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Form 5472 Introduction | International Tax Lawyer & Attorney

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In the complex landscape of US tax compliance, IRS Form 5472 plays a crucial role in reporting transactions between foreign-owned US corporations and their related parties. This article serves as a Form 5472 introduction. It explores the purpose of Form 5472, explains its filing requirements and warns about the potential consequences of noncompliance.

Form 5472 Introduction: What is Form 5472 ?

Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business, is an IRS form used to report certain transactions between a reporting corporation (including a reporting disregarded entity) and certain related parties.  The IRS uses information from Form 5472 to identify potential transfer pricing issues and ensure that transactions between related parties are conducted at arm’s length.

Form 5472 Introduction: Who Must File Form 5472 ?

There are generally three categories of entities that must file Form 5472. First, US corporations with 25% or more foreign owners. Pursuant to 26 U.S.C. § 6038A(c)(1), a US corporation is considered 25% foreign-owned if at least one foreign person owns, directly or indirectly, at least 25% of: (a) the total voting power of all classes of stock entitled to vote; or (b) the total value of all classes of stock of the corporation.

The second category of Form 5472 filers are foreign-owned disregarded entities (“FDE”). This is a relatively new addition to Form 5472 filers. This new category was added through Treasury regulations in the mid-2010s.

The final category of Form 5472 filers consists of foreign corporations which engage in trade or business within the United States.

Form 5472 Introduction: Key Concepts Related to Form 5472

Form 5472 requires understanding of at least three key concepts.  First of all, the definition of a “Reporting Corporation”.  Reporting Corporation is basically an entity that must file Form 5472.

The second and a very difficult concept is “related party”.  Related Party can be any direct or indirect 25% foreign shareholder or a person related to the reporting corporation or its 25% foreign shareholder.

The final and also very difficult concept is “reportable transactions”.  Reportable Transaction is any transaction listed in Form 5472 (and as interpreted by relevant Treasury regulations). Form 5472 covers a wide range of transactions.

Form 5472 Introduction: General Disclosure Requirements

In broad terms, the IRS requires Form 5472 filers to disclose the information about the nature and amounts of all reportable transactions between a reporting corporation and its foreign related parties.  

Form 5472 organizes the required information in various parts. Part I requires disclosure of information about the reporting corporation. Part II collects information about all 25% foreign shareholders. Part III discusses other Related Parties. Part IV focuses on the monetary transactions reporting corporations and foreign related parties. Part V is specifically about the reportable transactions of FDEs. Part VI discusses non-monetary and less-than-full-consideration transactions between the reporting corporation and the foreign related party. Finally, Parts VII, VIII and IX contain questions concerning other relevant information.

Form 5472 Introduction: Filing Deadlines and Extensions

Generally, Form 5472 must be filed with the reporting corporation’s income tax return by the due date (including extensions) of that return. For calendar year corporations, this is typically April 15th, with a possible extension to October 15th. Corporations that operate on a fiscal year must align the filing deadline with their income tax return deadline.

Form 5472 Introduction: Penalties for Form 5472 Non-Compliance

The IRS imposes severe penalties for failure to file Form 5472 or for filing an incomplete or inaccurate form.   First, there is a $25,000 initial failure to file penalty imposed on each form.

If the IRS notifies the taxpayer about the missing Form 5472 and the taxpayer fails to do anything afterwards for 90 days, then the IRS can assess an additional $25,000 penalty (or a fraction thereof) per each 30-day period.

Criminal penalties under sections 7203, 7206, and 7207 may also apply for failure to submit information or for filing false or fraudulent information.

Conclusion: Contact Sherayzen Law Office for Help With Form 5472 Compliance & Form 5472 Voluntary Disclosures

Navigating the complexities of Form 5472 compliance can be challenging and securing the help of an international tax lawyer is highly recommended.

Sherayzen Law Office is a leading firm in international tax compliance in the United States with extensive experience with Form 5472 and offshore voluntary disclosures concerning delinquent (late) Forms 5472. Whether you’re dealing with complex ownership structures, intricate related party transactions, or addressing past non-compliance, Sherayzen Law Office provides tailored solutions to meet your specific needs.

Contact Sherayzen Law Office today for professional help!

Form 5472: Basic Information

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The focus of this article is to provide some basic information on the IRS Form 5472, an Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business.

The purpose of Form 5472 is to provide information required by the IRS when “reportable transactions” occur during the tax year of a “reporting corporation”, with a foreign or domestic related party. In general, “reportable transactions” are defined to mean certain types of transactions listed in part IV of the form (such as sales, rents, royalties, interest), for which either monetary consideration was the sole consideration paid or received during the reporting corporation’s tax year, or if any part of the consideration paid or received was either not monetary consideration, or was less than full consideration.

“Reporting companies” that generally are required to file Form 5472 include both: 25% foreign-owned U.S. corporations and foreign corporations engaged in a trade or business within the United States.  Broadly speaking, the 25% ownership requirement is meant to apply to a foreign person who owns either directly or indirectly 25% of a US corporation, but not to multiple foreign persons owning only 25% in the aggregate.  However, the related party rules apply to determining ownership.  In certain situations, filing of Form 5472 may not be necessary if applicable exceptions are met.

For those required to file, Form 5472 must be filed with the reporting corporation’s tax return.  The IRS may consider a substantially incomplete Form 5472 to constitute a failure to file the Form.  For each foreign or domestic related party with which a reporting corporation had a reportable transaction during its tax year, a separate Form 5472 must be filed.  The IRS recently issued temporary and proposed regulations with the intent to remove a requirement under existing regulations mandating duplicate filing of the form.

Contact Sherayzen Law Office for Legal Help With Form 5472

If you have any legal or tax questions about Form 5472, contact Sherayzen Law Office for professional help.  Our experienced international tax firm will help you determine your 5472 filing requirements as well as assist you in properly completing the form.