address.

10. Do You Need an ITIN?

• ITIN (Individual Taxpayer Identification Number): If you, as the foreign owner, don't have and aren't eligible for a Social Security Number (SSN), you'll need an ITIN. You apply for an ITIN using Form W-7, which you can file with your first tax return (including the Form 5472/1120).

• You can only apply ITIN with your tax returns.

11. Where to File

Mail your completed Form 5472 and pro forma Form 1120 to:

Internal Revenue Service
1973 Rulon White Blvd.
Ogden, UT 84201

12. Should You Hire a Professional? (Let Nonresident.tax Help!)

While this guide provides a comprehensive overview, the US tax system is complex, especially for non-residents. Form 5472, in particular, has many nuances, and even seemingly small errors can lead to significant penalties. If you have any doubts, complex transactions, or simply want the peace of mind that comes with expert assistance, it's strongly recommended to consult with a tax professional specializing in international tax and US LLCs for non-residents.

That's where Nonresident.tax comes in.

We understand the unique challenges faced by foreign owners of US LLCs. Our team of experienced tax professionals provides comprehensive services specifically tailored to your needs, including:

• Accurate and Complete Form 5472 and 1120 Preparation: We'll ensure your forms are filed correctly and on time, minimizing your risk of penalties.

• Identification of All Reportable Transactions: We'll help you meticulously review your financial records to identify every reportable transaction, leaving no room for error.

• ITIN Application Assistance: If you need an ITIN, we can guide you through the application process (Form W-7).

• Proactive Tax Planning: We'll help you understand your US tax obligations and develop strategies to optimize your tax position.

• IRS Representation: If any issues arise with the IRS, we'll be there to represent you and advocate on your behalf.

• Peace of Mind: Focus on growing your business, knowing your US tax compliance is in expert hands.

Don't risk costly penalties or navigate the complexities of US tax law alone.

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By choosing Nonresident.tax, you're not just getting a form-filling service – you're gaining a partner dedicated to your long-term success and compliance. We take the stress out of US taxes so you can focus on what you do best: running your business.

13. Key Takeaways

• Foreign-owned US disregarded entities must file Form 5472 and a pro forma Form 1120, even with zero activity.

• Accurately track and report all reportable transactions.

• File on time or request an extension.

• The penalties for non-compliance are substantial.

• Consider professional help if you're unsure about anything.

• Don't fall for scams! File Form 5472 directly with the IRS. There are no filing fees. Websites charging for this are not affiliated with the IRS.

This guide is for informational purposes only and should not be considered tax or legal advice. Always consult with a qualified professional for personalized guidance.