What to Do When Llc Members Will Not Provide Ssn for K-1

If y'all accept a Single-Member LLC (1 owner) that is foreign-owned, and so you lot need to file Form 5472 and Form 1120 every year

Article published at LLC University®

A few important notes:

1. This article is written for non-U.S. residents and not-U.Southward. citizens (foreigners) who have formed an LLC in the U.S.

2. Your LLC must have an EIN in order to file Form 5472 and Class 1120. If you don't take an SSN or ITIN you lot can still go an EIN for your LLC. We take instructions hither: how to get an EIN without an SSN or ITIN.

3. This article is only an overview of Form 5472. It is non detailed stride-by-step instructions. Additionally, as a greenhorn, this is non your but reporting requirements with the IRS. Nosotros strongly recommend that you work with an accountant.

iv. This requirement should be taken seriously. If Form 5472 is not filed or filed incorrectly, the IRS charges a minimum penalty of $25,000 USD (increased from $ten,000).

Overview of Class 5472

The requirements for foreign-owned U.Southward. Corporations to file Form 5472 and Form 1120 have been effectually for some time, however, the IRS released TD 9796 and added new regulations to Department 1.6038A-1 of the Code of Federal Regulations. These new changes went into effect on January 1st, 2017 and now also bear upon all foreign-owned Single-Fellow member LLCs that are Disregarded Entities.

Starting in 2017, all foreign-endemic Single-Member LLCs that are Overlooked Entities are at present treated equally Corporations for federal reporting requirements (submitting information) to the IRS. This doesn't mean the LLC is paying tax similar a Corporation, only rather, it'southward just reporting information like a Corporation.

A Single-Member LLC is automatically considered a Disregarded Entity by the IRS unless the LLC has fabricated a special ballot to be taxed as a Corporation. The word "disregarded" but ways the IRS "ignores" the LLC for federal revenue enhancement purposes and taxes the LLC the same mode the owner is taxed.

The post-obit types of LLCs take to file Course 5472 and Form 1120 every year:

• a Single-Member LLC that is Overlooked and endemic by a not-United states of america resident or foreign company
• a Single-Member LLC that is Foreign-owned and taxed as a Corporation
• a Multi-Member LLC that is taxed equally a Corporation and has at least 1 Foreign owner that owns 25% or more of the LLC

Annotation: If you accept a Foreign-owned Multi-Member LLC that is taxed as a Partnership, you are non required to file Form 5472 and Class 1120.

Directly and Indirect Ownership:
Grade 5472 and Course 1120 requirements apply to foreign-owned Single-Member LLCs that are endemic directly or indirectly:

• Directly endemic means that the owner is a foreign person or a strange company
• Indirectly owned means the LLC is endemic by another Disregarded
• Entity LLC, which then owns the Single-Member LLC

In that location are more than complex examples of indirect ownership, however, that is beyond the telescopic of this commodity and you volition need to speak to an accountant for aid if yous have a more circuitous entity structure.

Purpose of Class 5472

The purpose of Form 5472 and these new regulations is to prevent foreigners from evading U.S. taxes and to shut some loopholes that existed in the revenue enhancement lawmaking.

Overview of steps for Single-Member LLCs that are foreign-owned

The requirements for foreign-owned Single-Member Overlooked LLCs are:

1. Go an Employer Identification Number (EIN).

2. File Class 5472 and Form 1120 (only LLC name, address, and items B and E are required).

3. Maintain financial records that evidence the information on Form 5472.

4. Depending on multiple factors (type of business concern, your taxation filing status, the state where yous reside, and US tax treaties), you may need to file a 1040NR (Nonresident Alien Income Tax Return) and get an ITIN (Individual Taxpayer Identification Number).

Having said that, depending on those same factors, you lot may non have Us source income and you may not accept to file a 1040NR or get an ITIN. You'll demand to speak with an accountant to make up one's mind your tax filing obligations in the US.

How to get an EIN for your LLC?

EIN stands for Employer Identification Number and is also called a Federal Tax ID Number. In order to file Grade 5472 and Form 1120, your LLC is required to have an EIN.

If you have an ITIN (Individual Taxpayer Identification Number) you can get an EIN for your LLC online. Instructions are here: how to get an EIN online.

If you don't take an ITIN (or an SSN, Social Security Number), you tin can't get an EIN online, simply yous can however get an EIN for your LLC. Instructions are here: how to go an EIN without SSN or ITIN.

What is a Foreign Person?

