The Form 5472 penalty is $25,000 for each form not filed, for each tax year, with no statutory maximum — and an additional $25,000 for every 30-day period the failure continues more than 90 days after the IRS notifies you. It applies to any 25% foreign-owned US corporation and, since tax years beginning on or after 1 January 2017, to every foreign-owned US disregarded entity, including the single-member LLC that thousands of UK residents formed in Delaware or Wyoming and then forgot about.
The detail that makes this the most expensive filing most people have never heard of: there is no income threshold and no activity threshold. An LLC that made no sales, held no bank account and did nothing whatsoever still has a reportable transaction in the year it was formed — and again in the year it is dissolved. Zero revenue does not mean zero filing, and zero filing means $25,000.
Who actually has to file Form 5472
Two categories of entity are "reporting corporations" in the ordinary sense: a US corporation that is at least 25% foreign-owned, and a foreign corporation engaged in a US trade or business. Both file Form 5472 when they have a reportable transaction with a related party.
The third category is the one that catches individuals rather than groups. A domestic disregarded entity that is wholly owned by a foreign person is treated as a corporation solely for these reporting rules. In plain terms: a US single-member LLC with one non-US owner is invisible for income tax and highly visible for information reporting.
For a UK-resident owner, this typically means a Delaware, Wyoming or Florida LLC formed to hold a US rental property, to invoice American clients, to run an Amazon or Shopify storefront, or simply because a US customer asked for a US entity. None of those need to generate profit for the obligation to bite.
- US corporation with a single foreign shareholder holding 25% or more of vote or value.
- US single-member LLC whose sole member is a non-US individual, company, partnership or trust.
- US single-member LLC owned by a US-citizen spouse and a non-US spouse in a way that leaves a foreign person as sole member of a separate LLC.
- Foreign corporation engaged in a US trade or business with related-party transactions.
- Dormant entities with no income, no employees and no bank activity — formation and dissolution are themselves reportable.
The pro forma Form 1120: a tax return that reports no tax
A disregarded entity has no income tax return of its own, so the IRS needed a vehicle to carry the Form 5472. The answer is a pro forma Form 1120 — a corporation return completed almost entirely blank. Per the IRS Instructions for Form 5472, only the entity's name and address and items B and E on the first page need to be completed, with "Foreign-owned U.S. DE" written across the top.
Everything else on that 1120 stays empty. No income, no deductions, no tax computation. The form exists purely as an envelope. This is precisely why so many owners are told by generic company-formation services that a dormant LLC "has no US filing" — technically it has no US income tax liability, which is a different statement entirely.
The pro forma 1120 does not create a corporate tax charge, and it does not change the entity's disregarded status for income tax. It is an information filing that happens to travel on a corporate form.
What counts as a reportable transaction (and why 'none' is almost never the answer)
For an ordinary reporting corporation, reportable transactions are the familiar related-party items: sales, rents, royalties, interest, commissions, loans and services between the US entity and its foreign related parties.
For a foreign-owned disregarded entity the definition is deliberately broader. It captures "any other transaction" with a related party, expressly including amounts paid or received in connection with the formation, dissolution, acquisition and disposition of the entity — and contributions to, and distributions from, the entity.
So the year you form the LLC, the formation itself is reportable. The year you put money in to cover the registered agent fee, that contribution is reportable. The year you take money out, that distribution is reportable. The year you dissolve it, the dissolution is reportable. A genuinely transaction-free year is rare, and where one exists the safer course is still to file, because the cost of an unnecessary filing is an hour of admin and the cost of a missed one is $25,000.
You cannot e-file it, and that changes your process
A foreign-owned US disregarded entity cannot file Form 5472 electronically. The IRS accepts only two routes: fax to 855-887-7737, or post to Internal Revenue Service, 1973 Rulon White Blvd, M/S 6112, Attn: PIN Unit, Ogden, UT 84201.
This matters more than it sounds. Ordinary tax software will not transmit the filing, so an owner who "filed everything through the software" has not filed this. There is no e-file acknowledgement, so there is no automatic proof of filing. And international post to Ogden is slow and occasionally lost.
Fax is the pragmatic choice, at 300 DPI or higher, with the transmission report retained. Where the return is posted, use a tracked service and keep the proof of posting — it is the evidence base for a reasonable cause argument later, and it is far easier to keep it now than to reconstruct it in three years.
Deadlines, extensions and the EIN problem
The pro forma Form 1120 with Form 5472 attached is due by the due date of that return — 15 April for a calendar-year entity — with a six-month extension available on Form 7004, which must itself be filed by the original due date and sent to the same dedicated address.
The entity needs an EIN before it can file, and it must have a responsible party with a US taxpayer identification number or, where none exists, apply on Form SS-4 by fax or post. UK-resident owners without an SSN or ITIN routinely find this step takes weeks, which is a strong argument for extending rather than sprinting.
Where the LLC is genuinely late for several years, each year is a separate form and a separate $25,000 exposure. A five-year gap on a dormant LLC is a $125,000 headline number before continuation penalties, which is why this is a problem to fix deliberately rather than quietly.
