# IRS Form 5472



## jasguild (Nov 21, 2020)

Hi I have a quick question about 5472

If a NRA sets up a US LLC for banking purposes only for the benefit of a foreign business does the 5472 need to report the underlying receipts and payments?

the NRA runs a business outside the US and the service is being provided outside the US but he created a US LLC only to assist with the difficulty in banking. As such the US LLC itself does not have any income, no US employee or office. All the monies received by the US LLC belong to the NRA. The US LLC holds some of the money, uses some of it to pay expenses in the US on behalf of the NRA and also transfers some to the NRA abroad. In essence the US LLC is just acting a custodian for the NRA and has no asset or income of its own.

Form 5472 does not seem designed to capture these monies going in and out of the US LLC as all the questions seems to be designed to capture items of income and expenses for the US LLC which does not exist in this situation.

Even line 12 and 25 for Other Amounts Received and Paid, in the instructions only require disclosure of other amounts received or paid that affect the US LLC's Taxable income. 

Am I missing something.

Thank you

jas


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## 255 (Sep 8, 2018)

jasguild -- An LLC is a separate entity and should be operated as such. Your LLC will effectively become "invalid," if you comingle personal funds. The LLC should have a separate checking account to operate (and any money belongs to the LLC, not the owner of the LLC.) There are options, where an LLC could hold a clients money, in escrow, but depending on the state, this might require a separate license.

You, or your offshore business, can certainly "contract" with your U.S. based LLC (in the U.S., LLC are state entities, not federal) and can do services on your behalf, but you will need a paper trail for the actions of the LLC, separate from the actions of your other business. You should also utilize a written contract where the LLC will earn "customary" fees for whatever services it provides. In other words, your idea to open an LLC in one of the 50 states and territories in the U.S. to serve as your alter ego is flawed.

IRS form 5472 is an attachment, to be filed with the LLCs normal annual income tax return (1120, 1120S, 1065, et.al.) LLCs are very flexible and can be taxed to benefit the owners. I think an LLC may still be valuable for your operations, but you need to operate it at "arms length" to yourself, or your other businesses. Good luck. Cheers, 255


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## jasguild (Nov 21, 2020)

255 said:


> jasguild -- your idea to open an LLC in one of the 50 states and territories in the U.S. to serve as your alter ego is flawed. IRS form 5472 is an attachment, to be filed with the LLCs normal annual income tax return (1120, 1120S, 1065, et.al.) LLCs are very flexible and can be taxed to benefit the owners. I think an LLC may still be valuable for your operations, but you need to operate it at "arms length" to yourself, or your other businesses. Good luck. Cheers, 255


Hi 255

Thanks for getting back to me. I really appreciate the comments and suggestions. however I believe we have addressed all the issues you have correctly identified in terms of the arms length of the transactions. The US LLC is not set up as an alter ego. It just has very limited purpose. The accounting appropriately reflects the owner ship of the monies and the liability associated with it and the arrangement has the appropriate documentation.

The question I was trying to get at is how these transactions should be disclosed on the 5472 or whether they need to be reflected at all. The regulations suggest that it be attached to a pro forma 1120 which is being done.

thanks again

Jas


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## 255 (Sep 8, 2018)

jasguild -- Disclaimer: I have never filed, nor have I ever heard of IRS form 5472, until I read your original post. However, it appears, in review of the form and it's instructions, the only transactions that need reported are those between the LLC and yourself/offshore business (s.) The 5472 is only an "information" return, it has no direct effect on your taxes owed (it's almost just a nuisance form, but with high penalties for not filing.) The U.S. Government has tons of these type of forms and are creating more all the time (it wasn't that long ago that these "information" returns were non-existent.) I know lots of folks want to "keep their privacy," but I fall on the side of giving them what they ask for and as long as I'm honest in my tax filings -- no issues.

If you are filing IRS form 1120, you are choosing to have your LLC taxed a a corporation. It used to be routine to "zero" out taxes in corporations (although, right now, the U.S. corporate tax rate is relatively low, that may change with the change in Government in the U.S.) There is no problem having a corporation with a "very limited purpose" or no purpose. Cheers, 255


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