A Foreign Person (aka "foreign-owned") is any of the post-obit:

• Non-Resident Alien Private
• any Foreign Company, Foreign Corporation, or Foreign Partnership (or their U.S Branches)
• Foreign Trust or Foreign Manor
• and whatever other person who is non a U.S. Person

Most of our foreign readers will exist Non-Resident Aliens and are therefore considered a Strange Person for U.S. tax purposes.

If that'due south the case, you fall under the new reporting requirements for Foreign-Endemic Unmarried-Member LLCs and you must file Grade 5472 and encounter its related requirements.

What is a U.Southward. Person?

A U.S. Person is any of the following:

• U.S. Citizen
• Resident Conflicting (determined by light-green carte test or substantial presence test)
• Domestic Corporation or Domestic Partnership
• any Manor that is not a Foreign Manor
• Trust that meets certain requirements
• and any other person that is non a Foreign Person

Resident Alien vs Non-Resident Alien:

For more data on the deviation between a Resident Alien and a Non-Resident Alien, please run across this IRS page: determining alien taxation status.

Takeaway (foreigner vs U.S. person)

Any foreign person that owns (directly or indirectly) a Unmarried-Member LLC, must file Form 5472 and Class 1120.

A U.South. person who owns an LLC doesn't have to file Form 5472 and Form 1120.

What about Foreign-owned Multi-Member LLCs?

If you have a Multi-Member LLC that is taxed equally a Corporation and has at least 1 Foreign owner that owns 25% or more you must file Form 5472 and Form 1120.

On the other paw – and most mutual – if you accept a Foreign-owned Multi-Fellow member LLC that is taxed equally a Partnership, you are not required to file Grade 5472 and Form 1120. Therefore, the Form 5472 and Form 1120 requirements do non apply to most Foreign-owned Multi-Fellow member LLCs (once more, those are taxed as a Partnership).

The reason why is because Multi-Member LLCs taxed equally a Partnership are considered Domestic Partnerships by the IRS, and Domestic Partnerships are U.South. persons, which must file a U.Due south. tax render.

Strange-endemic Multi-Fellow member LLCs must:

• file an informational Partnership Return (Form 1065)
• outcome K-1s to each LLC Member
• and each Member is responsible for filing a U.Due south. income taxation return

If the Foreign-endemic Multi-Fellow member LLC has no income (and no expenses, deductions, or credits it would similar to merits), and so there is no Course 1065 and 1000-1 filing requirement.

Important:  The above is a brief overview of U.S. taxation for a foreign-owned Multi-Member LLC, however the details are more than complex including who your LLC Members are, where your LLC is located, how income is made, and your U.S. tax filing requirements. For example, many foreign-owned Multi-Member LLCs as well need to file Form 8804 and Course 8805. You volition demand to speak with an accountant to determine all of your U.S. tax filing requirements.

Reportable Corporations, Reportable Transactions, and Related Parties

While reading IRS instructions, you lot may come across the following linguistic communication:

 "Form 5472 must be filed byReportable Corporations that haveReportable Transactions withRelated Parties."

That's a lot of "R" words, and then let'south ascertain them.

Reportable Corporations

A Foreign-endemic Single Member Disregarded Entity LLC is considered a Reportable Corporation under Section one.6038A-1 of the IRS code. It doesn't matter if the LLC Fellow member is a foreign individual or a foreign company. It is notwithstanding a Reportable Corporation.

Additionally, a foreign company that is engaged in trade or concern in the U.Southward. is likewise considered a Reportable Corporation.

Related Parties

The definition of a Related Political party in Section one.6038A-1(d) is a bit difficult to sympathise since it'south written for Corporations (nonetheless, it still applies to Unmarried-Member LLCs).

Here are some examples of who'southward aRelated Political party to a Single-Fellow member LLC:

• The LLC owner
• The LLC owner's parents, grandparents, brother, sister, spouse, etc.
• Other companies owned (directly or indirectly) by the LLC possessor

These are just a few common examples of Related Parties, nevertheless, there are more complex examples, many of which are beyond the scope of this article.

Your LLC is still allowed to have transactions with Related Parties, it just must be properly reported to the IRS.

We are unable to help you lot determine who is and who isn't a Related Political party, however, we strongly recommend you speak with an auditor who works with foreign-owned LLCs. You lot tin can also review the post-obit for definitions of Related Parties:

• Section 267(b)
• Section 707(b)(i))
• Section 482
• IRS publication 550

Reportable Transactions

A Reportable Transaction is the movement or exchange of coin (or property) between an LLC and its foreign owners. Reportable Transactions can exist, but are not limited to, the following:

• Coin deposited/invested into the LLC by a Related Party owner ("capital contribution")
• The LLC paying/giving money to a Related Party ("capital distributions")
• Loans made by the owner to the LLC or from the LLC to a Related Political party
• Money paid to form the LLC, dissolve (close down) the LLC, or any filings paid to the Country by a Related Party.
• Any exchange of money between the LLC and a Related Political party, including a sale, assignment, charter, license, loan, advance, or contribution.

