Own a US LLC from abroad? What Form 5472 means for you as a developer

A lot of non-US developers end up with a US single-member LLC. It makes Stripe easier, it gives app store payouts and B2B invoices a US home, and the formation services make it a 20-minute job. What they mostly don't mention is the yearly IRS filing that comes with it: Form 5472, attached to a pro forma Form 1120.

This post covers what that filing is, which of your everyday money moves trigger it, when it's due, what happens if you miss it, and how to keep records so filing season is boring. It's general information, not tax advice. Your own facts decide the answer, so talk to a tax professional about your situation.

Who has to file

The rule sits in Treasury Regulation §1.6038A-1. For tax years beginning on or after 1 January 2017 and ending on or after 13 December 2017, a foreign-owned US disregarded entity is treated as a corporation separate from its owner, solely for the §6038A reporting rules.

In practice, your LLC files when all three of these are true:

1. It's a single-member LLC treated as a disregarded entity for US tax (you haven't elected corporate tax treatment).
2. Its owner is a foreign person, which is you if you're not a US person.
3. It had at least one reportable transaction with you, or another foreign related party, during the year.

This is an information return. It has nothing to do with whether the LLC made money or owes US income tax. A loss year, or a year with zero revenue, can still need a filing. The IRS Instructions for Form 5472 only excuse a foreign-owned disregarded entity for a year with no reportable transactions of the types listed in Parts IV, V and VI.

If you aren't sure whether you're covered, the free Do I need to file Form 5472? checker walks through the conditions in a few questions.

What counts as a reportable transaction (it's more than you think)

Condition 3 catches a lot of developers off guard. The useful way to think about it is who is on the other side of the money.

Usually reportable (you or a related party on the other side):

• Funding the LLC. Moving personal savings into the LLC's bank account, including a small opening deposit. The rules set no minimum.
• Paying yourself. Owner draws, profit distributions, or moving money to your personal account. For income tax you and the LLC are otherwise treated as one taxpayer, but for Form 5472 this is still reportable.
• The LLC paying your personal expenses, such as rent, travel or a personal card bill.
• LLC costs you paid personally: the state fee, the registered agent, or that domain, hosting plan, IDE licence or developer-programme fee you put on your own card.
• Reimbursements from the LLC to you for those costs.
• Loans in either direction, plus repayments and interest.
• Non-cash property you put in, such as equipment, crypto, a domain name or other IP.
• Dealings with another company you own, or with close family.

Not reportable (an unrelated party on the other side):

• Customers paying the LLC through Stripe, PayPal or client invoices.
• App Store and Google Play payouts into the LLC's own account. The gross sales, the store's commission and the net deposit are all outside Form 5472.
• The LLC paying unrelated vendors or contractors from its own account.

A typical first year for an indie SaaS LLC has at least two reportable items: the money you sent in to get going, and the first withdrawal once revenue arrived. On the form, capital contributions, distributions and most owner-to-LLC payments go in Part V, described on an attached statement.

To sort your own year, tick through the 16 transaction types in the free reportable-transactions checker. It says where each one goes on the form and cites the regulation behind it.

Deadline and extension

For a calendar-year LLC, the pro forma Form 1120 with Form 5472 attached is due 15 April of the following year. More generally it's due on the 15th day of the 4th month after the tax year ends, moved to the next business day if that date falls on a weekend or holiday.

You can get six more months, to 15 October, by filing Form 7004 before the original due date. Two catches:

• The extension has to be filed by the original deadline. A Form 7004 filed late doesn't extend anything.
• It extends the time to file, not the time to pay. A foreign-owned DE's pro forma 1120 normally reports no tax, though.

The filing method also differs from what you might expect. According to the IRS instructions, a foreign-owned US DE can't e-file Form 5472. The package goes by fax or mail to the IRS Ogden PIN Unit (the instructions list the fax number and mailing address). A fax transmission receipt proves the fax was sent. It is not an IRS acceptance.

If your tax year doesn't end on 31 December, or you want to see the extended date, the free Form 5472 deadline calculator works it out.

The penalty risk

This is why the form matters. Under IRC §6038A(d):

• The penalty is $25,000 for each Form 5472 not filed when due and in the manner prescribed, or for failing to keep the required records.
• A substantially incomplete Form 5472 counts as not filed.
• If the failure continues for more than 90 days after the IRS mails a notice, another $25,000 applies for each 30-day period, or part of one. The statute sets no cap.

Because the penalty is for missing information, not unpaid tax, it can hit an LLC that owes no US income tax at all. Three missed years for one LLC means $75,000 in initial penalties before any continuation amounts.

The free Form 5472 penalty calculator estimates the statutory exposure year by year. If you've already missed a year, don't wait for a notice. Look at the IRS Delinquent International Information Return Submission Procedures, which the IRS directs people to when they haven't been contacted and aren't under examination. That page also says penalties may still be assessed.

Practical record-keeping for developers

The regulation expects you to keep records that support the return, and failing to keep them is itself penalised. A setup that makes filing easy:

• Keep the LLC's money in the LLC's name. Point the Stripe account, app store payout details and bank account at the LLC. If a platform pays you personally and you forward the money, that forward is an owner transaction.
• Pay LLC costs from the LLC's account. Every SaaS subscription on your personal card becomes a line item you have to report.
• Tag owner transfers when they happen. A contribution, distribution, loan or reimbursement label in your bookkeeping tool (or a plain CSV) takes seconds and saves hours later.
• Write down year-end total assets. The pro forma 1120 asks for it.
• Convert foreign-currency amounts to USD and note the rate you used. Form 5472 amounts are in US dollars. The IRS publishes yearly average currency exchange rates, and the free IRS yearly average exchange rates converter applies them for you.
• Keep the basics in one place: the LLC name, EIN, US address, formation date, NAICS code, and your foreign tax ID, residential address, citizenship and tax residence. These are the identity fields the forms ask for.
• Archive the filed package and its fax receipt with that year's records.

TL;DR

• A foreign-owned US single-member LLC files Form 5472 with a pro forma 1120 for any year with a reportable transaction, even without income.
• Funding the LLC, paying yourself, and LLC bills you pay personally all count. Customer revenue and payments to unrelated vendors don't.
• It's due 15 April for calendar-year LLCs, or 15 October with a Form 7004 filed on time. It's sent by fax or mail, not e-filed.
• The penalty is $25,000 per missed form, plus continuation penalties after an IRS notice.

Disclosure: I work on Form5472 Prep, a done-for-you service that prepares and faxes Form 5472 with the pro forma 1120 for foreign-owned single-member LLCs. The tools linked above are free and need no account. This post is general information, not tax advice.