In the last two years, many U.S. business owners have faced civil penalties for failing to file Form 5472. This penalty amounts to $10,000, which is significant for non-U.S. resident business owners. If you’ve previously received a penalty, the IRS may waive it once.
Understanding Form 5472 and Filing Requirements
What Is a Reporting Corporation?
•A U.S. corporation with 25% foreign ownership (including foreign-owned U.S. Disregarded Entities).
•A foreign corporation engaged in business within the U.S.
What Does 25% Foreign-Owned Mean?
A corporation is considered 25% foreign-owned if it has at least one direct or indirect 25% foreign shareholder during the tax year.
Who Is a 25% Foreign Shareholder?
A foreign individual or entity that owns, directly or indirectly, at least 25% of the corporation’s stock by vote or value.
Direct 25% Foreign Shareholder
A foreign individual who directly owns at least 25% of the corporation’s stock.
Ultimate Indirect 25% Foreign Shareholder
A foreign shareholder whose stock ownership is not attributed to any other 25% foreign shareholder under the principles of section 958(a)(1) and (2).
Disregarded Entities (DE)
Many businesses in Delaware, Wyoming, and Florida are classified as Disregarded Entities. A DE is an entity that is not considered separate from its owner for U.S. income tax purposes, per Regulations sections 301.7701-2 and 301.7701-3. See Form 8832 instructions for more details.
Filing Details: When and Where
Attach Form 5472 to the reporting corporation’s income tax return by its due date (including extensions). You must file a separate Form 5472 for each foreign or domestic related party involved in a reportable transaction during the tax year. If you need assistance with your tax return, Delaware Agency provides hassle-free services for non-U.S. residents, Disregarded Entities, and Foreign-owned Corporations.
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