Notes:
– Even if your U.S. LLC doesn't comport business or accept trade in the U.S., if yous made a capital contribution to your LLC, you lot still have to meet IRS Form 5472 filing requirements.
– The above is a simple overview of what a Reportable Transaction is and doesn't encompass all applicable examples. You will need to work with an auditor to make certain y'all are properly documenting all Reportable Transactions.

IRS Taxation Treaties and worldwide information sharing

The IRS has tax treaties with over 60 countries. This ways the governments of those countries agree to share information about their tax citizens in club to meliorate collect tax acquirement.

The requirement to file Form 5472 should not be taken lightly. The Us Treasury Section spends billions of dollars enforcing its laws on those that accept filing requirements in the U.S.

Download Grade 5472: https://www.irs.gov/pub/irs-pdf/f5472.pdf

IRS instructions for Class 5472: https://www.irs.gov/instructions/i5472

Complete the form by hand or on your computer:

You lot tin can either print the course, make full information technology out by paw (use a black pen), then sign; or, yous can type in the form on your reckoner, and so print and sign. When printing, employ regular white newspaper (viii.5″ x 11″).

Reminder:The information below is not detailed, step-by-stride instructions, but rather an overview. We strongly recommend working with an accountant in club to properly file Course 5472 and see all other U.Due south. tax reporting and filing requirements.

Part 1 – Reporting Corporation

Function 1 requires contact information and basic details about the Reporting Corporation/LLC.

You'll list the LLC name, the LLC's EIN, address, total avails, and concern action. You'll also list full payments, total value of those payments, and country of LLC germination, to mention a few.

Office 2 – 25% Strange Shareholder

Part 2 only needs to be completed by U.S. LLCs.

Strange LLCs or companies (those formed outside of the U.S.) don't need to consummate Part ii.

You will need to list the direct and indirect LLC owners in this section, including their name, accost, United states of america taxpayer ID, such as their ITIN (if applicative) and other information.

If yous need to apply for an ITIN, you can notice instructions here: how to apply for an ITIN.

Role 3 – Related Party

Role 3 includes information for the Related Political party that had Reportable Transactions.

Of import:A split Form 5472 must exist filed with the IRS for each Related Party.

Role 4 – Monetary Transactions Between Reporting Corporations and Foreign Related Party

Office iv only needs to be completed if the Reportable Transactions were with foreigners.

If the transactions were fabricated with U.S. persons, Part 4 doesn't need to be completed (although a Form 5472 nevertheless needs to be filed).

Part v – Reportable Transactions of a Reporting Corporation that is a Foreign-Owned U.Due south. Disregarded Entity (DE)

If you have a strange-owned U.S. LLC that is a Overlooked Entity, you lot need to check off the box in this section and include an attachment that describes these transactions.

Examples are any money paid or received in gild to:

• class the LLC
• close downwardly the LLC
• purchase the LLC
• sell the LLC

Additionally, monies paid from the LLC Member to the LLC ("capital contributions") and monies paid from the LLC to the LLC Fellow member ("capital distributions") are also Reportable Transactions.

Role half-dozen – Nonmonetary and Less-Than-Full Consideration Transactions Between the Reporting Corporation and the Foreign Related Party

Office 6 requires a argument to be fastened to Form 5472 if the Reportable Transactions were with foreigners.

If the transactions were made with U.S. persons, an zipper is not needed for Part half-dozen (although a Course 5472 still needs to exist filed).

Part 7 – Additional Information

There are boosted questions in Function 7. These questions must be answered by every Reporting Corporation.

A split up Grade 5472 required for each Related Party

Every bit mentioned before, each Related Party that had Reportable Transactions with the LLC must file their own Class 5472.

Grade 1120 is also required

Notation: Class 1120 is a revenue enhancement return for Corporations, nonetheless, it is now required by foreign-endemic Unmarried-Member LLCs under the new IRS regulations.

Grade 5472 must be sent to the IRS fastened to Form 1120. "Attached" just ways Form 5472 is submitted with Form 1120.

For LLCs who handle taxes on the calendar year, Jan through December, (which is the near commonly used) Form 5472 and Form 1120 are due every year by Apr 15th.

For example, if your LLC was formed someday in 2020, then yous have to file Form 5472 and Grade 1120 by April 15th, 2021.

