I filed Form 5472 on time — can the IRS still call it 'substantially incomplete' and assess the $25,000 penalty?

The current Form 5472 instructions are explicit: a Form 5472 that is substantially incomplete is treated as a failure to file. That language matters because IRC 6038A(d) triggers a $25,000 penalty for each taxable year in which the reporting corporation fails to furnish the required information. The IRS does not need to show you filed nothing — it only needs to show that what you filed left out material disclosures that the form requires. The penalty rule applies the same way for a blank return and for a return with material gaps.

Common substantial-completeness failures include: Part II with missing 25% foreign-owner address detail or country code, omitted Part V attached statement for the disregarded-entity 'other transactions' category (which includes capital contributions, distributions, formation, dissolution, and acquisition or disposition of the entity), omitted Part VI fair-market-value schedule for nonmonetary transfers, reporting only cash transactions when the entity is on the accrual method, and failing to write 'Foreign-owned U.S. DE' across the top of the Form 1120 when required by the instructions for FODE filers.

First, do not wait. The CP215 notice typically gives you a 30-day window before the assessment escalates and a 90-day window before continuation penalties accrue. Within that window, file a corrected Form 5472 with the missing schedules and required attachments. The IRS treats a corrected, substantially-complete return as superseding the earlier defective one for penalty purposes. Second, submit a reasonable-cause statement under penalties of perjury that explains why the original filing was incomplete (the owner-address detail was unavailable, the preparer omitted Part V in error, etc.). Reasonable-cause relief for substantially-incomplete returns is granted at high rates when the corrected return is filed promptly.