Form 5472 & Form 1120 for Foreign-Owned US LLCs: IRC § 6038A & Surviving the $25,000 IRS Penalty

For 2026, a foreign-owned single-member LLC must file Form 5472 attached to a pro-forma Form 1120 by April 15 — October 15 with a Form 7004 extension — even if the LLC earned $0 in the US. Missing the filing triggers a flat $25,000 penalty per form per year under IRC § 6038A, with no de minimis exception. The rest of this guide walks the deadline, the extension, and the line-by-line filing sequence.

For non-resident entrepreneurs, international developers, and foreign digital operators, forming a Single-Member Limited Liability Company (SMLLC) in Delaware or Wyoming is the default entry point into the United States economy. Because a single-member LLC is a "disregarded entity" for federal tax purposes, founders frequently assume that if they have no US physical presence and no Effectively Connected Income (ECI), they owe zero tax and have zero reporting obligations.

This assumption is a catastrophic multi-thousand-dollar trap. Under Treasury Decision 9796 and IRC § 6038A, foreign-owned disregarded entities are statutorily treated as domestic corporations for information reporting purposes.

Failing to submit Form 5472 attached to a pro-forma Form 1120 triggers an automated, non-negotiable $25,000 statutory penalty under 26 U.S.C. § 6038A(d).

This guide covers the LLC side only. If you are a US person holding shares in a foreign corporation rather than owning a US LLC, the reporting form is Form 5471 — see our IRS Form 5471 foreign corporation reporting playbook.

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1. The Statutory Architecture: TD 9796 & Treas. Reg. § 1.6038A-1

Under historical regulations, disregarded entities had no tax return filing obligations. In 2017, the Treasury Department promulgated T.D. 9796, amending Treas. Reg. § 301.7701-2(c)(2)(vi):

```

┌───────────────────────────────────────────────┐

│ FOREIGN BENEFICIAL OWNER (100%) │

│ (Non-US Citizen / Non-Resident) │

└──────────────────────┬────────────────────────┘

│

▼ (100% Membership)

┌───────────────────────────────────────────────┐

│ DOMESTIC US LLC (Disregarded) │

│ Formed in Delaware / Wyoming │

└──────────────────────┬────────────────────────┘

│

▼

┌───────────────────────────────────────────────┐

│ STATUTORY IRS FILING REQUIREMENTS │

├───────────────────────────────────────────────┤

│ 1. Form 1120 (Pro-Forma: Name, EIN, Address) │

│ 2. Form 5472 (Information Return attached) │

│ 3. Form 5472 Part IV (Reportable Transactions│

└───────────────────────────────────────────────┘

```

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2. Reportable Transactions: The Broad Catch-All

Under Treas. Reg. § 1.6038A-2, a reporting corporation must disclose all Reportable Transactions between the LLC and the 25% foreign shareholder or related parties:

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Even if the only transaction in the entire calendar year was the founder paying a $100 state filing fee from their personal pocket, that constitutes a capital contribution and must be reported on Form 5472.

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3. The $25,000 Penalty Calculus & Continued Failure Assessments

Under IRC § 6038A(d), the penalty for failing to furnish information on Form 5472 is mathematically relentless:

```

[April 15: Missed Filing] ───> Automatic $25,000 penalty assessed under IRC § 6038A(d)(1).

│

[IRS Issues Notice CP 215] ──> 90-day statutory grace period starts.

│

[Day 91: Still Unfiled] ────> Additional $25,000 penalty assessed!

│

[Day 121: Still Unfiled] ───> Additional $25,000 penalty assessed (Accumulates monthly!)

```

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4. Complete Filing Protocol: The Pro-Forma Form 1120

Because a disregarded entity has no corporate income tax liability, the IRS mandates a specialized pro-forma Form 1120:

• [x] Phase 1: Header Completion Only: Enter the LLC’s legal name, US address, and Employer Identification Number (EIN) at the top of Form 1120. Check Box "Foreign-owned domestic disregarded entity".
• [x] Phase 2: Leave Income Lines Completely Blank: Do NOT fill in income, deductions, or tax computation lines on Form 1120; write "$0" or leave blank pursuant to IRS instructions.
• [x] Phase 3: Form 5472 Direct Attachment: Complete Form 5472 detailing:
• Part I: Reporting Corporation information.
• Part II: 25% Foreign Shareholder information (Passport number, country of citizenship, address).
• Part III: Related Party details.
• Part IV: Exact dollar values of all reportable transactions during the tax year.
• [x] Phase 4: Physical Wet Signature Execution: The foreign managing member must sign and date the Form 1120 under penalties of perjury.
• [x] Phase 5: Fax Submission to IRS Ogden Service Center: Transmit the complete packet via fax to +1 855-887-7734 (the specialized IRS Ogden Disregarded Entity processing line). Retain the certified fax transmission confirmation page.