Download Grade 1120:
https://world wide web.irs.gov/pub/irs-pdf/f1120.pdf

IRS instructions for Form 1120:
https://world wide web.irs.gov/instructions/i1120

How to complete Class 1120:

Form 1120 requirement is referred to every bit a "pro forma" requirement, meaning, you don't have to consummate the entire Form 1120, merely a minor function of it.

Youmerely demand to complete the Name, Address, Department B, and Section E on the 1st page. Don't enter annihilation else on page 1 or any other pages of Form 1120. Leave everything else blank.

At the peak of the form:
Hand write "Foreign-owned U.S. DE" at the top of Form 1120. Information technology will look like this:

Name: Enter the complete name of your LLC.

Address (two lines): Enter the primary address or place of business organisation for your LLC. It'south best to use the aforementioned address listed on Form 5472 and on your EIN Application (Form SS-4). The address can be a U.S. address or it tin be a non-U.S. accost.

Section B: Enter the Employer Identification Number (EIN) for your LLC.

If you don't accept an EIN for your LLC, you will need to go one as shortly as possible. Yous can't submit Form 1120 or 5472 without your LLC'due south EIN.Doing so volition cause your filing to exist rejected and the IRS will charge a $25,000 penalty equally listed below.

• If you take an SSN or ITIN, yous can get an EIN for your LLC online. We have instructions here: how to get EIN for LLC online.
• If you don't take an SSN or ITIN you lot can't get an EIN online. You take to apply by mail or fax. We have instructions here: how to get an EIN without SSN or ITIN.

Section E: A box only needs to be checked if this is your beginning return or last render for your LLC.

For instance:

• The showtime time yous file Course 5472 and Class 1120, check off "Initial return".
• If y'all shut down the business concern and dissolve the LLC, check off "Final return".
• For all years in between, don't cheque off whatever boxes in Department E.

When is Form 5472 due

Because Form 5472 is sent to the IRS with Form 1120, the Form 1120 due dates apply to both forms.

For tax purposes, near U.Southward. LLCs operate on the calendar yr (Jan – Dec), equally opposed to the financial year.

For LLCs that operate on the agenda yr, Form 5472 and Form 1120 are due past April 15th each year. This due date will utilise to nigh filers.

If on the other mitt, your LLC operates on a different fiscal yr, please see Form 1120 instructions and wait at the "When to File" section.

Where to send Class 5472

Course 5472 needs to be sent to the IRS past postal service or by fax. Make sure Form 5472 is attached to Form 1120. "Attached" simply means that Course 5472 is backside Form 1120 when you submit them to the IRS.

Mailing address:
Internal Revenue Service
1973 Rulon White Blvd.
Chiliad/Southward 6112, Attn: Pivot Unit of measurement
Ogden, Utah 84201

Fax number:
855-887-7737

Remember: Write "Foreign-owned U.S. DE" across the summit of Form 1120.

Of import:Please confirm the above mailing accost (or fax number) with the data listed on IRS: Form 5472 instructions (search for the section titled "When and Where to File"). The mailing address and fax number may change from time to time. The last fourth dimension nosotros confirmed the mailing address and fax number higher up was February 22, 2020.

Nothing is sent back

The IRS doesn't send anything back letting you know that they've received Form 5472.

As mentioned above, we recommend that you lot work with an accountant that is too an IRS Credence Agent, since they specialize in working with foreigners who accept formed LLCs in the U.S.

Extension of 5472 due date

As mentioned in the When is Form 5472 due section of this article, for most people, Form 5472 (and Form 1120) are due by April 15th… that is, April 15th in the year following the year that your LLC was formed.7

If you demand more than time to file Course 5472 + Form 1120, you can asking an Extension by filing Class 7004 and this volition extend the due engagement to file the forms 6-months, until October 15th.

Withal:This isn't an extension to pay any taxes (if you/your LLC owes taxes). It's just an extension to file the paperwork (Form 5472 + Form 1120). If you/your LLC owe any taxes, you must pay those taxes by the due date (if you lot overpay, you'll get a refund later on subsequently you file). We strongly recommend speaking to an accountant (or a few) to determine if you accept any United states of america revenue enhancement filing (or tax reporting) requirements.

If for you,Grade 5472 andForm 1120 are due by April 15th, thenForm 7004 must be postmarked by April 15th, too.

Beyond the tiptop of Form 7004, write "Foreign-endemic U.S. DE" across the top (just like it'southward required on Form 1120).

On Form 7004 (in Part ane, number ane), you need to tell the IRS for which form you are requesting an extension. This is done by entering a grade code. In that location is a tabular array nether Part one with the form codes. You lot need to use the course code for Form 1120 (since the 5472 is filed with the 1120).

