This webinar provided tax advisers with a thorough and practical guide to completing Form 5472, focusing on the impact of IRS regulations requiring 5472 reporting by foreign owners of disregarded entities (DREs). The panel provided line-by-line guidance on completing the form, define difficult concepts, and discuss the impact of IRS rules expanding filing requirements.
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 one of the most complicated forms of all U.S. filing requirements for foreign companies since its inception. Initially, the reporting obligations applied to corporations only; however, IRS announced changes in 2016 that extend the reach of Form 5472 requirements to non-U.S. individuals owning DREs active in the U.S.
IRC 6038 requires “reporting corporations” to disclose specified “reportable transactions” it has with any “related parties” on Form 5472. Defining these elements is highly sophisticated, and tax advisers must have a thorough grasp of what constitutes each aspect to ensure that the taxpayer has met the record maintenance requirements to support its tax position for these transactions.
In response to scenarios in which foreign individuals were conducting business in the U.S. using DREs to avoid information reporting, the Service now requires foreign-owned single-member LLCs and other DREs to file Form 5472.
Foreign persons solely owning a U.S. domestic DRE, either directly or indirectly through attribution rules, must obtain necessary taxpayer identification numbers and disclose reportable transactions. Penalties for failing to file Form 5472 may reach $25,000 per failure, with complicated rules for penalty mitigation.
Listen as our experienced panel provides a thorough and practical guide to completing Form 5472, including key definitions and a discussion of the expanded filing requirements.
- Statutory provisions of IRC 6038A and 6038C
- Key definitions
- Reporting corporations
- Reportable transactions
- Related parties
- Regulations (TD 9796) requiring foreign-owned DREs to file Form 5472
- Completing the form
- Penalty abatement provisions
The panel discussed these and other important issues:
- What entities and individuals are subject to Form 5472 filing requirements?
- Identifying essential elements of IRC 6038A and 6038C to determine definitions of transactions to report
- Line-by-line guidance on completing Form 5472
- Steps that foreign individuals owning DREs operating in the U.S. must take to fulfill filing requirements
- Penalty abatement and mitigation provisions
Henry Stow Lovejoy, Counsel, Kostelanetz & Fink
John Samtoy, Tax Partner, Holthouse Carlin & Van Trigt
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