Under IRC §6038A(d), as amended by the Tax Cuts and Jobs Act (December 2017), the penalty for failing to file Form 5472 on time — or filing an incomplete or inaccurate form — is $25,000. If the failure continues more than 90 days after IRS notice, an additional $25,000 penalty applies for each 30-day period thereafter.
Penalty Structure
| Trigger | Penalty amount |
|---|---|
| Failure to timely file Form 5472 | $25,000 per form per year |
| Failure to timely file substantially complete form | $25,000 per form per year |
| Failure to maintain required records | $25,000 |
| Continued failure after 90 days IRS notice | +$25,000 per 30-day period |
| Fraudulent filing | Higher penalties + potential criminal referral |
Real 2025-2026 Enforcement Cases
- Case A: Non-US consultant, Wyoming LLC formed 2019, zero revenue, never filed. IRS assessed $150,000 (six years × $25K) in 2025. Reasonable-cause petition reduced to $75,000.
- Case B: Non-US SaaS founder, Delaware LLC formed 2022, $12K annual revenue, filed Form 1120 personally but not Form 5472. IRS assessed $25,000 for 2022. First-time abatement granted; full waiver.
- Case C: Non-US freelancer, dissolved LLC in year 1 without filing. $25,000 assessed. Reasonable cause denied.
- Case D: Non-US crypto trader, 3 unfiled years, $75,000 assessed. Voluntary disclosure program reduced to $25,000 total.
Reasonable Cause Exception (§6038A(d)(3))
The IRS may waive the penalty if the failure was "due to reasonable cause and not willful neglect." Historically successful arguments:
- Natural disaster affecting the filer or their records
- Serious illness or death of the person responsible for filing
- Erroneous IRS written guidance relied upon
- Records destroyed by fire, flood, theft (documented)
Historically unsuccessful:
- "I did not know about the rule"
- "My accountant did not tell me"
- "I had no US income so I thought I did not need to file"
- "The LLC never made any money"
- "I could not find a CPA who knew about Form 5472"
First-Time Abatement
IRS's First Time Abatement (FTA) program can waive one penalty per taxpayer per 3-year lookback window. Available if:
- You have a clean compliance history for the prior 3 years
- You are current on all other filings and payments
- The specific penalty is your first of this type
Request FTA in your penalty response letter; it is often granted for single-year Form 5472 lapses.
Streamlined Filing Compliance Procedures (Non-Willful)
For taxpayers who non-willfully missed multiple years, the Streamlined Foreign Offshore Procedures (for taxpayers outside the US) can waive most penalties. Requirements:
- File 3 years of amended tax returns
- File 6 years of FBARs (if applicable)
- File all delinquent Forms 5472
- Certify non-willfulness under penalty of perjury
If accepted, all Form 5472 penalties are waived.
Prevention Cost vs Penalty Cost
- DIY Form 5472 preparation: 3-5 hours annually, $0 direct cost
- Professional preparation: $500-1,500 first year, $300-800 subsequent
- Miss one year, IRS catches: $25,000 minimum, likely $50-100K after adjustments
The economics are clear: preparing Form 5472 correctly costs 0.5-3% of the penalty. There is no scenario where skipping filing saves money.