Five Years of Missing Forms 5472: How We Helped a Foreign Owner Catch Up

His U.S. LLC had been operating since it was formed. He had never heard of Form 5472.

The client's situation

The client lives in Central America and runs a small marketing agency. Five years earlier he formed a U.S. LLC so that American clients could pay him more easily. Revenue moved through the LLC's U.S. bank account and most of it was transferred to his personal account abroad. His home-country accountant reported the income locally, and he assumed that was all that was needed.

What went wrong

No one on either side had looked at the U.S. reporting. The LLC was a foreign-owned single-member entity, so every year it had reportable transactions with its owner — at a minimum, the regular transfers from the LLC to his personal account, which are distributions.

The tax or reporting requirement

Each year required a separate pro forma Form 1120 with Form 5472. Each form had to report the year's transactions with the owner: contributions, distributions, any expenses he paid personally and any loans. We also needed to confirm whether the agency's income was effectively connected with a U.S. trade or business, which would mean a personal Form 1040-NR — a separate question from Form 5472.

The potential IRS exposure

Five missed years meant five separate forms, each with potential $25,000 penalty exposure — up to $125,000 before any continuation penalties. In addition, when a required Form 5472 is not filed, the statute of limitations for the related return can stay open, so those years were never "closed."

How Chirino USA analyzed the situation

We first confirmed that the IRS had not contacted the LLC and that it was not under examination, which kept the voluntary correction procedures available. We then rebuilt five years of transactions from bank statements, invoices and transfer records, separating owner contributions, distributions and owner-paid expenses.

On the income question, the services were performed entirely by the owner outside the United States, with no U.S. office, employees or agents. Based on those facts, the income was not effectively connected U.S. business income, so no Form 1040-NR was required for those years.

How we addressed the issue

We prepared all five years of pro forma Forms 1120 and Forms 5472 and filed them together, each with a detailed reasonable cause statement signed under penalties of perjury. The statements explained the owner's background, his reliance on his home-country accountant, the absence of any U.S. tax due, and his prompt action once he learned of the requirement. The current year was filed on time with an extension.

The result

All five years are now on file and the LLC is current. Because the filings were made voluntarily, with complete forms and supporting explanations, the client is in a far stronger position than if the IRS had found the issue first. If a penalty notice is issued for any of those years, the explanation is already part of the record and a formal response can follow.

What other taxpayers in similar situations should know

• Missing years do not get better with time — the exposure grows and the limitations period stays open.
• Each year is a separate filing with its own potential penalty.
• Being contacted by the IRS first can narrow your options, so acting early matters.
• Your home-country accountant may not be looking at U.S. reporting at all.

How Chirino USA can help

If you own a U.S. company from outside the United States and are concerned about a missing or incorrect Form 5472, Chirino USA Accountants & Advisors can review your filings, identify potential exposure, and help determine the appropriate path forward. You can email us or message us on WhatsApp, in English or Spanish.

Sources and official references

• IRS — About Form 5472
• IRS — Instructions for Form 5472
• eCFR — Treas. Reg. §1.6038A-1 (foreign-owned disregarded entities)
• eCFR — Treas. Reg. §1.6038A-4 (penalties and reasonable cause)