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Form 5472: the $25,000 penalty foreign founders don't know about

Form 5472 reports a foreign-owned US company's dealings with its owner, and a missing one costs $25,000. Here is who files, when, and how to fix a miss.

Vishant Mehta, CPA, Ex-Big 4

Published November 2, 2026

startups
Form 5472
foreign founders
foreign-owned LLC
Form 1120
penalties

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Form 5472 is the IRS information return a US company files to report its dealings with a foreign owner and other related parties. It applies when one foreign person owns at least 25% of a US corporation, or all of a US single-member LLC.

A form is needed for each related party the company dealt with that year. A missing one costs $25,000 per year, even when no tax is due. For calendar year 2026, the form is due with the company's Form 1120 on April 15, 2027.

What it reports	Dealings with related parties
Who files	25% foreign-owned US companies
Foreign-owned LLC	Files it with a pro forma Form 1120
Due for 2026	April 15, 2027
With Form 7004	October 15, 2027
Penalty	$25,000 per related party, per year
After an IRS notice	$25,000 more per 30 days, after 90 days
Rules checked	November 2, 2026

What is the purpose of Form 5472?

Form 5472 reports a foreign-owned company's transactions with related parties, so the IRS can check how they are taxed. Section 6038A of the tax code requires it from three kinds of company.

A US corporation that is 25% foreign-owned. One foreign person owns at least 25% of its vote or value at any time in the year. Shares that person holds through family or other companies count.
A US single-member LLC with a foreign owner. The LLC is normally ignored for income tax. For Form 5472, it is treated as a US corporation.
A foreign corporation with a US trade or business. Section 6038C applies the same rules, and it attaches the form to its Form 1120-F.

The test looks at one foreign person at a time. Two unrelated foreign owners with 15% each do not make a company 25% foreign-owned.

Which transactions go on Form 5472?

A reportable transaction is almost any payment or transfer between the company and a related party. Related parties include the 25% foreign owner, people and companies related to that owner or the company, and others under common control.

Sales and purchases of goods and other property.
Rents, royalties and payments for intangible property, such as software or a trademark.
Fees for services, and commissions.
Loans in either direction, and the interest on them.
For a foreign-owned single-member LLC only: the owner's capital contributions and distributions, and payments to form or close the LLC.

That last item catches most new LLCs. Money the owner puts in, even just to open the bank account, counts, so an LLC with no revenue usually still files.

Each related party with a reportable transaction gets its own Form 5472. A company with no reportable transactions in the year files none.

When should I file Form 5472?

File Form 5472 with the company's income tax return, by that return's due date, including extensions. For a calendar-year company, the 2026 forms are due April 15, 2027.

A US corporation attaches it to its Form 1120. Question 7 on Schedule K asks whether one foreign person owned 25% or more.
A foreign-owned single-member LLC files a pro forma Form 1120 as a cover. Only the name, address and items B and E are filled in, with "Foreign-owned U.S. DE" written across the top.
The LLC cannot file electronically. It faxes both forms to 855-887-7737, or mails them to the IRS in Ogden, Utah.
The LLC uses its owner's US tax year, or the calendar year if the owner has no US filing requirement.

Tax year	Due date	With Form 7004
2025	April 15, 2026	October 15, 2026
2026	April 15, 2027	October 15, 2027

Form 7004, filed by the April due date, gives six more months. A foreign-owned LLC faxes or mails it the same way.

What is the penalty for not filing a Form 5472?

The penalty is $25,000 for each year a required form is not filed, for each related party. A substantially incomplete form counts as not filed. The penalty applies even when the company owes no income tax.

If the form is still missing 90 days after an IRS notice, $25,000 more is due for each 30 days or part of that. The law sets no maximum.

A foreign owner put $5,000 into a US single-member LLC in 2025. That contribution is a reportable transaction.
No pro forma Form 1120 and Form 5472 were filed by April 15, 2026. The penalty is $25,000.
The IRS mails a notice. The forms arrive 100 days after its 90-day window ends, which is 4 periods of 30 days or part.
That adds 4 times $25,000, or $100,000, for a total of $125,000.

A missing form has a second cost. Until the form is filed, the IRS's normal three-year window to assess tax for that year stays open. It closes no earlier than 3 years after the form arrives.

What if you already missed a Form 5472?

File the missing forms now, with a statement explaining why they were late. The penalty can be excused for reasonable cause and good faith, shown in a written statement signed under penalties of perjury.

The regulation tells the IRS to apply reasonable cause liberally to a small corporation that did not know of the rule. It must have gross receipts of $20 million or less and limited contact with the US, and cooperate promptly with the IRS.

What should you do now?

Check whether one foreign person owned 25% or more of your company at any time in 2026.
List every payment and transfer between the company and its owner or related companies, including money put into an LLC.
Put April 15, 2027 in your calendar, and file Form 7004 by then if you need until October 15, 2027.
If you run a foreign-owned LLC, fax or mail its forms, and keep the fax confirmation or mailing receipt.
If you missed an earlier year, file it with a reasonable cause statement before the IRS contacts you.

For returns and advice from founding to exit, see our startup accountant service.

Sources.