Read this first. I am a property investor, not a tax adviser. Everything below comes from the Internal Revenue Code, the IRS instructions and published guidance from cross-border accountants, and I have named the sources. Form 5472 is a specialist filing and it is not one to attempt alone.
Almost every guide to buying US property as a foreigner tells you to form an LLC. Mine does. It is usually good advice, except for Canadians, for reasons set out in LP vs LLC for Canadians.
Very few of them mention the filing obligations that come with owning a US entity.
If your LLC is foreign-owned and has one member, and money has moved between you and it in either direction, you have a return to file every year. It reports no income. It creates no tax. It just has to be filed, and the fine for missing it starts at $25,000. It sits alongside the other US filings a foreign owner picks up, which I have set out in my US tax guide for foreign investors.
BOI reporting is the filing people confuse this one with, and it ended on 14 August 2026. See what happened to BOI reporting for foreign owned LLCs.
There is no cap on that penalty. It applies per form, per year. And it applies even if your rental lost money, sat empty, or never got let at all.
I have never had a client hit with it. That is not the comfort it sounds like, and I will explain why below.
1. Why does this catch property investors?
The rule was written for big company transfer pricing. It catches you because of how a US rental property purchase works.
Here is the sequence almost every one of my clients follows.
You form an LLC in the state where the property is. You get an EIN. You open a US bank account in the LLC's name.
My client Ronald went through exactly that sequence from Ottawa before buying his first US rental property in Kansas City, and it is written up in his case study. Which state to use, and why it should normally be the property state, is covered in how to structure your US property investment.
Finally, you wire your deposit from your own account into the LLC's account, because that is how the money gets to closing.
That wire is a reportable transaction. It is money put in by a foreign owner, and it is exactly what the form exists to report. The rest of the money moving on that day is in what closing costs actually are.
You have done nothing odd or wrong. You followed the standard advice, mine included, and in doing so you created a filing duty most people find out about later.
The mechanics of setting the entity up are in how to fund a US property purchase. This is the part that comes after.
2. Who has to file Form 5472?
Two categories, and the second is the one that surprises people.
A US corporation that is at least 25% foreign-owned, which is the original target of the rule.
And a foreign-owned US disregarded entity. Since tax years starting on or after 1 January 2017 that includes single-member LLCs. It came in under Treasury Regulations 1.6038A-1, which is why so many people who set up an LLC years ago have never heard of it.
If you are the sole member of a US LLC and you are not a US person, you are in the second category. You need to file.
Ownership is tested widely. The 25% test covers what you own directly, what you own through other entities, and what your family owns. That includes your spouse and your children. Splitting an LLC with your wife does not get you out of it. How the whole holding is arranged matters more than most people expect.
3. What counts as a reportable transaction?
This is where people get caught, because the answer is almost anything.
Money moving in either direction between you and the LLC. Your deposit going in. Rent or profit coming out. You paying an LLC expense personally. The LLC paying something of yours.
And it is not just money. Interest-free loans, the use of property and services provided all count. So does moving the property itself into another structure, which is treated as a sale and is covered in can a foreign investor do a 1031 exchange.
There is no minimum. No small transaction exception, no $600 floor, no $10,000 floor. One published guide uses a $500 transfer to cover agent fees, on an LLC with no revenue at all, and says the filing was still required.
Another puts it plainly. If value moved between the LLC and its foreign owner, either way, in any amount, the IRS will probably treat it as reportable.
Which means the practical answer for a property investor is that you almost certainly have one. You funded the LLC. That is the transaction. Rent coming back out counts too, and how that rent is taxed before it reaches you is in how to stop the 30% withholding.
The one thing to remember: the obligation follows the transaction, not the income. An LLC that lost money all year, or never got let, still files if you put money into it.
4. How big is the penalty, and how does it compound?
Under IRC section 6038A(d)(1), the fine is $25,000 per form, per year. It applies to a missed filing, to poor records, and to a return that is largely incomplete.
There is no statutory cap.
If it runs more than 90 days after the IRS writes to you, another $25,000 lands for every 30 days it goes on.
One published worked example runs like this. A 2023 filing was missed. The IRS issued a notice on 1 March 2026. The return was filed on 1 September 2026. Penalty: $25,000, plus three further 30-day periods at $25,000 each, giving $100,000.
And you need a separate form for each related party, so more relationships means more fines, not a shared one.
Two things make it worse than it needs to be. A return sent to the wrong address is treated as never filed. So is one that is incomplete. It is the same category of avoidable error as a mismatch on your withholding paperwork, which I have set out in how to get your FIRPTA money back.
5. How is Form 5472 actually filed?
The procedure is unusual, and the procedure is where people slip.
