• COVID-19
  • Insights
  • Who We Help
    •   Industrial Automation
    •   Manufacturing & Distribution
    •   A&E Professional Services
    •   International Businesses
      • ◦   Expanding Outside the U.S.
      • ◦   Expanding to the U.S.
  • Services
    •   COVID-19
      • ◦   Cash Flow Confidence Assessment
      • ◦   Maximize Your Loan Forgiveness
      • ◦   5 Key Focus Areas
      • ◦   COVID-19 Resource Center
    •   Client Accounting
      • ◦   Software Solutions
      • ◦   Accounting Support
      • ◦   Reporting
    •   Tax
      • ◦   R&D Tax Credit
      • ◦   Tax Credits & Incentives
      • ◦   Tax Structure
      • ◦   Federal Tax
      • ◦   State & Local Tax
      • ◦   Personal Tax
      • ◦   Other Tax Filings
    •   Advisory & Assurance
      • ◦   Assurance Levels
      • ◦   Reporting
      • ◦   Employee Benefit Plan Audits
      • ◦   Technical Accounting & Reporting
    •   Consulting
      • ◦   Data Analytics
      • ◦   Transaction Services
      • ◦   Business Planning
      • ◦   Succession & Exit Strategies
    •   International
      • ◦   International Tax
      • ◦   Foreign Direct Investment
      • ◦   Global Expansion
      • ◦   International Accounting
  • Events
  • Careers
    •   Why C&M
    •   Students
      • ◦   Campus Events
      • ◦   Internships
      • ◦   Reach Beyond Program
    •   Experienced Professionals
      • ◦   Team member profile videos
    •   Opportunities
    •   Employee Journals
    •   Office Tour
  • About Us
    •   How We Help
      • ◦   Service Approach
      • ◦   Affiliations
      • ◦   Communications & Technology
    •   Meet Our Team
    •   Testimonials
    •   Our Videos
    •   Our Story
  • Contact Us
  • Subscribe
CHANGE COUNTRY:
  • United States
  • 中国
  • Client Login
Clayton & McKervey Logo
  • COVID-19
  • Insights
  • Who We Help
  • Services
  • Events
  • Careers
  • About Us
  • Contact Us
  • Subscribe
    • Most Recent Insights
  1. Home
  2. Insights
  3. Important Filing Requirement for Foreign-Owned U.S. Companies

Important Filing Requirement for Foreign-Owned U.S. Companies

Posted by Nina Wang on February 19, 2020

Nina Wang Nina Wang

The last thing any business wants to receive is an audit notice from the Internal Revenue Service (IRS).  Your first reaction will naturally be panic or fear.  So, what protective measures can a business or business owner put in place?

An easy, but often overlooked tactic is to simply review your tax compliance activity on a regular basis.  This simple step can help alleviate many of these concerns and result in a more favorable outcome should you have an IRS audit.

Don’t Overlook Form 5472

Here, we’ll discuss one of the most commonly filed forms by our inbound clients: Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business Tax. As laws continually change, it’s critical for business owners to keep up with the updates to legislation.  This is a high exposure reporting requirement and is usually used by the IRS to understand global transactions and transfer pricing issues between domestic and foreign-related parties.   2017’s tax legislation from the Tax Cuts and Jobs Act (TCJA) increased the noncompliance penalty from $10,000 per form to $25,000 per form.  A simple oversight can be costly.

Form 5472 applies to any U.S. corporation with 25% direct or indirect foreign ownership AND with reportable transactions with a foreign or domestic related party during the tax year.  The form also applies to a foreign corporation engaged in a U.S trade or business, or to businesses including the foreign-owned U.S. disregarded entities, such as domestic single-member limited liability companies.  If you are a foreign-owned US corporation and have transactions with foreign or domestic related parties, this form most likely will be applicable to you.

Reportable transactions include loans, sales of goods and services, commissions, rent, royalties, interest and other amounts paid or received between the related parties.  The reporting requirement of Form 5472 has also been expanded by TCJA to include information reporting related to some newly enacted international tax rules (e.g. disallowed deductions paid in hybrid transactions or with hybrid entities under IRC 267A, foreign-derived intangible income deduction under IRC 250 and information related to Base Erosion and Anti-Abuse Tax under IRC 59A).

Separate 5472 forms are required for each related party with reportable transactions.  This form is included in the taxpayer’s U.S. corporate income tax return.

For taxpayers that might have overlooked this filing requirement previously, the IRS offers Delinquent International Information Return Submission Procedures that can provide relief to taxpayers with reasonable cause for the failure to file.  More details related to this procedure are available on the IRS’ site.

