If you own a U.S. company for your software agency but live abroad, you might be asking if you need to file Form 5472 with the IRS. The answer depends on your entity structure, not the kind of software services you provide.
Whether you write code, build custom apps, or deliver IT support, the IRS looks only at whether you formed a foreign-owned single-member LLC or a corporation with at least 25% foreign ownership. In those cases, yes, Form 5472 must be filed. If your agency is a multi-member LLC taxed as a partnership, Form 5472 usually does not apply.
This guide explains what Form 5472 is, how to know what type of company you have, what information is reported, and why even a software agency with no paying clients may still need to file. We’ll use an agency example, but the rules apply across industries.
What is Form 5472?
Form 5472 is an information return used by the IRS to track transactions between U.S. companies and their foreign owners. It isn’t a tax return, but the IRS uses it to see if money is moving across borders in ways that should be monitored. If your software agency is foreign-owned, you’re likely required to file it.
Transactions that trigger filing include owner contributions, loans, reimbursements, or payments made between you and the business. Even if your agency had no revenue in its first year, if you funded it from abroad, that alone means Form 5472 is required.
Who must file Form 5472?
It depends entirely on your entity type:
- A foreign-owned single-member LLC must file Form 5472 with a pro forma Form 1120.
- A U.S. corporation with 25% or more foreign shareholders must file Form 5472 along with its full Form 1120.
- A multi-member LLC taxed as a partnership files Form 1065 instead, not Form 5472.
How to know what type of company you have
It’s common for founders who used formation companies to be unsure about their structure. Here’s how you can check:
- If you set up an LLC with only one owner and never filed a special election, you almost certainly have a single-member LLC. Look at your EIN confirmation letter. If your name is followed by “Sole Mbr” or the letter describes the entity as “disregarded,” that’s confirmation.
- If your LLC has more than one owner, it is a multi-member LLC by default. Your EIN letter may show the applicant’s name followed by “Mbr,” which indicates multiple members. Multi-member LLCs file Form 1065.
- If you formed a corporation (such as a Delaware C-Corp), you file Form 1120 every year. If 25% or more of it is foreign-owned, you also file Form 5472.
- If you ever filed Form 8832 or 2553 to change your classification, that election may override the default treatment. Reviewing those forms will confirm.
What information goes on Form 5472?
The IRS asks for basic company details (name, EIN, state, address), owner information (name, country, ownership percentage), and reportable transactions. For a software agency, these transactions might include funding from the owner to pay developer salaries, contractor invoices, or software subscriptions.
Reimbursements back to the owner also count. Even without client revenue, these movements require reporting.
When is Form 5472 due?
The deadline is the same as corporate tax filings. For calendar-year companies, Form 5472 is due April 15, with an extension available to October 15 using Form 7004. The form is never filed on its own—it must be attached to either a pro forma Form 1120 (for single-member LLCs) or a full Form 1120 (for corporations).
Missing the deadline can result in steep fines. The penalty for a late or missing Form 5472 is $25,000 per year. Ignoring IRS notices can add additional $25,000 penalties. The penalty applies even in years when your agency didn’t generate income.
Common questions software agency founders ask
One frequent question is whether it matters what services you sell. It doesn’t. Whether you’re coding mobile apps, running IT projects, or building websites, the IRS only looks at your entity type.
Another question is whether an agency with no revenue must file. The answer is yes, if you had any reportable transactions such as owner contributions or reimbursements. The IRS requires filing even when there were no sales.
Some founders also ask about catching up if they missed a year. Bookmate does not usually prepare past filings on your behalf, but we can guide you on how to approach resolving missed filings and avoiding further penalties.
How to stay ahead of filing
Track every transfer of money between you and your U.S. agency. If you put in funds, record whether it was a loan or a capital contribution. If the agency pays you back, note it clearly. This ensures everything is ready when preparing Form 5472. Filing before the deadline also avoids last-minute stress and gives time to handle any IRS questions.
Example for a software agency
A founder in India sets up a Delaware single-member LLC to run a custom software development agency. In the first year, there are no clients, but she wires $20,000 into the company account to cover employee salaries and hosting costs.
Even without client revenue, the $20,000 transfer is a reportable transaction. She must file Form 5472 with a pro forma 1120. Filing on time prevents the $25,000 penalty and keeps the company compliant.
How Bookmate helps software agencies
Bookmate specializes in federal U.S. filings for foreign-owned companies. For software agencies, we:
- Prepare and file Form 5472 with the pro forma 1120 for single-member LLCs.
- Prepare and file Form 1120 with Form 5472 attached for corporations with foreign ownership.
- Submit filings from within the U.S., ensuring the IRS accepts them.
- Guide you on how to deal with past years if you’ve missed filings.
We don’t apply for EINs or ITINs directly, but we work with theitin.com for ITINs and recommend trusted formation companies for EIN support. Our focus is keeping your IRS filings correct and penalty-free.
Final thoughts
Running a software agency through a U.S. entity while living abroad is completely possible, but compliance is critical. The IRS doesn’t care about your service offering—it cares about your entity type. If you operate as a foreign-owned single-member LLC or corporation, Form 5472 is almost always required. Even without client revenue, filing is necessary if there were any owner-related transactions.
Bookmate helps agency owners around the world file Form 5472 correctly and on time, so they can focus on building their software businesses without IRS worries.
Learn more at trybookmate.co or book a consultation today.