Form 5472 goes in attached to a pro forma Form 1120, which is the US company tax return. You fill in very little of the 1120: the name and address, and two boxes on page one.
You write "Foreign-owned U.S. DE" across the top of the Form 1120.
It cannot be e-filed. It has to be posted or faxed to a specific IRS address for these filings, which is not the one in the general 1120 instructions.
The deadline is 15 April for a calendar-year filer, with an automatic six-month extension available on Form 7004, provided the extension is filed by the original due date.
A separate Form 5472 is required for each related party. One combined form covering several is one of the more common mistakes.
None of that is difficult. All of it is easy to get wrong, and getting it wrong is treated as not doing it. The same is true of the paperwork on the way out, which I have set out in capital gains tax when a foreign owner sells.
6. What do I do if I am years behind?
Many people reading this will realize they should have been filing and have not.
File late, voluntarily, before the IRS contacts you. Every source I have read agrees on this. Fines can be dropped for reasonable cause, and filing before the IRS makes contact improves your odds a lot. First-time relief may also be open to you if your record is otherwise clean.
Do not wait and hope. One 2026 guide says the IRS now matches EIN records against Form 1120 filings, so an EIN with no filing behind it can get flagged. Whether or not that is happening at scale, the point stands. The IRS knows your LLC exists, because it issued the EIN.
And this is a job for a CPA who has done it before. A reasonable cause statement is an argument, not a form, and it needs writing well.
7. Does my structure change it?
Yes, and it is worth knowing before you choose.
A single-member LLC files. That is the standard structure and the one most foreign buyers use.
A multi-member LLC or an LP taxed as a partnership generally does not file Form 5472. It has a different set of obligations, including a partnership return, so this is not an escape from reporting. It is a different set of paperwork.
That is one more consideration in the LP against LLC decision, where the main arguments are about foreign tax credits rather than filing.
British owners ask the same question about a company they already have, which I have answered in can you buy US property in a UK limited company, and the Canadian version of the same problem is in the US tax guide for Canadian investors.
I would not choose a structure to avoid a form. Choose it for the tax treatment and the financing, then file whatever it requires. But if you are already choosing between the two for other reasons, this belongs on the list.
8. What do I actually do?
Five things, and none of them are clever.
I treat the filing as part of owning the entity, not as an optional extra. If you have an LLC, you have a return, in the same way you have a registered agent.
I use a cross-border CPA rather than a US one. This is exactly where a good American accountant may not know the rule exists, because it never comes up for their US clients. The same gap shows up on the withholding forms, as I have set out in how property managers make money on repairs. I have had a property manager's accountant confidently give me the wrong answer on a much simpler form, which I wrote about in how to stop the 30% withholding on your US rent.
I diarize 15 April and file the extension if the information is not ready. The financing sits on the same entity, and what lenders ask of it is in DSCR loans explained.
And I keep a record of every transfer between me and the entity. The form asks for the amounts, and the fine covers poor records as well as a missed filing.
I have never had a client receive one of these penalties. I do not think that means much. The obligation is real, it is in the regulations, and the amounts are large enough that being lucky so far is not a strategy.
If you would rather have somebody set the structure up correctly from the start, that is part of what our purchase service covers, and you can plan the wider position with the free tools in my investor starter kit.
The bottom line
Form 5472 is the least interesting thing in this whole subject and one of the most expensive to ignore.
It reports no income. It creates no tax. It exists so the IRS can see money moving between a US entity and its foreign owner. On a property purchase, that means the deposit you wired to buy the house.
The penalty starts at $25,000, has no cap, and applies whether or not the property earned anything.
Set it up once with somebody who knows the filing, diarize the date, keep the records, and it becomes a yearly chore costing a few hundred dollars. The return that actually reports your income is a separate one, and you can see what that one produces on a real property with the US rental income tax calculator
Ignore it because your rental made a loss, and the arithmetic gets very unpleasant very quickly.
Remember, investing is a game of probabilities. Paperwork is not.
This article is general information, not legal, tax or financial advice. David Garner is a property investor and is not a tax adviser, accountant, CPA or Enrolled Agent. Cashflow Rentals is a real estate consultancy, not a tax practice or law firm. The position described derives from Internal Revenue Code section 6038A, Treasury Regulations 1.6038A-1, the IRS instructions to Forms 5472 and 1120, and published guidance from cross-border accounting practices, as we understand them in August 2026. Penalty amounts, thresholds, deadlines and filing addresses change. Whether you have a filing obligation depends on your specific ownership and transactions. Always take advice from a CPA or Enrolled Agent experienced in foreign-owned entity reporting before filing or deciding not to.
