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Do you have to file IRS Form 5472? For several expat business individuals, the answer is a big yes! In this article, we will discuss everything about Form 5472 and everything you should understand about this complicated form.
- The Internal Revenue Service (IRS) needs companies and businesses to file IRS Form 5472 if they are a US company with a minimum of 25 percent of their stock owned by a foreign entity or 25 percent of stock owned by an individual or a foreign corporation or engaged in a business or trade inside the United States.
- IRS Form 5472 is an IRS tax form that is used to report particular transactions of foreign partnerships and foreign corporations
What Is Form 5472?
IRS Form 5472 is an IRS (Internal Revenue Service) tax form that specific foreign-owned companies, including partnerships and foreign corporations, should file. These corporations should file IRS Form 5472 yearly and offer details about their transactions and ownership structures that include changes made to the business ownership.
Who Has to File Form 5472?
The IRS (Internal Revenue Service) needs every business to file IRS Form 5472:
- A foreign entity is engaged in a business or trade inside the United States.
- A US company with a minimum holding share of 25 percent must be owned by a foreign company or an individual.
- A US-disregarded entity with a minimum of 25 percent stock should be owned by a foreign entity or an individual.
Also, different related parties might have to file their own copy of IRS Form 5472 if they are involved in any reportable transactions with the entity. Those reportable transactions are:
- Loan guarantees
- Purchase of stock
- Sales leases
- Sale of stock
- Buying of tangible asset
- Sales of tangible asset
- Interest paid
- Consideration for services
- Premiums paid for insurance
The regulations for what becomes eligible as a related party might be difficult to interpret. A similar thing is true for considering whether a corporation is 25 percent foreign-owned.
Exceptions from Filing IRS Form 5472
Several companies that fit the categories mentioned above must file IRS Form 5472 every year. Also, there are a few exceptions, such as:
- The company has a gross income exemption under section 883 and has compiled entirely with the reporting requirements of sections 887 and 883
- The organization is considered a foreign sales corporation and has to file Form 1120-FSC
- The entity has no reportable transactions in a given financial year.
- The company is based in a country with a United States tax treaty, has no permanent establishment, and should file form 8833 in the US.
Those are not the only exceptions. You can consult a qualified tax expat service for more details.
IRS Form 5472 Examples
To better know what businesses must file IRS Form 5472, let us discuss some of the examples.
Sarah, John, and Ken each own an equal stake in organization A, a US domestic corporation. John and Sarah are both citizens of the United States, while Ken is an Australian citizen. As Ken is a foreign owner who has more than 25 percent of the stake, company A has to file an IRS 5472 form.
Company B is an LLC US-based that has elected to be taxed as a disregarded organization. Company B is owned by entity C, a foreign company based in Mexico. As company B is a disregarded company owned by a foreign company, it should file IRS Form 5472.
Company D is an entity based in South Korea that has a presence in the United States and sells products in the US market. As Company D is a foreign company that is deemed to be engaged in a business or trade inside the United States, it should file IRS Form 5472.
In all three examples discussed above, other related parties are connected to an entity that also has to file their own copies of IRS Form 5472.
What Information Is Needed on Form 5472?
IRS Form 5472 might seem a straightforward form that needs little details, but it has few nuances. Form 5472 is used to disclose a range of details about the reporting company and its transactions, including:
- Foreign shareholders names
- Principal business activity for an entity
- Articles of incorporation or an organization
- Foreign shareholders addresses
- Information on all the reportable transactions
- Foreign shareholder’s countries of citizenship
IRS Form 5472 Due Date
The IRS Form 5472 due date is at the same time as your company’s income tax return or Form 1120. For the 2023 income tax year, that will mean 18 April 2023. Also, if you file a six-month extension for your IRS Form 5472, IRS Form 1120 can be postponed to a similar date, which is 16th October, for the financial year 2023. The consequences of income tax filing your taxes late might be serious. You should file a new IRS Form 5472 every financial year; your company meets the income tax filing needs.
IRS Form 5472 Penalties
The standard charge for failing to file IRS Form 5472 on time is a $25,000 penalty. There is also an additional penalty of $25,000 if you fail to file IRS Form 5472 within three months of being notified by the Internal Revenue Service.
Filing an inaccurate or incomplete IRS Form 5472 is considered a failure to file.
How to File Form 5472?
Filing IRS Form 5472 is a complex process with several opportunities to make errors. Even considering whether you have to file IRS Form 5472 may be complicated. We would suggest you enlist a highly skilled tax expert to assist you rather than attempting to file IRS Form 5472. A recent form example is seen below. To know how to file IRS Form 5472, you may see the instructions in the 5472 form given on the site of the Internal Revenue Service.
Filing Form 5472 Doesn’t Have to Be Difficult
We hope that in this article, you got a clear understanding related to the instructions and requirements for IRS Form 5472. Also, if you have any doubts, you have USTAXFiling experts to help you. Our USTAXFiling experts ensure to discuss all your queries and make sure to resolve them at the earliest. Our USTAXFiling is highly skilled and qualified to help you with IRS Form 5472 and has all the updates related to 5472 form filing. You can also reach out to them to file the 5472 form, and you may sit back and relax while they take care of everything. If you have any doubts related to the next steps or process, then our USTAXFiling champions will happily address all your queries. Your wait is over now! Don’t think much and take action. Call USTAXFiling right away for expat tax services online in the United States!