I Forgot to Check "Final Return" on 1120/5472 for My Foreign-Owned LLC: Will I Get the $25K Penalty?

Someone on Reddit had a foreign-owned LLC (Wyoming, opened from the EU) and had filed Form 1120 and Form 5472 for the last three years with no transactions. The company was dissolved by the state in September 2023. On the last filing they did not check the "final return" box on the 1120/5472 and were worried about the $25,000 Form 5472 penalty. They asked whether to file again or let it slide. You should file a corrected or superseding return for that last year with the "final return" box checked on Form 1120 (and Form 5472 consistent). Doing so clarifies to the IRS that the entity has ceased and may help reduce or avoid penalties; don't let it slide.

Bottom line: You should consider filing again (a corrected or superseding return) to include the final return check on Form 1120 (and ensure Form 5472 is consistent). That helps clarify to the IRS that the entity has ceased and may support your position on penalties. Filing promptly, even after the due date, can help in reducing or avoiding the $25,000 Form 5472 penalty and other penalties, especially when you have a history of filing and the only issue was omitting the final return designation. Your facts (no transactions, no bank account, state dissolution) can support reasonable cause or penalty abatement if the IRS assesses a penalty. For the right form (amended vs. superseding) and how to request abatement, consult a tax professional with experience in foreign-owned U.S. entities and Form 5472.

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Question from Reddit

Foreign owned LLC 1120/5472 penalty

Hi there,

I opened LLC from EU in Wyoming at September 2021. I did pay taxes for first year and filed for last three years 1120/5472 without any transactions. Unfortunately I now see that for the last form I didn't put final return check. I had 0 transactions and company was automatically dissolved by tax in September 2023 by state of Wyoming. Not sure what to do as company wasn't active in 2024, but yet in last file I did not put final return check. I really do not wanna have the 25k fine, as I said I filled every year correctly except last one. Should I file another one now or just let it slide? As I said also 0 transactions was made in the company, and no bank account is connected to it, but I would like in future visit USA as tourist.

Thanks for the help

Source: Reddit

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Analysis

The user is concerned about potential penalties for failing to mark the final return on their Form 1120 and the implications of not filing Form 5472 correctly for a foreign-owned LLC that has now been dissolved. They are especially interested in:

• The penalties for late or incorrect filings
• Whether corrective action (e.g., filing an amended or superseding return with the final return box checked) can help avoid the $25,000 fine per LLC

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Answer

You should consider filing again (or filing an amended/superseding return) to include the final return check on Form 1120, even if the company had no transactions. Doing so helps clarify to the IRS that the entity has ceased and may support your position when it comes to penalties.

Why it matters

• Form 1120 is used to report income, deductions, and credits. If you do not check the "final return" box, the IRS may not know the LLC has been dissolved, which can lead to follow-up notices or penalty assessments for non-filing in later years.
• Form 5472 is required for foreign-owned U.S. disregarded entities (including single-member LLCs). Failing to file Form 5472 can result in a $25,000 penalty per year, and the IRS may also assess additional penalties for late or incorrect Form 1120 filings.

What to do

• File a corrected or superseding return for the last year you filed, with the "final return" box checked on Form 1120, and ensure Form 5472 is consistent (e.g., marked as final if applicable). Filing promptly, even after the due date, can help in reducing or avoiding penalties, especially when you have a history of filing and the only issue was omitting the final return designation.
• Because your LLC had no transactions, no bank account, and was dissolved by the state, the facts support that you were not trying to evade reporting; you simply missed one checkbox. That context can be important for reasonable cause or penalty abatement if the IRS assesses a penalty.
• Consult a tax professional (CPA or tax attorney) with experience in foreign-owned U.S. entities and Form 5472. They can confirm the right form (amended vs. superseding), attach a brief explanation or reasonable-cause statement if needed, and help you respond to any IRS notices. For organizing your facts and filings before you see a pro, you can create an account with Margen to outline what you filed and what you're correcting.

Travel to the U.S.

• Resolving U.S. tax compliance (filing and correcting returns, addressing any penalties) is generally advisable if you plan to visit the U.S. as a tourist. Outstanding federal tax obligations can, in some cases, affect immigration or entry issues; getting your filings in order reduces that risk.

Related: Foreign-Owned Single-Member LLC: 5472 and 1120 · Can You File Form 1120 and Schedule F for the Same Business? · Entity Classification Election Mistake (LLC vs C-Corp) · Single-Member LLC Passthrough and Schedule C

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Applicable Sections

Federal / IRS

• Form 1120: Used by corporations (and certain entities filing as corporations) to report income, deductions, and credits. Checking the "final return" box indicates the entity has ceased and will not file in future years.
• Form 5472: Used to report certain transactions and information for foreign-owned U.S. disregarded entities (e.g., single-member LLCs). Failure to file can result in a $25,000 penalty per year under IRC § 6038A and related provisions.

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Practical Notes

• The $25,000 penalty for failing to file Form 5472 is per entity per year; the IRS may also impose late-filing or accuracy-related penalties for Form 1120. Filing the returns promptly, including a corrected final return, may help in reducing or avoiding these penalties.
• Keep copies of all prior 1120/5472 filings and any state dissolution documents; they support that you filed in good faith and that the only error was the final return designation.
• Do not "let it slide." Taking corrective action is usually better than waiting for the IRS to assess penalties; voluntary compliance is generally viewed more favorably.
• Margen can help you summarize what you filed and what you're correcting so you're prepared when you consult a tax professional or respond to the IRS.

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Limitations

This answer does not cover state tax obligations (e.g., Wyoming) or non-tax legal effects of dissolution. It is not legal or immigration advice. For advice tailored to your situation, including whether to file an amended vs. superseding return and how to request penalty abatement, consult a tax professional. Margen can help you organize your facts and filings before you engage a professional.