While we’re discussing Form 5472 for inbound clients, there are many other forms that could also apply.  If you are making a decision about your next CPA, or your business has expanded to require a CPA with international experience, Clayton & McKervey can help.

Our team is always ready to help.

Please contact us for more information.

Nina Wang

Nina Wang

Senior Manager, International Tax

Contact Nina   |   Read Nina's bio

related news

Doing Business in Mexico: What to Expect this Year

Without a doubt, this year will be interesting for Mexico. To start, it’s an election year and we all know what that means…a lot of uncertainty. As the global pandemic…

Read full story

What Expenses Qualify for R&D Tax Credits?

The R&D tax credit is one of the most overlooked opportunities to boost your bottom line. Many business owners fail to claim it under the mistaken belief that they’re not…

Read full story

Clayton & McKervey Launches The Sound of Automation Podcast

Media Contact: Denise Asker, dasker@claytonmckervey.com; 248.936.9488 Southfield, Mich.—February 17, 2021—Clayton & McKervey, a certified public accounting and business advisory firm helping growth-driven companies compete in the global marketplace, is excited…

Read full story

Misconceptions About the Research & Experimentation Tax Credit

As companies put more emphasis on Industry 4.0 and business processes become more automated and accessible, the opportunities for Research & Experimentation tax credits increase. The Research and Experimentation (R&E)…

Read full story

Your Guide to R&D Tax Credits

If you haven’t looked into the R&D tax credit before, there’s a good chance that you’re missing a big opportunity to boost your cash position. Even if they’re aware of…

Read full story

Categories

Jump directly to the topics that matter to you most.

  • A&E Professional Services
  • About Us
  • Advisory & Assurance
  • Business Owners
  • C&M Press Releases
  • Careers
  • China Consulting
  • Clayton & McKervey
  • Client Accounting Services
  • Consulting
  • COVID-19
  • Data Analytics
  • Estate Planning
  • Expanding Outside the U.S.
  • Expanding to the U.S.
  • From the President
  • Industrial Automation
  • International
  • Manufacturing & Distribution
  • Mexico Consulting
  • Podcasts
  • Private Client Services
  • Tax & Tax Credits
  • Transaction Services
  • Videos

Authors

Read news direct from our managers and stakeholders.

    • Ben Smith
    • Beth Butchart
    • Bryan Powrozek
    • Carlos Calderon
    • Casey Haggerty
    • Clayton & McKervey
    • Dave Van Damme
    • Denise Asker
    • Eric Lin
    • Jim Biehl
    • Julie Killian
    • Kevin Johns
    • Margaret Amsden
    • Miroslav Georgiev
    • Nina Wang
    • Rob Dutkiewicz
    • Ruben Ramirez
    • Sarah Russell
    • Sue Tuson
    • Tarah Ablett
    • Teresa Gordon
    • Tim Finerty
    • Tim Hilligoss
    • Wendy Reedy

Additional Resources

Additional news from Clayton & McKervey can be found below.

  • Subscribe to our email newsletter
  • View upcoming events
  • Contact us to let us know how we can help you
  • Main Content
  • Related Insights

Important Filing Requirement for Foreign-Owned U.S. Companies

Posted by Nina Wang on February 19, 2020

Nina Wang

The last thing any business wants to receive is an audit notice from the Internal Revenue Service (IRS).  Your first reaction will naturally be panic or fear.  So, what protective measures can a business or business owner put in place?

An easy, but often overlooked tactic is to simply review your tax compliance activity on a regular basis.  This simple step can help alleviate many of these concerns and result in a more favorable outcome should you have an IRS audit.

Don’t Overlook Form 5472

Here, we’ll discuss one of the most commonly filed forms by our inbound clients: Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business Tax. As laws continually change, it’s critical for business owners to keep up with the updates to legislation.  This is a high exposure reporting requirement and is usually used by the IRS to understand global transactions and transfer pricing issues between domestic and foreign-related parties.   2017’s tax legislation from the Tax Cuts and Jobs Act (TCJA) increased the noncompliance penalty from $10,000 per form to $25,000 per form.  A simple oversight can be costly.

Form 5472 applies to any U.S. corporation with 25% direct or indirect foreign ownership AND with reportable transactions with a foreign or domestic related party during the tax year.  The form also applies to a foreign corporation engaged in a U.S trade or business, or to businesses including the foreign-owned U.S. disregarded entities, such as domestic single-member limited liability companies.  If you are a foreign-owned US corporation and have transactions with foreign or domestic related parties, this form most likely will be applicable to you.

