Frequently Asked Questions
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How to complete Form 5472
Form 5472 can seem confusing and complicated . Here’s what to put where:
Part I: Information about the LLC
All reporting LLCs must complete Part I of Form 5472. This covers the name, address, and EIN.
- The address can be a foreign address. (It will almost certainly be the same address you used on Form SS-4.)
- The address should be somewhere the IRS can send notices to the responsible party, a nominee or someone affiliated with the LLC.
- You must also provide a description of the LLC’s business activity and corresponding code. (You can find those in the instructions for Form 1120.)
- Typically, a foreign-owned LLC that is engaged in e-commerce activities such as amazon FBA, Dropshiping, eBay, shopify sales etc. may use “Electronic Shopping & Mail-Order Houses” description and code 454110 .
- Check Line 3 of Part I to show that your LLC is a foreign-owned disregarded entity.
- Lines 1F to 1L of Part I is relevant to your LLC. Check box “1j” if this is the first year for which the LLC is filing a Form 5472
- On the issue of LLC residency, the IRS released International Technical Assistance (ITA) 200019042, which clarified that a single-owner LLC is a disregarded entity separate from its owner for federal income tax purposes, the LLC is not a person for purposes of U.S income tax treaties. The IRS further stated that the income of the single-owner LLC is taxable in the hands of the single owner, and not in the hands of the LLC. The LLC is not liable to tax within the meaning of U.S income tax treaties, and even under the domestic law. Therefore an LLC owned by a foreign person cannot certify that the LLC is a resident of the United States.
- Also, Make sure to review the instructions and fill out any lines that do apply, especially if your LLC has had transactions with multiple Related Parties.
Part II: Information about the Foreign Owner
Now you’ll need to complete Part II with the name and address of the LLC’s single foreign owner. This foreign owner may be:
- an individual who is not a citizen or resident of the United States,
- a company, association, partnership, or corporation that isn’t created or organized in the U.S., or
- a foreign estate or foreign trust.
If you don’t have a U.S. Tax Identification Number, you don’t have to enter one. However, the form may include your foreign Tax Identification Number. If you don’t have even a foreign Tax Identification Number, then just put “none” or “n/a” on Line 1(b)(3). But that’s only if you really don’t have one at all.
If you enter anything other than a U.S. Tax Identification Number, you’ll also need to enter a Reference Identification Number. That’s a number you come up with yourself. You don’t have to apply to the IRS for it.
This Reference Identification Number must:
- be 50 characters or less, and
- include only letters or numbers, no special characters or spaces.
You’ll have to use the Reference Identification Number every year, so be sure to write it down somewhere for next year.
Part III: Information about the “Related Party”
Next up, you have to complete Part III. Part III deals with the “Related Party” the LLC had reportable transactions with during the tax year. In most cases, that will be the foreign owner. Related Party can also be a U.S person, the completion of part III is mandatory.
However, the definition of Related Party is broad. For example:
- If a single member LLC is owned by a foreign company, a Related Party might be another company in the same controlled group.
- If an LLC is owned by a foreign trust, it might be the trust’s beneficiary and settlor.
- If an LLC is owned by a foreign individual, Responsible Parties might even include members of that individual’s family.
With that in mind, here’s what you have to do:
- Enter the name and address of the Related Party (Whether domestic or foreign) the LLC had reportable transactions with during the tax year, including the foreign owner already reported in Part II. Again, if the Related Party doesn’t have a U.S. Tax Identification Number, you’ll need to enter a Reference Identification Number.
- If the Related Party is an individual, you can ignore any references to business activity.
- Part III also requires the name of the country under whose laws the Related Party files income tax returns as a resident.
Note: You must file a separate Form 5472 for every Related Party the LLC had a reportable transaction with.
Parts IV, V and VI: Information about Reportable Transactions
Part IV is where you’ll list primary transactions.
Note: Most transactions listed on Part IV may not be applicable to a foreign owned disregarded entity. Next, you’ll have to check a box in Part V if the LLC has had any transactions with its owner or other Related Parties that are not listed in Part IV.
Part V request for ANY amounts paid or received in connection with the formation, dissolution, acquisition, and disposition of the entity, including contributions to and distributions from the LLC.
Part VI asks whether the LLC conducted any less-then-full or non-monetary transactions. If the answer is yes, you’ll have to detail those on an attached statement.
Part VII: Additional Information
Last, you’ll have to fill out Part VII. For the most part, you’ll just be checking “no,” but it’s important, nonetheless.