How the Form 5472 penalty escalates after 90 days
The initial penalty under section 6038A(d) is $25,000 per form per year, assessed on failure to file when due or failure to maintain the required records. That is the number everyone knows.
The number that turns an expensive problem into an unmanageable one is the continuation penalty. If the failure continues more than 90 days after the IRS notifies the entity, an additional $25,000 applies for each 30-day period, or part of a period, that it continues. There is no cap. A notified failure left unattended for a year compounds well past the original assessment.
The practical lesson is about the calendar, not the law: the 90-day clock starts on IRS notification, so the worst possible response to a 5472 notice arriving at a UK address is to leave it in a pile while you find an adviser. Acknowledge it, get representation on file, and file the delinquent forms inside the window.
Where the LLC also generated US tax that went unpaid, ordinary failure-to-file and failure-to-pay penalties run alongside the 5472 exposure — you can size that separate layer in our US late filing penalty calculator.
Record-keeping is a separate obligation with the same penalty
Section 6038A also requires a reporting corporation to keep permanent books and records sufficient to establish the correct treatment of related-party transactions, and to be able to produce them. Failure to maintain those records carries the same $25,000 penalty as failure to file.
For a small LLC this is not onerous, but it is not nothing: keep the formation documents, the operating agreement, the bank statements, a simple ledger of member contributions and distributions with dates and amounts, and any invoices between the LLC and its owner or the owner's other companies.
Where the LLC transacts with a UK company the same person controls, keep something evidencing that the pricing is commercial. That is where an information-reporting question quietly becomes a transfer-pricing question.
Fixing a missed year: reasonable cause, not first-time abatement
The instinctive first move — request First Time Abate — usually does not work here. FTA operates by reference to a related penalty on the underlying income tax return, and a pro forma Form 1120 for a disregarded entity carries no failure-to-file penalty to abate, because there is no tax. The realistic route is reasonable cause.
Reasonable cause means showing you exercised ordinary business care and prudence and were nevertheless unable to comply. It is a facts-and-circumstances test, made in writing, and it is significantly stronger when the delinquent forms are filed voluntarily before the IRS makes contact than after a notice arrives.
A credible statement is specific: when the entity was formed and by whom, what advice was given and by which adviser, what the owner reasonably believed and why, when the error was discovered and what was done immediately afterwards. A weak statement is generic — "I was not aware of the requirement" standing alone rarely succeeds.
- File the delinquent pro forma 1120 and Form 5472 for every affected year, each year separately.
- Attach a dated, signed reasonable cause statement to each year rather than one covering letter for all of them.
- Write "Foreign-owned U.S. DE" across the top of each pro forma 1120.
- Fax and keep the confirmation, or post tracked and keep the receipt.
- Put a Form 2848 power of attorney in place so an Enrolled Agent can respond to correspondence sent to a US address.
Form 5472 is not Form 5471 — and the direction matters
The two forms are one digit and one direction apart, and confusing them wastes a great deal of money. Form 5471 is filed by a US person who owns a foreign corporation — the American in London who owns a UK limited company. Form 5472 is filed by a US entity that has foreign owners — the UK resident who owns a Delaware LLC.
If you are a US citizen resident in the UK with a British company, your problem is the one covered in our guide to Form 5471 for Americans with UK companies, together with the income inclusion rules discussed in our piece on the section 962 election.
If you are a UK resident with a US LLC, this article is your problem. And if you are a dual filer with both — an American in London who owns a UK company and a US LLC — you have both, on the same 15 April, and they are prepared by different rules.
The tax you may still owe underneath the information return
Form 5472 is an information return, not a tax computation, but filing it often surfaces a substantive liability that was also missed. A non-US owner whose LLC is engaged in a US trade or business has effectively connected income and needs a Form 1040-NR. An LLC receiving US-source rents may need a section 871(d) election to be taxed on a net basis rather than 30% of gross.
For a UK resident, the US-UK treaty usually determines whether business profits are taxable in the US at all — broadly, only where there is a permanent establishment. A single-member LLC with no US office, no US staff and no dependent agent frequently has no permanent establishment, which is why so many owners genuinely owe nothing and still owe the filing.
The order of operations matters: establish the treaty position first, then file the information returns consistently with it. Filing a 5472 that contradicts the position you intend to take on a treaty-based return is an avoidable problem.
What to do if you think this applies to you
Start with three questions. Was the LLC formed in the US? Is its sole member a non-US person? Has it existed in any tax year beginning on or after 1 January 2017? Three yeses mean a filing obligation for every year since formation, whether or not the entity ever traded.
Then check what was actually filed rather than what you were told. Ask your formation agent for copies of any Form 5472 and pro forma 1120, with the fax confirmation or posting receipt. "It is all handled" is not a filing record, and registered-agent packages very often exclude federal information returns entirely.
TaxStone handles delinquent Form 5472 packages for UK-resident LLC owners, including the reasonable cause statements and the treaty analysis that sits underneath them. If you have an LLC you are unsure about, contact us with the formation date and the state, and we will tell you how many years are open.
