Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. trade or Business, is an informational return submitted to the Internal Revenue Service annually, most frequently by a US corporation with significant foreign ownership and which has transactions with foreign related parties. Form 5472 is submitted as part of the US corporate tax return and is, generally, not filed separately. The foreign ownership threshold for filing this form is a direct or indirect ownership interest of at least twenty-five percent at any time during the tax year. Additionally, starting with calendar year 2017, foreign owned US Disregarded Entities also have to file Form 5472 separately, see our article on this topic here.
Due to the Tax Cuts and Jobs Act (TCJA), the penalty for not filing, failure to file in a timely manner, and to maintain records relating to Form 5472 has increased from $10,000 to $25,000. This penalty is often automatically assessed by the Internal Revenue Service if a tax return containing Form 5472 is filed late. Additionally, the penalty will be assessed independently of any other penalties that may be imposed for the late filing of the primary tax return.
The increase in penalty is effective for tax years beginning after December 31, 2017. As the 2019 filing season (for 2018 tax returns) is upon us, taxpayers must ensure that they have adequate records and information to timely prepare Form 5472 and keep proof of the timely filing of the returns to avoid assessment of the penalty.
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