Form 5472: The $25,000 Mistake Foreign Business Owners Keep Making

Many foreign entrepreneurs set up a U.S. single-member LLC thinking they won’t owe the IRS anything if they don’t make a profit. But even if your LLC has zero income, the IRS still expects paperwork. Miss it, and you could be facing a $25,000 penalty—per year.

One of the biggest mistakes foreign business owners make is assuming they don’t need to file Form 5472 if the LLC had no activity. That’s not how the IRS sees it.

If your LLC is foreign-owned, you likely need to file Form 5472 along with a pro forma Form 1120 every year. This isn’t about paying taxes, it’s about reporting. Even if you only transferred money into the LLC or covered an expense, that counts as a reportable transaction under IRS rules.

How to Stay Compliant and Avoid the Penalty

• Know the deadline – Form 5472 is due with your U.S. tax return by April 15 (or October 15 with an extension).

• File even if the LLC had no income – The IRS still requires reporting for foreign-owned U.S. LLCs.

• Reportable transactions matter – If the LLC received or spent any money, that likely needs to be reported.

If you’re not sure whether you need to file, this isn’t something to guess on. The penalties are steep, and the IRS is enforcing them more aggressively.

At Big Cake Tax, we specialize in helping foreign entrepreneurs stay compliant, avoid penalties, and keep more of their money.

Need to file Form 5472? Let us handle it for you. Book a consultation today.