Reportable Transaction

A reportable transaction is the core of Form 5472. It is any movement of money, property, or value between your US LLC or corporation and a related foreign party, most often the foreign owner. The IRS uses this information to see how money flows between US companies and the people abroad who control them.

For a foreign-owned single-member LLC, the definition is extremely broad. It covers almost everything: putting money into the company, taking money out, lending money in either direction, paying rent, buying inventory, and paying for services. Even formation costs count. If you paid a $300 state filing fee from your personal card to set up the LLC, that is a reportable capital contribution.

Here is a simple example. Maria, who lives in Spain, owns a Wyoming LLC. During the year she wires $10,000 into the LLC bank account, the LLC pays her $4,000 for design work, and she withdraws $3,000 in profit. That is three types of reportable transactions: a $10,000 contribution, $4,000 in service payments, and a $3,000 distribution. Each amount goes in its own box on Form 5472.

Reporting these transactions is not optional and does not create tax by itself. The form attaches to a pro forma Form 1120 (or to a real Form 1120 for a corporation) and is due April 15 for a single-member LLC, with an extension available through Form 7004. Failing to report, or filing a substantially incomplete form, brings a $25,000 penalty per form per year. Multi-member LLCs report their income on Form 1065 instead, but corporations they own can still have Form 5472 duties.

Common reportable transactions

• Capital contributions from the foreign owner to the LLC
• Distributions or profit withdrawals to the owner
• Loans between the owner and the company, plus any interest
• Payments for services, rent, royalties, or inventory
• Company formation and dissolution costs paid by the owner