Reportable transactions include loans, sales of goods and services, commissions, rent, royalties, interest and other amounts paid or received between the related parties.  The reporting requirement of Form 5472 has also been expanded by TCJA to include information reporting related to some newly enacted international tax rules (e.g. disallowed deductions paid in hybrid transactions or with hybrid entities under IRC 267A, foreign-derived intangible income deduction under IRC 250 and information related to Base Erosion and Anti-Abuse Tax under IRC 59A).

Separate 5472 forms are required for each related party with reportable transactions.  This form is included in the taxpayer’s U.S. corporate income tax return.

For taxpayers that might have overlooked this filing requirement previously, the IRS offers Delinquent International Information Return Submission Procedures that can provide relief to taxpayers with reasonable cause for the failure to file.  More details related to this procedure are available on the IRS’ site.

While we’re discussing Form 5472 for inbound clients, there are many other forms that could also apply.  If you are making a decision about your next CPA, or your business has expanded to require a CPA with international experience, Clayton & McKervey can help.

Our team is always ready to help.

Please contact us for more information.

Nina Wang

Senior Manager, International Tax

Contact Nina   |   Read Nina's bio

related news

Doing Business in Mexico: What to Expect this Year

Without a doubt, this year will be interesting for Mexico. To start, it’s an election year and we all know what that means…a lot of uncertainty. As the global pandemic…

Read full story

What Expenses Qualify for R&D Tax Credits?

The R&D tax credit is one of the most overlooked opportunities to boost your bottom line. Many business owners fail to claim it under the mistaken belief that they’re not…

Read full story

Clayton & McKervey Launches The Sound of Automation Podcast

Media Contact: Denise Asker, dasker@claytonmckervey.com; 248.936.9488 Southfield, Mich.—February 17, 2021—Clayton & McKervey, a certified public accounting and business advisory firm helping growth-driven companies compete in the global marketplace, is excited…

Read full story

Misconceptions About the Research & Experimentation Tax Credit

As companies put more emphasis on Industry 4.0 and business processes become more automated and accessible, the opportunities for Research & Experimentation tax credits increase. The Research and Experimentation (R&E)…

Read full story

Your Guide to R&D Tax Credits

If you haven’t looked into the R&D tax credit before, there’s a good chance that you’re missing a big opportunity to boost your cash position. Even if they’re aware of…

Read full story

Categories

Jump directly to the topics that matter to you most.

  • A&E Professional Services
  • About Us
  • Advisory & Assurance
  • Business Owners
  • C&M Press Releases
  • Careers
  • China Consulting
  • Clayton & McKervey
  • Client Accounting Services
  • Consulting
  • COVID-19
  • Data Analytics
  • Estate Planning
  • Expanding Outside the U.S.
  • Expanding to the U.S.
  • From the President
  • Industrial Automation
  • International
  • Manufacturing & Distribution
  • Mexico Consulting
  • Podcasts
  • Private Client Services
  • Tax & Tax Credits
  • Transaction Services
  • Videos

Authors

Read news direct from our managers and stakeholders.

  • Ben Smith
  • Beth Butchart
  • Bryan Powrozek
  • Carlos Calderon
  • Casey Haggerty
  • Clayton & McKervey
  • Dave Van Damme
  • Denise Asker
  • Eric Lin
  • Jim Biehl
  • Julie Killian
  • Kevin Johns
  • Margaret Amsden
  • Miroslav Georgiev
  • Nina Wang
  • Rob Dutkiewicz
  • Ruben Ramirez
  • Sarah Russell
  • Sue Tuson
  • Tarah Ablett
  • Teresa Gordon
  • Tim Finerty
  • Tim Hilligoss
  • Wendy Reedy

Additional Resources

Additional news from Clayton & McKervey can be found below.

  • Subscribe to our email newsletter
  • View upcoming events
  • Contact us to let us know how we can help you

Website

  • COVID-19
  • Insights
  • Who We Help
  • Services
  • Events
  • Careers
  • About Us
  • Contact Us
  • Subscribe

Location

+1 248.208.8860
2000 Town Center
Suite 1800
Southfield, MI
48075 | USA

Connect

  • Events
  • Newsletter
  • Client Login

Social

  • LinkedIn
  • Facebook
  • Twitter
  • Glassdoor
  • YouTube
  • Instagram

Awards

DFP Top Work Places Best & Brightest
Prime Global

Tax | Accounting | Assurance | Consulting | Highly technical and accessible team of CPAs helping growth driven, closely held, middle market companies compete in the global marketplace. Michigan-based accountants and advisors focused on helping business owners in the United States and throughout Europe and China.

Privacy Policy Disclaimer

© 2021 Clayton & McKervey