Are you a non-resident business owner in the US? Then IRS Form 5472 is necessary for you as a US taxpayer. The IRS makes this Form compulsory for U.S.-owned foreign corporations and related parties to stop tax evasion and avoidance.
So, to comply with tax regulations, you must file Form 5472. For your guidance to fill out the Form correctly, we are here with Form 5472 instructions. Please read our blog carefully and fill out the Form with a relaxed mind.
What Is Form 5472?
Form 5472 is a tax form used by foreign-owned and foreign shareholders to submit their information to the US IRS (Internal Revenue Service). This form must be filed as an attachment to a tax return.
Foreign-owned U.S. business owners submit their ownership structures and information about transactions, including share sales, stock purchases, balance sheets, asset sales, profits, earnings, losses, leases, and more. Plus, filing Form 5472 can offer you several tax benefits.
IRS Form 5472 Examples
To better understand the form, we are giving you situations.
- Suppose your company “A” is based in Australia, but you sell products to the U.S. market. So, your company is now recognized as a foreign corporation, and you should file Form 5472.
- Another example is – three friends, Max, John, and Kim, who founded a company in the US. Max and John are U.S. citizens, but Kim is from China and has over 25% of the company. So, the company is identified as a US-owned foreign company and has to file Form 5472.
Why Do You Need Form 5472?
The purpose of Form 5472 is to prevent foreigners from avoiding U.S. taxes and to close some loopholes in the tax code. The IRS demands that you provide information about foreign corporations on this form. Below, we added some crucial facts about why foreign corporations must submit the form.
- Transparency of Transactions: Form 5472 shows transactions between a corporation and its linked parties. The IRS can check the data and ensure the company’s transparency towards the laws and regulations.
- Keep Records of Foreign Corporations: Form 5472 is required to track foreign corporations’ information. The IRS told companies to provide information about sales, purchases, loans, and other financial transactions.
- Prevent Corporations from Hiding Assets: By providing information, foreign corporations can’t hide the records of their assets and avoid U.S. taxes.
What Are the Form 5472 instructions?
We are going to give you step-by-step filing instructions below. It will help you file your Form correctly and smoothly.
Who Can File Form 5472?
The following companies are required to file Form 5472:
- US-Owned Foreign Entity: Disregarded entities owned by a foreign person.
- Foreign Shareholder: US company with 25% of shares owned by a foreign person.
- Foreign Corporations Engaged in US Business: A foreign-owned company that sells products in the US.
Who Can Not File Form 5472?
In the following conditions, you can’t file Form 5472:
- Foreign corporations that are not engaged in any transactions in the US.
- Foreign corporations that foreign governments own.
- If the corporation is considered a foreign sales corporation and files Form 1120-FSC.
- If the corporation doesn’t have a permanent establishment in the US.
- Foreign corporations with no US income.
- If the foreign corporation has a gross income exemption under Section 883.
Form 5472 Filing Requirements
Before filing the Form, you may need some crucial information:
- Corporation information.
- Ownership information.
- Articles of organization or incorporation.
- EIN.
- Principal business activity for the company.
- Details of all reportable transactions, sales, stocks, etc.
- Corporation financial information, including costs, profits, and losses.
- Foreign shareholders’ information, including name, address, citizenship, etc.
- Filing deadline and fees.
Form 5472 Reportable Transactions
In Form 5472, it is necessary to disclose certain reportable transactions between the foreign-owned corporation and its related parties. A reportable transaction is exchanging money or property between a company and other parties. Two categories of reportable transactions are:
- Transactions for monetary consideration that meet a specified monetary threshold during the tax year. The threshold could be $50,000 or more for each category of transaction.
- Transactions involving non-monetary consideration, including sales, purchases, exchanging property, the contribution of capital, and other transactions.
All transactions must be reported on Form 5472, providing specific details about the transaction type, the related parties involved, and the financial aspects of the transaction.
How to Fill out Form 5472 on the Due Date?
After gathering all the necessary information, try to fill out the form carefully. Form 5472 has several parts to fill out. Here is the breakdown of each part.
Part I: Reporting Corporation
In this section, you must provide basic information about the transactions you report to the government. If your company has multiple transactions with different people or entities, you must file for each.
Part II – 25% foreign shareholder
This part is required for shareholders to show the foreign shareholder’s stake in the company.
Part III – Related party
In this part, you must provide information about the other company you transacted with. You will need their SSN, EIN, and other information to complete this part.
Part IV – Monetary transactions
Part IV is not for all fillers. It only applies to transactions that involve foreign entities or people.
Part V – Reportable transactions (foreign DE)
If your company is a foreign-owned disregarded entity and has yet to complete transactions reported in Part IV, you must fill those out here.
Part VI – Non-monetary transactions
Like Part IV, you must fill out this section if your transaction happens with a non-domestic party. This section is intended for situations where the compensation was non-monetary, such as exchanging shares.
Part VII – Additional information
Part VII is for all corporations and involves reporting any additional information, such as deductions, interest payments, and royalties gained.
Part VIII – Cost-sharing arrangement
In this section, you must list all the related parties with whom you have a cost-sharing arrangement (CSA).
Part IX – Base erosion payments
In this section, you must fill out the number of base erosion payments. You should report any tax benefits claimed related to the transactions.
Still, Trying to Figure it Out? Take Help
We understand that filling out the IRS form is tricky, and you might be confused about whether you must file Form 5472 or Form 1120 for your foreign-owned company. To clear up your confusion and fill out the form correctly, you can get help from a professional expert like Business Globalizer.
Business Globalizer can provide you with all the necessary services for your tax preparation. You’ll never have to worry again about your taxes. They can handle all your paperwork smoothly, and they can also suggest the advice you need.
FAQ on the IRS Form 5472
Q1: When Is the Form 5472 due date?
Answer: Form 5472 is filed as an attachment with the tax return Form 1120 by the same due date. So, the due date would be the same as Form 1120. The due date is –
- 15th day of the 4th month following the end of the corporation’s tax year. If the corporation follows the calendar year as its tax year, the due date for filing Form 5472 would be April 15th of each year.
It is noted that the date can change over time. Always check the IRS website for proper dates and instructions to avoid making mistakes.
Q2: What Is the Form 5472 Penalty for Late Filing?
Answer: The IRS decides the penalty for a late filing of Form 5472 under different circumstances. They are-
- The standard penalty for late filing Form 5472 on time is $25,000 per tax year.
- If you do not submit Form 5472 within 90 days of receiving notice from the IRS, the penalty will rise by $25,000.
Q3: What Is the Extension of Form 5472’s Due Date?
Answer: To avoid the penalties, a corporation can apply for an extension of time to file the Form. However, the request for an extension of time should be made before the regular due date. The extension time to file is Six months, and you must file Form 7004.
Q4: Where do I Submit Form 5472?
Answer: Foreign-owned US companies should mail or fax the completed Form 5472 to the IRS address. Remember that the Form should be attached to Form 1120.
- Fax (300 DPI or higher) to 855-887-7737, or
- Mail to:
Ogden, UT 84201
Internal Revenue Service
1973 Rulon White Blvd
M/S 6112 Attn: PIN Unit
Final Words
Filing Form 5472 has a confidentiality concern about disclosing business information – because you file your confidential information with the IRS. However, it’s noted that it is still essential to file this form.
Don’t be nervous when tax season approaches. Follow our Form 5472 instructions and file it timely and accurately. Filing Form 5472 offers several benefits for the reporting corporation and the Internal Revenue Service (IRS). For your betterment, never miss it.
