Filing IRS Form 5472: A Guide for Aussies who own a US LLCs

Filing taxes for a business can be complicated, especially from an international context. Many US accountants are not even aware of the IRS filing requirements for foreign-owned LLCs (Limited Liability Companies). As Australians, we want to know when we need to file and also when we qualify for a filing exemption.

IRS Form 5472 is primarily used for reporting owner information to the IRS to help with compliance with U.S. tax laws. This blog post will delve into the purpose of Form 5472, who needs to file it and who does not, the filing process, deadlines and penalties for non-compliance.

Understanding the Purpose of IRS Form 5472

Form 5472 collects information about foreign owners and certain transactions between a U.S. LLC and you as its owner or related party. This form helps the Internal Revenue Service (IRS) monitor and analyse international economic activity and ensure compliance with tax regulations. Form 5472 collects similar data to FinCEN's Benefical Owner Information Report. However, it is slightly different. In the future, it is conceivable that these two reports may be merge. For now, proper reporting helps prevent tax evasion and ensures that all activities in the USA are transparent.

A step by step help guide for filing Form 5472 by yourself

Who Needs to File IRS Form 5472?

The requirement to file Form 5472 applies primarily to foreign-owned single-member LLCs that are treated as disregarded entities for U.S. tax purposes. It also applies if a disregarded LLCs is owned by a foreign married couple. Disregarded means that the LLC is not taxed separately, and the income will be reported on the owner’s tax return. These are the 3 main filing considerations.

1. Foreign Ownership: If you as an Australian own 25% or more of an LLC, you likely need to file.

2. Transaction Reporting: Even if your LLC did not receive income or trade in the tax year, you may still need to file. If you make a contribution or take a distribution from the LLC during the tax year, you need to report such transactions. This includes if your LLC pays for formation, renewal or dissolution, expenses for the LLC. If your LLC had a bank account (or digital account) in the tax year, it is likely that it will contain transactions, even if it is only earned interest.

   
   

3. Exemption from Filing: Obviously, you don't want to file if you are not required to. The key filing exemption is if your LLC had no reportable transactions of the types listed in Parts IV, V and VI of form 5472. Here is the list of reportable transactions. Note the LLC operational fees. It is likely okay if you personally paid the LLC fees, so long as you did not assign them as an LLC expense.

   
   

List of Reportable Transactions from Form 4572

The Filing Process for IRS Form 5472

You can find Form 5472 on the IRS website. The three main sections of the form are:

• Information About the Reporting Corporation

• Information About the Foreign Owner

• Details on Transactions with Related Parties

  
  

You or your accountant can file Form 5472 with your LLC’s income tax return. Alternatively, if you do not have a requirement to file a US income tax return, then you can file form 5472 directly by faxing it directly to the IRS for free at +1 855 887-7737

A tax form being accurately filled out for compliance.

Deadlines for Filing Form 5472

The deadline for filing Form 5472 typically aligns with the IRS tax return deadlines. Here are the key timelines to remember:

• For Calendar Year Filers: If your LLC operates on a calendar year basis, your Form 5472 is due by April 15 of the following year when you file your income tax return (Form 1120 or Form 1120-F). If you need an income tax return quote including filing form 5472, then we can help. Simply fill out a request for an income tax return quote.

  
  

• Extensions: If you apply for an extension for your tax return (Form 7004), Form 5472 must also be filed by the extended deadline.

Penalties for Non-Compliance

Failing to file Form 5472 when required can subject your LLC to penalties. These include a fine up to $25,000 per form and per tax year. Ensuring compliance should be a top priority for foreign-owned LLCs to avoid these hefty fines. Whether you are a seasoned entrepreneur or just starting your foreign-owned LLC, staying informed and compliant will guide you towards a successful and compliant business journey.