5. The Penalty Escalation Ledger

Section 3 states the formula; the ledger below follows the timeline diagram in §3 — the first additional $25,000 attaches on Day 91 after the CP 215 notice, then one more every 30 days. The filing deadline behind this timeline — April 15, extendable to October 15 with Form 7004 — is set out in our master Form 5472 filing guide. The penalty is fixed, not proportional: it does not scale down for a small LLC or a short delay.

The arithmetic behind the table is the article's own formula applied period by period:

Twelve months after the CP 215 notice arrives, 275 days have passed since the 90-day grace period expired. Additional penalties have attached on Days 91, 121, 151, 181, 211, 241, and 271 — seven in total:

That is the cost of one year of silence after the notice: $200,000 for a return that costs a fax transmission to file. The penalty keeps attaching every 30 days until the return is filed; the statute states no cap in the material cited in this guide, so the ledger has no ceiling to plan around — the only exit is filing.

6. The $100 Trap Ledger

Section 2 establishes that even a $100 state filing fee paid from the founder's personal pocket is a reportable capital contribution. The penalty for leaving it off Form 5472 is the same $25,000 as for leaving off a six-figure transfer — because the penalty attaches per failed return, not per unreported dollar. The table below divides the article's own $25,000 penalty by its own transaction figures:

The multiple is the point. A founder who moves $5,000 home and forgets the form pays five times the moved amount; a founder whose only transaction all year was a $100 filing fee pays 250 times it. Small, clean LLCs carry the worst ratio in the book — the less money the entity moved, the more disproportionate the penalty looks, and the IRS assesses it the same way either way. The $100 fee is also the transaction most likely to be forgotten, because it feels like an administrative cost rather than a movement of capital between owner and entity. Under Treas. Reg. § 1.6038A-2 it is a reportable transaction all the same, and Part IV Line 19 is where it belongs.

7. The Multi-Year Exposure Ledger

The FAQ states the penalty is $25,000 per failure, and each tax year's unfiled Form 5472 is a separate failure. A founder who formed the LLC in 2023, never filed, and discovers the obligation in 2026 is not facing one penalty — the exposure stacks by year:

The arithmetic is the article's own per-failure figure multiplied by the count of unfiled years:

These are minimums: each year's failure also carries its own 90-day notice clock and its own $25,000-per-30-days escalation once the IRS issues a CP 215 for that year. The discovery pattern matters too. A founder who files late voluntarily, before any notice, faces the $25,000-per-year initial penalties but stops every escalation clock at once — the same filing that closes year one closes year three. A founder who waits for the IRS to find the entity instead lets each year's clock start on the IRS's timetable, not theirs. The cheapest year to fix is always the current one, and the second cheapest is always the year before it.

8. Decision Table

9. Operator Boundaries

• Assuming zero income means zero filing. The FAQ is explicit: a foreign-owned disregarded entity must file Form 5472 and a pro-forma Form 1120 even with $0 in US-source income. Zero income removes the tax bill, not the information return.
• Treating a personal-pocket payment as not a transaction. The $100 state filing fee paid from the founder's own account is a capital contribution under Treas. Reg. § 1.6038A-2. If the money moved between owner and entity, it is reportable.
• E-filing the pro-forma return through consumer software. The guide's warning stands: TurboTax-style software errors out on a blank return. The packet goes by fax to +1 855-887-7734 or by certified post to the Ogden Service Center.
• Filing only the current year after a multi-year gap. Each unfiled year is a separate $25,000 failure. Filing 2025 while 2023 and 2024 stay unfiled leaves $50,000 of exposure standing.
• Waiting for the IRS to ask. The 90-day grace period starts when the CP 215 notice issues, not when the founder reads it. Every 30 days past Day 90 adds $25,000, and the clock runs whether the founder is watching it or not.

For the full filing protocol behind this penalty — the pro-forma Form 1120 line by line, every Form 5472 part, the Ogden fax submission, and the reasonable-cause abatement playbook — see the master Form 5472 guide for foreign-owned LLCs.

For the individual side of foreign reporting, see our Form 8938 (FATCA) playbook.