We Discovered Multiple Missing Forms 5472 Before the IRS Issued a Penalty Notice

In the first document request, we asked whether he owned any U.S. entities. He did — and that LLC had never filed Form 5472.

The client's situation

The client lives in Mexico and earns U.S. rental income from a property he owns personally. Three years earlier he had also formed a U.S. LLC to hold a second property he planned to buy. The purchase was still pending, but he had funded the LLC, paid an attorney and covered the annual fees.

What went wrong

His previous preparer handled only the personal return and never asked about entities. The LLC had three years of reportable transactions — the funding, the attorney's fees and the annual fees — and no filings.

The tax or reporting requirement

A foreign-owned U.S. single-member LLC must file a pro forma Form 1120 with Form 5472 for each year with reportable transactions involving its foreign owner. Owner contributions and expenses the owner pays on the LLC's behalf are reportable, even when the company has no operations.

The potential IRS exposure

Three missing years meant potential exposure of $75,000 before any continuation penalties. Because the IRS had not yet contacted the LLC, the client still had the full range of voluntary options available.

How Chirino USA analyzed the situation

Timing was the key fact. Correcting a problem before the IRS raises it generally puts a taxpayer in a stronger position than responding to a notice. We confirmed there had been no IRS contact and no examination, then rebuilt each year's transactions from bank and attorney records.

How we addressed the issue

We filed all three late years of pro forma Forms 1120 and Forms 5472 together, each with a reasonable cause statement, following the IRS procedures for delinquent international information returns. We filed the personal return at the same time, so that both the individual and the entity were fully current.

The result

The client's U.S. filings are now complete and consistent. A late filing can still result in a penalty notice, but the explanation is already on file, and the client is responding from a position of voluntary compliance rather than reacting to an IRS discovery.

What other taxpayers in similar situations should know

• If your preparer never asked whether you own a U.S. entity, ask the question yourself.
• Voluntary correction before IRS contact generally leaves more options open.
• Personal returns and entity filings should be reviewed together.
• A pending investment can still create reportable transactions.

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)