Form 5472 is an Informational return for a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation engaged in a U.S. trade or business. Under sections 6038A and 6038C, Form 5472 is to be filed if there are reportable transactions between the reporting corporation and any foreign or domestic related party.
Form 5472 is to be filed together with the reporting corporation’s Income Tax Return as an attachment, when the Corporate Tax Return or Form 1120 is due.
It is very important to know if you will be subjected to penalties, as the IRS will always want any reporting requirement to be filed correctly and on time. In connection, the IRS has automatic penalties for late and incomplete filing of Form 5472. The penalty for late and incomplete filing of Form 5472 before the taxable year 2018 is $10,000 per form, while it increased after that. The existing penalty for late and incomplete filing of Form 5472 is $25,000 per form, starting after tax year 2018. The penalty is per form, because each set of Form 5472 will need to be filed for every related party with reportable transaction for every tax year.
It is also important to note that if the related party is a U.S. person/company, the reportable transactions need not be reported on Part IV or Part VI of Form 5472.
The I-III above is the checklist to identify if the company is required to file Form 5472 in attachment to the Annual Federal Tax Return. However, there are still exceptions. The following instances exempt a reporting corporation from filing Form 5472:
*see the Form on https://www.irs.gov/pub/irs-pdf/f5472.pdf
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