A US LLC with one foreign owner and no US income has no federal income tax return to file. It still has a federal filing obligation, the form has no tax on it, and missing it costs $25,000 a year.
That combination is why this one gets missed. Nothing about it behaves like the rest of the tax system. There is no bill, no balance due, no refund, and no notice from the formation agent who set the company up.
Where the obligation came from
Section 6038A makes a 25% foreign-owned domestic corporation report its transactions with related parties. An LLC is not a corporation, and a single-member LLC is normally disregarded, so for years an entity like this sat outside the rule entirely.
Treasury closed that in 2016. Regulation 301.7701-2(c)(2)(vi) now says an entity that is disregarded as separate from its owner is treated as separate from its owner and classified as a corporation for purposes of section 6038A, where the entity is domestic and one foreign person has direct or indirect sole ownership of it. The final regulations are at T.D. 9796, and the rule applies to tax years of entities beginning after December 31, 2016 and ending on or after December 13, 2017.
Read the scope of that sentence closely. The entity is a corporation for section 6038A and for nothing else. It is still disregarded for income tax. That is exactly why the filing looks so strange when it lands: a corporate information return, attached to a corporate income tax return, filed by something that is not a corporation and owes no corporate tax.
Who this catches
Three things have to be true together. The entity is domestic. It is disregarded for US income tax purposes, which for a single-member LLC means nobody filed Form 8832 to elect corporate treatment. And one foreign person owns all of it, directly or indirectly.
Some entities that look similar are outside it. An LLC with two or more members is a partnership by default, not a disregarded entity, and its return is a Form 1065. An LLC that did elect to be taxed as a corporation files a real Form 1120, and picks up Form 5472 through the original route if a foreign person holds 25% or more. A single-member LLC owned by a US person is not in scope at all.
What actually triggers the filing
The obligation is not "you exist." It is "you had a reportable transaction." Which makes the definition of that phrase the whole question, and the part that catches people is not where they look.
Part IV of the form is the list everyone expects: sales of inventory, sales of other tangible property, rents, royalties, sales and licenses of intangible property, payments for technical and managerial and engineering and similar services, commissions, interest, insurance premiums, loan guarantee fees, and amounts borrowed and loaned. Each of those has a received side and a paid side. A young LLC with one owner and no trading activity can look at that whole list and correctly conclude that none of it happened.
Part V exists only for entities like yours. It asks you to describe, on an attached sheet, any other transaction as defined by Regulation 1.482-1(i)(7) that is not already in Part IV. Then it names the ones that matter: amounts paid or received in connection with the formation, dissolution, acquisition and disposition of the entity, including contributions to and distributions from the entity.
So the owner wiring in the money that capitalized the LLC is a reportable transaction. Taking money back out is a reportable transaction. Paying the formation agent from the owner's personal account is money paid in connection with the formation of the entity. An LLC that did no business at all in its first year, but had to be funded to open a bank account, has something to report.
There is a related trap in Part IV. Lines 21 and 35, "other amounts received" and "other amounts paid", carry an instruction to include amounts only to the extent they are taken into account in determining the taxable income of the reporting corporation. A disregarded entity has no taxable income of its own, so owner funding does not belong on those lines. It belongs in Part V, on the attached statement, with the Part V box checked.
The exceptions you will reach for, and why they miss
The instructions list six exceptions from filing. The first is the real one: no reportable transactions of the types in Parts IV and VI, and for a foreign-owned US disregarded entity, none of the type in Part V either. That is a narrow gate for an entity that had to be funded in order to exist.
Exceptions 2, 3 and 6 each state in terms that they do not apply to foreign-owned US disregarded entities.
Then there are the two that get quoted at founders most often, and they are not filing exceptions at all. The small corporation exception in Regulation 1.6038A-1(h) covers a reporting corporation with less than $10,000,000 in US gross receipts. The de minimis rule in 1.6038A-1(i) covers one whose aggregate gross payments to and from foreign related parties are not more than $5,000,000 and less than 10 percent of its US gross income. Both read on their face as though a small LLC is home free. Neither does the thing people think.
Each begins by excluding, by name, an entity that is a reporting corporation as a result of being treated as a corporation under 301.7701-2(c)(2)(vi). That is precisely this entity. And even for a reporting corporation that does qualify, what the exceptions lift is the record maintenance requirement in 1.6038A-3 and the agent authorization requirement in 1.6038A-5. The information reporting requirement in 1.6038A-2, which is the requirement to file Form 5472, stays in place either way.
