What is Form 5472 (for disregarded entities) and who must file it without exception?

What is Form 5472 (for disregarded entities) and who must file it without exception?

If you have a company in the United States and have foreign members owning more than 25% of the company’s ownership, then you must read this article.

What is Form 5472?

Form 5472 is a document provided by the IRS that you must fill out to report activities within the U.S. by foreign-owned companies or companies with more than 25% foreign ownership.

With this form, the IRS aims to prevent tax evasion.

It’s not a payment document or anything similar; it is purely informational but of utmost importance.

Who needs to file it?

U.S. companies with more than 25% of their capital under foreign control must file it.

Foreign companies engaged in business within the U.S. must also file it if they have been involved in loans, payments, receipt of interest or dividends, sales of products or services, or royalties in which foreign members were involved.

If any individuals or legal entities related to foreign members have participated in any of the aforementioned activities, Form 5472 must also be filed.

It must be filed regardless of whether it is an LLC or a corporation.

What information needs to be filled out on Form 5472?

  • The reporting entity (company name, address, EIN, business activities, among others).
  • The foreign member (whether a person or entity) owning more than 25% of the ownership.
  • The “Related Party” (foreign-owned U.S. DE entity).
  • Monetary transactions.
  • Reportable transactions of the foreign-owned entity (Disregarded Entity).
  • Non-monetary transactions.
  • Additional information.  

How to file Form 5472?

You must attach the form to your annual tax return.

The company should have a Employer Identification Number (EIN), and proper accounting of the company’s operations according to U.S. tax laws is required.

A certified accountant or a company providing such services can assist you with this process.

Rex Legal can help you with this; just contact us if you need assistance.

When should Form 5472 be filed?

Since it is filed along with your tax return, the filing deadline is the same (April 15th of each year).

In case of delay, you can request an extension for both documents.

What happens if it’s not filed? Are there penalties?

As mentioned at the beginning of this article, Form 5472 is of utmost importance to the IRS and must be filed if it meets the criteria.

Therefore, a penalty of $25,000 will be imposed if:

It is not filed by the due date or the extended due date.

The form is submitted incomplete.

Additionally, if the penalty is not paid within 90 days, an additional $25,000 will be added each month.

If this extends over several months or if fraudulent information is provided, it could even lead to jail sentences.

Need help?

We understand that all the legal paperwork involved in running a business can become tedious and complicated.

That’s why at Rex Legal, we take care of all this for you, giving you more free time and peace of mind, free from worries.

If you need assistance, just contact us.

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