TITLE: Form 5472 vs the 1% Remittance Tax: A 2026 Guide for Foreign-Owned U.S. LLCs
International sellers using a U.S. LLC face two important compliance topics in 2026: Form 5472 reporting and the new 1% remittance transfer tax.
These rules are separate. Form 5472 is an information return. The remittance tax is an excise tax on certain transfers funded with physical instruments. Understanding the difference will help you avoid costly filing errors and keep your U.S. operations organised.
This guide explains the latest IRS position as of August 2026, including Form 5472 penalties, filing mechanics, enforcement risks, and what the remittance tax means for cross-border ecommerce businesses.
Start with the key distinction: Form 5472 is not a 1% tax
Form 5472 does not charge a percentage on international transfers.
It requires certain foreign-owned U.S. corporations and foreign-owned U.S. disregarded entities to report transactions with related parties. A single-member U.S. LLC owned by a non-U.S. person may fall into this category.
The 1% remittance transfer tax is a separate measure introduced under the One, Big, Beautiful Bill. It generally applies from 1 January 2026 when a remittance transfer from the United States is funded using:
- Cash.
- A money order.
- A cashier’s check.
- Another similar physical instrument.
The IRS announcement on the remittance transfer tax confirms that remittance providers generally collect the tax and report it through Form 720.
Your business does not report this 1% charge through Form 5472.
Check whether your foreign-owned U.S. LLC must file Form 5472
The IRS treats a domestic disregarded entity wholly owned by a foreign person as a separate corporation for limited information-reporting purposes under section 6038A.
This means a foreign-owned single-member LLC may need to file:
- A pro forma Form 1120.
- One or more Forms 5472 attached to that filing.
You may have a filing obligation when your LLC has reportable transactions with its foreign owner or another related party. Common examples include:
- Capital contributions from the foreign owner.
- Distributions to the foreign owner.
- Loans to or from the owner.
- Reimbursements between the owner and the LLC.
- Payments for services provided by a related foreign business.
- Payments for intellectual property, software, or other assets.
- Transactions connected with forming, acquiring, dissolving, or disposing of the LLC.
- Non-cash or less-than-full-consideration transactions.
Your marketplace sales to unrelated customers are not automatically Form 5472 transactions. However, the related-party activity supporting your U.S. structure may still create a reporting requirement.
The IRS Form 5472 instructions explain that a separate form is generally required for each related party with reportable transactions.
Prepare for strict processing and Form 5472 penalties
The IRS states that a penalty of $25,000 may apply for each failure to file a complete and correct Form 5472 by the due date.
The penalty may apply when you:
- Do not file Form 5472.
- File it late.
- File it in the wrong manner.
- Submit a substantially incomplete form.
- Fail to keep the required supporting records.
If the failure continues for more than 90 days after the IRS sends a notice, an additional $25,000 penalty may apply for each 30-day period, or part of a 30-day period, for each related party involved. The IRS states that there is no maximum penalty amount for these continuation penalties.
These are the main Form 5472 penalties to monitor in 2026:
- Initial failure: $25,000 per failure.
- Continuing failure: an additional $25,000 for each 30-day period after the 90-day notice period.
- Record-keeping failure: potentially subject to the same initial penalty framework.
- Interest: may continue to accrue on assessed penalties until paid.
The IRS does not describe Form 5472 enforcement as “automated” in its official instructions. However, the fixed-penalty structure and system-based processing mean that you should not rely on an informal grace period. A late or incomplete filing can create significant exposure even where the LLC has little or no taxable income.
Review the IRS international information reporting penalties page for the current penalty treatment and relief procedures.
File Form 5472 with the correct pro forma return
A foreign-owned U.S. disregarded entity generally cannot file Form 5472 by itself.
Instead, attach it to a pro forma Form 1120. The IRS instructions state that the pro forma Form 1120 requires limited information, including the entity’s name, address, and specific identifying items on the first page.
For a foreign-owned U.S. disregarded entity, the IRS currently requires paper or fax filing. The form cannot be filed electronically by the disregarded entity.
The IRS instructions identify the dedicated submission process:
- Write “Foreign-owned U.S. DE” across the top of the Form 1120.
- Attach the completed Form 5472 and any required schedules.
- Fax the filing at the IRS-prescribed number, or mail it to the dedicated Ogden, Utah address.
- Keep evidence of submission, including fax confirmation or tracked delivery records.
You may request additional time by filing Form 7004 by the original due date. An extension gives you more time to file. It does not remove the requirement or automatically correct incomplete information.
For a calendar-year entity, the usual filing deadline is generally in the fourth month after the end of the tax year. Confirm the exact deadline based on the owner’s U.S. tax year and the entity’s filing position.
Build a transaction record before the deadline
Do not wait until filing season to reconstruct your related-party activity.
Maintain a monthly or daily record of transactions involving:
- The U.S. LLC.
- The foreign owner.
- Any parent or sister company.
- Related foreign suppliers.
- Related service providers.
- Related payment accounts.
- Loans and capital accounts.
Your records should reconcile to the bookkeeping system and business bank statements. Keep invoices, agreements, payment references, exchange-rate calculations, loan records, distribution details, and capital contribution evidence.
This process is especially important for international ecommerce sellers. A U.S. LLC may receive marketplace settlements, pay fulfilment providers, purchase inventory, reimburse its owner, and transfer funds across several countries. Without a clear transaction trail, it becomes difficult to distinguish customer sales from related-party funding or distributions.
A structured tax compliance system for ecommerce marketplaces can help you connect payment data, accounting records, and filing requirements.
Understand the 1% remittance transfer tax
The 1% remittance transfer tax began applying to covered tra