How it gets filed, which is where the mechanics bite
A foreign-owned US disregarded entity has no income tax return to file, and the regulations still require the Form 5472 to be attached to something. So it goes on a pro forma Form 1120.
Pro forma means almost empty. The only information required on that Form 1120 is the name and address of the entity plus items B and E on the first page, which are the employer identification number and the check boxes for initial return, final return, name change and address change. Write "Foreign-owned U.S. DE" across the top.
You need an EIN to do this. Item B on the 1120 wants one and line 1b of the Form 5472 wants one, and unlike the identifying numbers for foreign owners further down the form, there is no reference number you can assign yourself in its place. Apply early enough that the number exists before the deadline rather than on it.
Then two more things that do not work the way the rest of your filings do.
You cannot e-file it. The instructions carry a caution to that effect in so many words. The filing route is fax at 300 DPI or higher to 855-887-7737, or mail to a dedicated address: Internal Revenue Service, 1973 Rulon White Blvd, M/S 6112 Attn: PIN Unit, Ogden, UT 84201. That is not the address in the Form 1120 instructions, and the instructions repeat the warning not to use the regular one.
The extension goes to the same odd place. The return is due by the due date of that pro forma Form 1120, including extensions, and the entity uses the same tax year its owner uses for US filing purposes, or the calendar year if the owner has none. To extend, file Form 7004 by the regular due date, enter the code for Form 1120 on Part I line 1, write "Foreign-owned U.S. DE" across the top, and fax or mail it to that same dedicated number or address rather than the usual Form 7004 one.
Where the numbers come from
Every amount goes on the form in US dollars, with a schedule showing the exchange rates you used attached. For an LLC funded in euros or pounds or rupees, that schedule is not optional decoration; it is the audit trail behind every figure on the form.
If you keep books on the accrual basis, the amounts are accrued payments and accrued receipts rather than cash movements, under Regulation 1.6038A-2(b)(10).
Loans in either direction get their own method. Report amounts borrowed and amounts loaned, including balances already in place at the start of the year, using either the outstanding balance method, which wants the beginning and ending balances, or the monthly average method, which wants a single average for the year. An owner who funds the company by lending it money rather than contributing capital lands here.
Where an actual amount is not determinable, reasonable estimates are allowed, and the regulation puts a number on reasonable: an estimate is any amount that is at least 75% and not more than 125% of the actual figure. That is a tolerance for genuinely uncertain values, not permission to guess at what your own bank statements say.
The penalty, in the order it arrives
Section 6038A(d)(1) sets a penalty of $25,000 for each taxable year in which a reporting corporation fails to furnish the required information, or fails to maintain the required records. Both halves are live. A late Form 5472 and an absence of books are separately capable of producing the same number.
Filing a substantially incomplete Form 5472 counts as a failure to file. A form that is in on time with Part V blank because nobody understood what it was for is not obviously better than one that is late.
If the failure continues for more than 90 days after the IRS mails notice of it, an additional $25,000 applies, and that additional amount runs for each 30-day period or part of one during which the failure continues after the 90 days end, with respect to each related party for which a failure occurred. The arithmetic on a multi-year, multi-party failure gets bad quickly.
Section 6038A(d)(3) provides the counterweight. The time prescribed to furnish the information, and the start of the 90-day period after notice, are treated as no earlier than the last day on which reasonable cause existed for the failure, shown to the satisfaction of the Secretary. Criminal penalties under sections 7203, 7206 and 7207 sit behind all of this for failure to submit information or for filing false information.
What to have in place before the deadline
The filing itself is short. What makes it hard in March is that the answers live in places nobody wrote down during the year.
Keep the owner's money and the company's money in separate accounts, and keep them separate in the books. Every transfer between the owner and the LLC needs a date, an amount, the currency it arrived in, and a note saying whether it was a capital contribution, a loan, a distribution, or a reimbursement of something the owner paid personally. Those four are different lines on this form, and reconstructing which was which from a bank feed eighteen months later is the expensive version of this task.
Get the EIN in place as soon as the entity exists. Keep the exchange rate source you used alongside the converted figures. And write down the formation costs somebody paid out of pocket, because those are a first-year Part V item that leaves no trace in the company's own bank account.
None of this replaces having a preparer who handles international filings look at the actual facts. It is a description of what the form and the regulations say, and the gap between what this entity owes in tax, which is often nothing, and what it owes in information, which is never nothing, is the part worth carrying away.