One important aspect of being a business owner is ensuring that you keep up with changing laws and regulations that may be applicable to your business. There are consistent changes and updates being made to various legal requirements and ignoring those changes or failing to recognize them could result in negative consequences for your business. 

One ruling that business owners should be sure to maintain awareness of is the need to complete and file Form 5472. 

Who must file Form 5472? 

Form 5472 must be filed by any business owner that has a foreign owner or foreign shareholders of 25% or more of the company. Form 5472 is used by IRS to understand global transactions and transfer pricing issues between domestic and foreign-related parties. 

The requirement for eligible business owners to file this form began in 2017. It should be noted as well that this form should be filed by the corporation rather than the individual or shareholders themselves. 

What happens if I don’t file Form 5472 and am supposed to?

New laws enacted in 2017 significantly increased penalties related to not appropriately filing. Penalties include fines of between $10,000 to $25,000. These penalties may be enacted both for failure to form or filing in an incomplete manner. Penalties may also be charged for failing to maintain adequate records. 

Form 5472 Foreign Owned Company Filings

What do I need to report on Form 5472? 

All reportable transactions must be included in the submission of Form 5472. Reportable transactions are broadly defined by IRS as:

  • Any type of transaction listed in Part IV (sales, rent, etc.) for which monetary consideration was the sole consideration paid or received during the reporting corporation’s tax year
  • Any type of transaction or group of transactions listed in Part IV, if:
    • Any part of the consideration paid or received was not monetary consideration 
    • Less than full consideration was paid or received

To put this information in simpler terms, if you receive any money from, pay any money to, or pay anything on behalf of an eligible LLC, you must file For 5472. 

How do I file Form 5472? 

It should be noted that in order to file Form 5472, you must have an Employer Identification Number (EIN). Once your EIN is obtained, you can file Form 5472. Unlike many other forms, Form 5472 cannot be filed electronically. It must be filed and submitted by paper or fax. 

While IRS provides specific instructions on how to complete the filing of Form 5472, the instructions are complex and may be confusing for many. 

If you’re concerned about your Form 5472 being filed correctly, our team of experts at Milikowsky Tax Law may be able to support you. Avoid penalty charges by ensuring that your filings are completed correctly the first time. In the event that you do face penalties, we are prepared to help keep them to a minimum and make necessary adjustments. Call or contact us today to get started. 

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