Over the past year our review team has seen hundreds of Form 5472 drafts — some we prepared from scratch, some we took on from founders who had tried to file themselves, and some we reviewed as a second opinion for other firms. The errors cluster. Here are the ten we see most often, in rough order of how costly each one is if it slips through.
1. Treating a zero-income year as “nothing to file”
By a wide margin, the single most common misconception. The reasoning sounds reasonable: “My LLC made no money this year, so there is nothing to report, so there is nothing to file.” It is wrong because Form 5472 is an information return, not an income return.
A single-member LLC owned by a non-US person files Form 5472 for every tax year in which there is any reportable transaction between the LLC and the owner. A capital contribution during formation counts. A $200 transfer to a personal account counts. A single AWS bill paid from a personal card counts. The zero-income threshold does not apply.
The cost of this mistake: $25,000 per missed filing, under 26 U.S.C. §6038A(d).
2. Mis-matching the legal name
The 5472 asks for the reporting corporation’s legal name. The IRS matches it against the CP 575 (or 147C) letter in the IRS’s own records. “ACME Labs LLC” and “Acme Labs, LLC” are different documents to the IRS. “Acme Labs, LLC” and “Acme Labs LLC” (one with a comma, one without) are different documents to the IRS.
The fix is boring but mechanical: open your CP 575, read the legal name character-for-character, type it into the 5472 character-for-character. If you no longer have your CP 575, request a 147C — the IRS re-issues the same information under a different letter code.
During BorderFile intake we flag any legal-name mismatch between what you type and what the IRS record shows. In an uncomfortable number of cases, the formation documents at the state (Delaware, Wyoming) show a slightly different name than the IRS record. That is a separate problem — the state record is usually what gets corrected — but the 5472 must match the IRS record, not the state record.
3. Missing the “Foreign-owned U.S. DE” header
The pro-forma 1120 that accompanies the 5472 must have the words “Foreign-owned U.S. DE” at the top of page 1. The IRS uses that header to route the attachment to the right processing stream. Without it, the whole package can be returned.
This is one of the easiest mistakes to make and one of the easiest to catch — but only if you know to look. BorderFile adds the header automatically. Self-filers routinely miss it because the 1120 template they are using (TurboTax, a free PDF, a template from a friend who used to work in a US tax firm) was built for real 1120s and does not expect the pro-forma header.
4. Owner-paid expenses missed entirely
Our second-most-common review bounce after legal-name mismatches. The founder prepared the 5472 from the LLC’s bank statements alone and never looked at their personal card. Reviewer asks: “Did you pay any LLC expense from your personal card this year?” — the answer is almost always “oh, yes, a few”.
Those few are related-party transactions. They need to be in the 5472 category 6 (owner-paid expense / reimbursement in). They need to be totalled accurately. And they usually do not appear on the LLC’s own bank statement.
The fix: during intake, specifically pull your personal card statement for the tax year and search for anything that looks like an LLC expense. AWS, cloud providers, domain registrars, SaaS subscriptions, US business travel. If you did any of this on a personal card, flag it.
5. Netting contributions and distributions
The 5472 wants gross amounts in each direction. If you contributed $10,000 in March and withdrew $3,000 in November, the 5472 shows $10,000 in category 1 (contribution) and $3,000 in category 2 (distribution). Not $7,000 in category 1. Not $3,000 in category 1 and $0 in category 2.
Netting feels tidier but it hides information the IRS specifically wants to see. Our reviewer flags netted totals as a matter of routine; self-filers who net often do not realise it is an error until the reviewer looks.
6. “Loans” with no documentation
A capital inflow from the owner can be a contribution or a loan. The difference matters: a loan creates a liability that can later be repaid without triggering a distribution event; a contribution is equity-like.
To be a bona fide loan, the IRS wants to see:
- A written promissory note.
- A stated interest rate (ideally at or above the AFR).
- A stated repayment schedule.
- Actual repayment behaviour matching the schedule.
If any of these is missing, especially the written note, calling the inflow a “loan” is wishful thinking. BorderFile recategorises undocumented “loans” as contributions during review. The owner is welcome to document the loan terms and bring it back — but a label without supporting paperwork does not change the underlying tax treatment.
7. Using a residential overseas address on the pro-forma 1120
Technically allowed. Practically bad. The IRS may route correspondence to the address on the filing; a residential address overseas means a letter arrives weeks (or months) after it was sent, if at all. A US registered-agent address is almost always the right choice.
Related mistake: using an old residential address because that is what is on the formation document. If you moved, your filings should move with you.
8. Property contributions forgotten
If you (the owner) brought a laptop, a domain, a design asset, or any other property into the LLC for business use at formation or afterwards, that transfer is a related-party transaction. It is a property contribution at its fair market value.
Property contributions are missed because they do not appear on any bank statement. The reviewer catches them by asking a direct question: “Any property transferred into the LLC that year?” The answer is often “yes, now that you mention it”.
9. Faxing to the wrong number
The IRS fax number for 5472 can change season to season. Some filers remember a number from a previous year, dial it, get a dial tone, and conclude the filing went through. Months later, the IRS asks why a filing was never received.
The fix: look up the current fax number from the current year’s 5472 instructions, every time. Never dial from memory. Keep the dialled number logged alongside the fax confirmation.
BorderFile reads the fax number from a versioned config entry per tax season; we never hard-code it.
10. No proof of transmission kept
A faxed filing is only as useful as its confirmation page. If the IRS ever queries whether the filing arrived, the confirmation page is the entire case. Yet founders routinely do not save it, or save a dialled-out receipt without the full confirmation page.
The fix: save the confirmation page as a PDF, store it with the filing, and keep it for at least seven years (the general US tax recordkeeping horizon). BorderFile stores it automatically on your filing record and bundles it into the proof pack.
The pattern underneath
If you look at these ten mistakes together, they fall into three families:
- Scope errors (mistakes 1, 4, 8): the filer underestimated what counts as reportable.
- Documentation errors (mistakes 2, 3, 7, 9): the filer typed the wrong data onto the correct form.
- Evidence errors (mistakes 5, 6, 10): the filer did not keep or produce the documents that back the filing.
A good review process catches all three. A good preparation workflow — statement intake, transaction tagging, legal-name validation, reviewer checklist, EA/CPA sign-off, fax confirmation stored — exists specifically because any individual filer, no matter how careful, will make at least one of these mistakes at least once.
What to do if you have already made one
If you are reading this and realising a prior filing has one of these errors, two next steps:
- Do not panic. Many of these errors are correctable without a penalty if addressed before the IRS raises them. First-time abatement is often available for a first-year miss; reasonable-cause abatement is available for most others, with proper documentation.
- Talk to a credentialed professional. For a straight re-file we can do that as a Late / catch-up engagement. For anything that already has an IRS notice attached to it, the expert desk is the right starting point.
The one thing not to do is file the next year’s return without correcting the prior-year error. The IRS reads the sequence of filings; introducing a contradiction in year two is worse than a clean amended filing in year one.
If you want a review of a specific filing before you send it, email support@borderfile.io with the draft and we will run our checklist against it.