Note: In Part 2, you'll see a question nigh a "foreign Corporation". Please keep in mind, y'all don't own a foreign Corporation or a strange LLC. A strange Corporation/foreign LLC is a company that was formed exterior of the United states of america. On the other hand, you take a US LLC; it just happens to be a foreign-owned LLC. However, a foreign-owned LLC and a foreign LLC (or foreign Corporation) are very different things.

Nosotros recommend working with an accountant to complete the balance of Grade 7004. For boosted information, please see IRS: Instructions for Course 7004.

Accurate books & records

Along with filing Form 5472 and Form 1120, a Foreign-owned Single-Member LLC must maintain financial records that prove the accurateness of Form 5472.

The financial records must item all Reportable Transactions with all Related Parties.

In addition to Reportable Transactions with Related Parties, your LLC's records should accurately reverberate your LLC's federal income tax return filing history along with whatever other required IRS filings.

The IRS tin can charge its penalty for failing to maintain proper books and financial records.

We strongly recommend working with an auditor on this.

$25,000 Penalty

The punishment used to be $10,000, simply in mid-2018, the IRS increased it to $25,000.

The IRS penalizes LLC Members (owners) that don't file Form 5472 on time. Each LLC Members will exist jointly and severally liable.

Note:  Filing a "substantially incomplete" Grade 5472 is considered as a late filing and will be penalized.

Your LLC will be first assessed a $25,000 penalty for late or non-filing of Form 5472. The assessment from the IRS usually comes with a notice reminding you to file Course 5472 within 90 days. If you fail to file Form 5472 within that grace period, the IRS will so assess another $25,000. Later on that, the IRS volition fine your LLC $25,000 every 30 days until you finally file Grade 5472 and pay the fees.

In addition to the penalties above, the IRS may also file criminal charges against yous under Sections 7203, 7206, and 7207 of the Internal Acquirement Lawmaking

Getting penalties reduced:If yous are late and demand to file Grade 5472, you may be able to get your penalties abated (reduced) if at that place is "reasonable cause". If your LLC makes $xx 1000000 (or less) and has a limited presence in/with the United States, the IRS is unremarkably more than flexible. We recommend working with a tax professional who is knowledgeable nigh foreign-endemic LLCs.

Other IRS tax forms for foreigners

Important:This article doesn't list all requirements strange owners of U.S. LLCs have with the IRS.

You lot volition need to speak with an accountant who specializes in working with foreigners who formed a U.S. LLC and are doing concern in the U.S.

Some things to research and speak to your auditor are:

• U.s.a. Nonresident Alien Income Taxation Return (1040NR/1040NR-EZ)
• Sales revenue enhancement and/or excise tax
• Deport of a U.S. merchandise or business (USTB)
• Effectively Connected Income (ECI)
• Stock-still, Determinable, Annual, Periodic Income (FDAP)
• Federal Withholding Taxation for Foreign Nationals
• Foreign Bank Account Annual Written report (FBAR)
• Existent Manor and Strange Investment Real Holding Tax Act (FIRPTA)
• Payroll taxes (if applicable)
• Federal and state unemployment taxes (if you have U.S. employees)
• Form 1042-South
• Grade W-8 BEN
• and more than

How to find an accountant for your LLC

We recommend calling a few accountants who specialize in working with foreigners. U.S. taxes for foreigners are much different than for U.S. citizens and the rules vary a lot depending on what country you live in (the U.S. has tax treaties with lx+ countries).

Nosotros recommend using the IRS Acceptance Agent list to find an accountant located in the country where you formed your LLC. All the accountants listed as IRS Acceptance Agents piece of work with foreigners.

Not sure? File anyway

If you're not sure whether or not y'all have to file Form 5472 and Course 1120 for your strange-owned LLC, as we've mentioned above, it's best to speak with an accountant.

And the full general rule of thumb in the revenue enhancement globe is that if you're not certain if you should file, it'southward best to file anyway.

Submitting information to the IRS does non automatically mean you have to pay taxes. It but just reports the information to the IRS and keeps yous and your LLC in compliance with U.Due south. tax laws.

IRS Contact Info

If you take whatsoever questions, you should first contact an accountant since the IRS doesn't requite revenue enhancement advice. However, if yous demand to contact the IRS, you can call their International Department at 1-267-941-1000. Their hours are Monday through Fri from 6am to 11pm U.S. Eastern Time.

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Source: https://drummondadvisors.com/en/2020/11/20/foreign-owned-single-member-llc-and-irs-form-5472/

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