Form 5472 penalty calculator

This calculator applies the penalty rules written in the law to your situation. It shows the maximum the IRS can assess, before any relief. Most founders who catch up on their own, with a clear explanation, never pay that amount. The rest of this page explains where the numbers come from and how to bring them down.

How the numbers are calculated

The penalty comes from section 6038A(d) of the Internal Revenue Code, and the Instructions for Form 5472 repeat it:

• Initial penalty: $25,000. It "will be assessed on any reporting corporation that fails to file Form 5472 when due and in the manner prescribed". For a foreign-owned LLC, the reporting corporation is your LLC. The IRS manual (IRM 20.1.9.5.4) counts it "once per related party per taxable year". With one foreign owner, that is $25,000 for each year that is missing.
• Continuation penalty: another $25,000 per 30-day period. If the failure "continues for more than 90 days after notification by the IRS", $25,000 is added "with respect to each related party for which a failure occurs for each 30-day period (or part of a 30-day period)". The law sets no maximum for it.
• Incomplete counts as missing. The instructions say that "filing a substantially incomplete Form 5472 constitutes a failure to file Form 5472." The same penalty applies when the records the IRS requires are not kept.

The calculator multiplies these amounts by the number of years and related parties you enter. For the continuation penalty, it counts the 30-day periods that have started since the 90th day after the date on the notice.

What the result does not include

• Other returns. If the LLC is late on other filings (for example a Form 1065 for a multi-member LLC, or your personal Form 1040-NR), those have their own penalties.
• Interest. The IRS also charges interest on assessed penalties that are not paid.
• Relief. The result assumes no relief at all. That is the point of the next section.

How to bring the penalty down

1. File every missing year now. The IRS manual recommends that reasonable cause "not be considered for any year until all delinquent returns have been filed". Our catch-up guide walks through each packet.
2. Attach a reasonable cause statement, signed under penalties of perjury. The manual says reasonable cause "will be applied liberally" to a small corporation (gross receipts of $20,000,000 or less) that did not know about the requirement, has limited presence in the United States and answers the IRS promptly. That describes most founders abroad.
3. Ask about First-Time Abatement. When the penalty was assessed automatically because Form 5472 was attached to a late Form 1120, the manual allows First-Time Abatement in some cases where the Form 1120 would have qualified, which a pro forma return showing $0 tax can do.
4. Never let a notice sit. According to the manual, reasonable cause generally cannot extend beyond 90 days after the IRS notifies you. Past that point, the continuation penalty keeps adding up.

The line-by-line guide shows how to fill in the forms themselves.

Frequently asked questions

Is the penalty really $25,000 even if my LLC made no money?

Yes. The penalty is not tied to income or tax due. It applies because a required information return is missing. That is also why relief based on reasonable cause matters so much for small LLCs.

Does the penalty apply per form or per year?

Per related party and per tax year. With one foreign owner and no other related party, one missing year means one $25,000 penalty.

When does the 90-day period start?

On the date the IRS mails its notice of the failure. The calculator uses the date printed on the notice for that reason. Keep the envelope and the notice.

Is this calculation tax advice?

No. It applies the rules written in the law to the numbers you enter. Whether relief applies depends on your facts, which is what a review of your file is for.