In the past 2 years, most US business owners receive a civil penalty because they miss filing the 5472 Form. This fee is $10,000 and it’s a big deal to US business owners as non-US residents. If you received a civil penalty before, the IRS will waive your penalty for one time.

Basic understanding of 5472 Form and who must file?

– Reporting Corporation

A 25% foreign-owned U.S. corporation (including a foreign-owned U.S. DE), or A foreign corporation engaged in a trade or business within the United States.

– 25% foreign-owned

A corporation is 25% foreign owned if it has at least one direct or indirect 25% foreign shareholder at any time during the tax year.

– 25% foreign shareholder

Generally, a foreign person (defined later) is a 25% foreign shareholder if the person owns, directly or indirectly, at least 25% of either:

– Direct 25% foreign shareholder

A foreign person is a direct 25% foreign shareholder if it owns directly at least 25% of the stock of the reporting corporation by vote or value.

– Ultimate indirect 25% foreign shareholder

An ultimate indirect 25% foreign shareholder is a 25% foreign shareholder whose ownership of stock of the reporting corporation is not attributed (under the principles of section 958(a)(1) and (2)) to any other 25% foreign shareholder.

How about Disregarded entities? (DE)

Most of Delaware, Wyoming, and Florida business owners are classified as a Disregarded Entity. Basically, A DE is an entity that is disregarded as an entity separate from its owner for U.S. income tax purposes under Regulations sections 301.7701-2 and 301.7701-3. See the instructions for Form 8832.

When and Where To File

You can attach Form 5472 to the reporting corporation’s income tax return by the due date (including extensions) of the return. A separate Form 5472 must be filed for each foreign or domestic related party with which the reporting corporation had a reportable transaction during the tax year. If you need help with your tax return, you can do with us. Delaware Agency will help you hassle-free tax return regarding needs of Non-US Residents, Disregarded Entities and Foreign-owned Corporations.

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