Failing to file IRS Form 5472 correctly can result in significant penalties, even if your company had no income and owed no U.S. tax.
For foreign owners of U.S. single-member LLCs, Form 5472 penalties are commonly misunderstood. Many penalties arise not from intentional non-compliance, but from confusion about filing requirements.
What Is the Penalty for Not Filing Form 5472?
The penalty for failing to file Form 5472 is:
- $25,000 per year, per form
This penalty may apply if:
- Form 5472 is not filed at all
- The form is filed late
- The form is incomplete or inaccurate
- The required pro forma Form 1120 is missing
The penalty applies even if no U.S. tax is owed.
Does the Penalty Apply to Inactive or Zero-Income LLCs?
Yes.
Even if your LLC earned $0, had no customers, or was inactive, the penalty can still apply if Form 5472 was required and not filed.
When Can Form 5472 Penalties Be Assessed?
- Failure to file Form 5472
- Late filing
- Filing without Form 1120
- Incomplete ownership or transaction information
- Failure to respond to an IRS request
Can the $25,000 Penalty Increase?
Yes. If the IRS requests the form and the issue is not resolved within the allowed time, additional penalties may apply for each additional period of non-compliance.
Are There Automatic Penalty Waivers?
No.
There is no automatic waiver for first-time filers, inactive LLCs, or honest mistakes. In limited cases, penalties may be reduced if reasonable cause can be demonstrated, but this is not guaranteed.
Why Are Form 5472 Penalties So High?
Form 5472 is an information reporting requirement. U.S. tax rules require accurate reporting when a U.S. entity has a foreign owner, even when no income tax is due.
How Can Foreign Owners Avoid Form 5472 Penalties?
- Confirm whether Form 5472 is required
- File on time
- Include the required pro forma Form 1120
- Accurately report transactions
Key Takeaways
- $25,000 penalty per year for non-compliance
- Applies even with no income
- No automatic waiver
- Timely, accurate filing is essential
Ready to File Form 5472 Correctly?
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Last updated: January 2025