April 28, 2020, Comment off

What is Form 5472?

If your U.S. company has non-U.S. persons and also involves with foreign related parties, you wouldn’t want to miss to file Form 5472. Although not an actual tax return, Form 5472 is an informational form to be submitted to the Internal Revenue Service (“IRS”) annually for the U.S. companies with foregoing conditions.

This form may be filed either separately or as part of the actual tax return depending on the situation. For instance, a U.S. Disregarded Entity and owned by foreigners need to file separately.

The requirements

The “significant” foreign ownership threshold is at least twenty-five percent at any time during the tax year. This filing responsibility starts when a U.S. company is 25% foreign- or when a foreign corporation engaged in a trade or business within the US. A company with 25% foreign-owned and has at least one direct or indirect 25% foreign shareholder at any time during the tax year. Generally, a foreign person is a 25% foreign shareholder if the person owns, directly or indirectly, at least 25% of either.

Penalties usually arise for the failure to file. It is essential to ensure to have adequate records and information to timely prepare Form 5472. Keep proof of the timely filing of the returns to avoid the assessment of the penalty. Otherwise, the company would be at risk to face stiff penalties. The penalty for not filing or failure to file in a timely manner can be from $10,000 to $25,000.  Internal Revenue Service assesses the penalty if a tax return containing Form 5472 late-filed.

However, it must be noted that it is the corporation, not the individual owner or shareholder that files the form. As a result, any penalties will incur to the corporation.

In short, if your US company has a foreign owner or foreign shareholders then form 5472 required to file.

You can hire us to file your federal income tax return

Do you have more questions or do you want to file your taxes with us? Please feel free to contact us at info@delawarefile.com.