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Differences between form 5471 and 5472

  • June 23, 2025
  • Posted by: Sarwat Sayyed
  • Categories: Finance & accounting, Uncategorized
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form 5471 vs 5472 key difference

Confused between IRS Form 5471 and Form 5472? This quick guide explains the key differences between form 5471 and form 5472, filing requirements, and penalties—perfect for international business owners, tax professionals, and U.S. shareholders of foreign corporations. Stay compliant and avoid costly mistakes with this essential comparison.

 

Difference between form 5471 and 5472 

If you’re a U.S. individual or entity that owns a foreign corporation, you file Form 5471 to report financials and ownership details. In contrast, U.S.-based companies with at least 25% foreign ownership file Form 5472 to report specific transactions with foreign owners or related parties.

In simple terms:

  • Form 5471 = U.S. ownership in foreign companies

  • Form 5472 = Foreign ownership in U.S. companies

What Does Each Form Cover?

Form 5472

Form 5471 focuses on ownership and control of foreign corporations.
Form 5472 emphasizes financial transactions between U.S. businesses and their foreign affiliates.

Key Components of Form 5472

  • Cross-Border Transactions: U.S. businesses must disclose any reportable dealings with related foreign parties (e.g., sales, rent, royalties, interest, loans).

  • Foreign Ownership Disclosure: Identify any foreign owner holding 25% or more of the business, directly or indirectly.

  • Foreign Businesses in the U.S.: Any foreign business conducting U.S. operations must file if it has transactions with related parties.

  • Recordkeeping: Keep detailed records of all reportable transactions including pricing, terms, and involved parties.

  • Penalties: Failure to file leads to a $25,000 penalty. Additional $25,000 penalties apply for every 30-day delay after IRS notification.

Key Components of Form 5471

  • Financial Reporting: U.S. entities must provide full financial statements of the foreign corporation—income, expenses, assets, liabilities, and equity—even if there’s no income.

  • Subpart F & GILTI Reporting: Report earnings that fall under Subpart F and Global Intangible Low-Taxed Income rules.

  • Related-Party Transactions: Disclose all financial activities between the U.S. entity and its foreign corporation.

  • Penalties: Late filings attract a $10,000 fine, with penalties increasing up to $50,000 per form.

Who Needs to File Form 5471 vs. Form 5472?

If you are unaware or confused about which form to file, here is a complete breakdown to figure out which form you need to file.

Criteria Form 5471 Form 5472
U.S. citizen or resident File if you own 10% or more of a foreign corporation. File only if your U.S. business is 25%+ foreign-owned and transacts with them.
Represent a U.S. business File if your U.S. business controls a foreign corporation. File if your U.S. business is 25%+ foreign-owned and has reportable transactions.
Involved in foreign corporations Required if you’re an officer/director and hold 10% or more. Not required unless there are transactions with a foreign owner.
Foreign transactions Required for financial dealings with your foreign corporation. Required for transactions with foreign owners or affiliates.
Example John, a U.S. citizen, owns 15% of an Indian company — must file Form 5471. A U.S. firm owned 30% by a French company pays it for services — must file Form 5472.

Compliance Differences Between Form 5471 and Form 5472

Difference Form 5471 Form 5472
Entity Involved U.S. person owns a foreign corporation Foreign person owns a U.S. corporation or LLC
Ownership Threshold 10% or more 25% or more
Main Purpose Report foreign corporate ownership and finances Report transactions with foreign owners
Financial Disclosure Full financials (P&L, balance sheet, equity, etc.) Only cross-border transactions
Complexity Highly detailed; includes multiple schedules Simpler; focused on foreign-related transactions
Filing Attachment Attach with Form 1040 or 1120 Attach with Form 1120 or pro forma 1120
Penalties Start at $10,000; max out at $50,000 Start at $25,000; increase without limit
Statute of Limitations Remains open until the form is filed Same rule applies

Need Help?

[Schedule a Free Consultation Today]

Managing complex tax forms like 5471 and 5472 can be overwhelming. Mistakes—such as choosing the wrong category—can lead to penalties and tax issues.

Let Ledgers handle the paperwork for you. Our experts manage the full process from review to accurate filing. Whether you’re a U.S. company with a foreign subsidiary or a foreign investor in a U.S. firm, we’ve got you covered.

 

FAQs

Who needs to file Form 5471?
U.S. citizens who own 10%+ of a foreign corporation (shareholders, directors, or officers).

What is the purpose of Form 5471?
To report foreign corporate ownership and financials to the IRS.

What is Form 5472 used for?
To disclose transactions between U.S. companies and their foreign-related owners.

Can individuals file Form 5472?
No. Only businesses with 25%+ foreign ownership need to file this form.

What is the applicability of Form 5472?
It applies when a U.S. business is 25% or more foreign-owned and engages in reportable transactions.

How does LedgersCFO help?
We:

  • Accurately prepare and file Forms 5471 and 5472

  • Complete all financial schedules and transaction disclosures

  • Support audit-ready consolidated reporting

  • Advise on transfer pricing and structuring to maintain IRS compliance

 



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