Non-resident owner avoids a $25k penalty
This is an illustrative example of our work in international & non-resident tax. Below is the situation, how an IRS Enrolled Agent approaches it, the outcome those tools can produce, and what it means for anyone facing something similar.
The client & the challenge
A foreign owner of a US LLC had never filed Form 5472 and faced a $25,000-per-year penalty.
Situations like this rarely improve on their own. The right move is to get a licensed representative involved early, before penalties, interest, or enforcement escalate.
Our approach
We prepared the late 5472 + 1120 filings, requested reasonable-cause penalty relief, and set up ongoing compliance.
How we handle cross-border tax:
- 1Map the obligations. We identify exactly which US filings apply - FBAR, FATCA (8938), 5472, 1040-NR, or ITIN - based on your status.
- 2Get you an ITIN. As a Certifying Acceptance Agent we verify documents in-office and file the W-7, so passports never leave your hands.
- 3Come into compliance. For unfiled years we use the Streamlined Procedures and reasonable-cause relief to avoid or abate penalties.
- 4Apply treaty positions. We claim the correct treaty rates and exclusions (like the Foreign Earned Income Exclusion) so you are not double-taxed.
- 5Set an annual routine. We build a simple recurring filing plan so you stay compliant going forward.
The outcome
Penalties were abated and the LLC is now fully compliant with a simple annual filing routine.
Understanding International & Non-Resident Tax
US tax rules reach across borders. US citizens and residents are taxed on worldwide income and must report foreign accounts (FBAR/FATCA). Non-residents and foreign-owned US LLCs face their own filings - Form 5472, 1040-NR, and ITIN applications - where mistakes carry severe penalties (a missed Form 5472 alone is $25,000 per year).
As a Certifying Acceptance Agent, we handle ITIN (Form W-7) applications without you mailing original passports, and we bring expats and foreign owners into compliance using the right programs and treaty positions.
International facts worth knowing:
- US citizens abroad must file even with no US income - the FEIE and foreign tax credit usually prevent double tax.
- A missed Form 5472 (foreign-owned US LLC) carries a $25,000-per-year penalty.
- FBAR is required if foreign accounts exceed $10,000 in aggregate at any point in the year.
- The Streamlined Procedures let non-willful filers catch up penalty-free.
Frequently asked questions
Do I have to mail my passport for an ITIN?
No. As a Certifying Acceptance Agent we verify your documents directly, so your passport stays with you.
I'm an expat who never filed - am I in trouble?
Usually not if it was non-willful. The Streamlined Procedures let you catch up without penalties.
My US LLC has a foreign owner - what do I file?
A pro-forma 1120 plus Form 5472 each year. Missing it is a $25,000 penalty, so this is critical.
Will I be taxed twice?
Generally no - treaties, the Foreign Earned Income Exclusion, and foreign tax credits are designed to prevent double taxation.
Key takeaways
- Outcome: Compliant - and penalty-free.
- Handled by a federally licensed IRS Enrolled Agent, start to finish.
- Available remotely to individuals and businesses in all 50 states.
- The sooner you act, the more options you have - waiting adds penalties and interest.
This case study is an illustrative example of the type of matter we handle and how we approach it. It is a composite written for explanation, not an account of a specific client, and the figures shown are examples rather than actual client outcomes. Your result depends on your own facts and on IRS determinations, and no particular outcome is promised. See our disclaimer.
Facing something similar?
Get a free, no-pressure consultation with an Enrolled Agent who can tell you exactly where you stand.
Ready to Keep More of
Your Money?
Stop stressing about the IRS and start building wealth. Fill out the form to connect directly with a Libre Tax Strategist.