Form 5472 Transaction Workpaper and Record-Keeping File
Map related-party activity to Parts IV, V, and VI, reconcile processors without misusing Form 1099-K, and retain evidence that explains every reported amount.
Reviewed August 30, 2026 against the current IRS Form 5472 instructions, section 6038A regulations, and IRS Form 1099-K guidance.
Key controls
- Start with the legal counterparty and transaction character—not the bank-feed description.
- Part V is the core statement for formation, contributions, and distributions of a foreign-owned U.S. disregarded entity; Parts IV and VI remain relevant to other transactions.
- A processor payout is not automatically an owner distribution, and Form 1099-K gross receipts do not prove distributions.
- Use actual amounts when determinable; document any permitted reasonable estimate and the exchange-rate bridge to U.S. dollars.
- Retention follows relevance and the limitations period, not a universal three-, seven-, or permanent-year slogan.
The Workpaper's Scope
This page is the filing workpaper: it identifies foreign related parties, maps reportable transactions, reconciles the U.S.-dollar amounts, and indexes the supporting evidence. The companion foreign-owned LLC bookkeeping guide owns the broader operational ledger, chart of accounts, processor clearing, and monthly close. Keep one ledger and one Form 5472 workpaper; do not maintain two conflicting transaction totals.
A wholly foreign-owned U.S. disregarded entity is treated as a reporting corporation for the limited section 6038A reporting and record-maintenance rules. The current instructions provide a filing exception when it had no transactions reportable in Parts IV, V, or VI. Zero revenue is therefore not the test: formation, owner funding, owner-paid costs, distributions, loans, dissolution, and noncash activity can create the transaction that must be analyzed.
Transaction-to-Form Map
Treat this as a triage map, not a substitute for the current form. Monetary, nonmonetary, accrual, withholding, and transfer-pricing facts can change the final placement.
| Transaction | Workpaper mapping | Core evidence |
|---|---|---|
| Formation, owner contributions, and distributions | Part V for a foreign-owned U.S. disregarded entity | Formation invoice, bank/wallet proof, property valuation, owner authorization, and attached-statement roll-up |
| Loans, principal, interest, and guarantees | Part IV monetary categories; also test Parts V and VI for the actual facts | Signed note, rate support, maturity, payment schedule, accruals, security, and balance confirmation |
| Services, commissions, rents, royalties, and licenses | Part IV when paid or accrued with a foreign related party | Agreement, invoices, benefit received, allocation method, pricing support, withholding analysis, and payment proof |
| Property or services transferred without money or for less than full consideration | Part VI, with fair-market-value support | Description, parties, dates, valuation method, comparable evidence, and business purpose |
| Owner-paid expenses and later reimbursements | Facts determine whether Part IV, V, or VI applies | Vendor invoice, proof the owner paid, entity adoption/approval, reimbursement terms, and contemporaneous characterization memo |
| Unrelated customer receipts and vendor payments | Not reportable solely because they pass through the LLC | Keep in the books; separately identify any related party, owner settlement, recharge, or noncash element |
Required Ledger Fields
Five columns are rarely enough once currencies, accruals, processors, owner settlements, or multiple related parties exist. Each workpaper row should preserve:
Processors and Form 1099-K
Form 1099-K reports gross payment transactions. It does not identify the LLC's foreign owner, classify a related-party transaction, subtract fees or refunds, or establish that a payout was a capital distribution. Under current IRS guidance, a third-party settlement organization generally must issue the form when goods-and-services payments exceed $20,000 and more than 200 transactions; a platform may issue below that federal threshold, state rules can differ, and payment-card reporting follows separate rules.
Never cross-check distributions to gross Form 1099-K receipts. Instead build a processor bridge: gross receipts minus refunds, chargebacks, and processor fees equals the change in processor funds available, which then reconciles to payouts and the closing processor balance. A payout to an LLC bank account is an internal transfer; a payout to an owner account still needs distribution, reimbursement, loan, service, or other characterization.
Retain the annual tax form if issued, but use transaction exports, balance reports, fee reports, refund and chargeback files, and payout-destination records as the reconciliation evidence.
Owner-Paid and Formation Costs
Do not force every state fee, registered-agent invoice, subscription, or pre-formation purchase into “capital contribution.” Record who incurred the obligation, who paid it, whether the entity existed, whether it adopted the cost, whether reimbursement was expected, and how the amount is treated in both the owner's and LLC's records.
Keep a short contemporaneous memo for each ambiguous item. Formation-related amounts can belong in the Part V statement, while later reimbursement, service, loan, or noncash facts can point elsewhere. Pre-formation deductibility and capitalization under the income-tax rules are separate from identifying the reportable owner/entity transaction; substantial or cross-border arrangements warrant professional review.
U.S. Dollars and Estimates
- State all reported amounts in U.S. dollars and attach the exchange-rate schedule required by the current instructions.
- For accrual-basis Part IV or VI reporting, “paid” and “received” include accrued payments and receipts.
- Use actual amounts when determinable. When the instructions permit a reasonable estimate because the actual amount is not determinable, retain the method, inputs, reviewer, and later true-up; the defined range is at least 75% and not more than 125% of actual.
- Do not use the estimate rule as permission to replace obtainable bank, processor, contract, or related-party records with a guess.
Evidence File by Transaction
Capital and distributions
Owner approval, bank or wallet proof, source of funds, property FMV support, and an equity roll-forward that distinguishes distributions from reimbursements and loan settlements.
Intercompany services and IP
Executed agreement, invoices, time or usage evidence, allocation keys, proof of benefit, pricing support, withholding documentation, and payment/accrual reconciliation.
Loans
Note, principal schedule, rate and arm's-length support, interest accrual, payment proof, security or guarantee documents, and year-end confirmations in both parties' books.
Noncash and below-market transfers
Asset or service description, transfer date, ownership trail, fair-market-value method, comparables or appraisal, consideration actually exchanged, and Part VI statement support.
Preserve the document-to-ledger link and a searchable index. A folder of PDFs without a transaction ID, counterparty, or return mapping is an archive, not a defensible workpaper.
Retention and Foreign Records
Treasury Regulation §1.6038A-3 generally requires relevant records to be retained for as long as they may be material to the correct treatment of a related-party transaction, but not less than the applicable limitations period. Long-lived basis, debt, inventory, IP, or deferred items can therefore outlive a generic seven-year folder policy.
Required records may be kept abroad only if the U.S.-availability rules are satisfied. The regulation generally requires requested originals or duplicates within 60 days and English translations within 30 days after a translation request, with specific relocation and extension rules. Document the custodian, location, export process, language, and translation owner before an examination request arrives.
Electronic records are acceptable only if the accounting data, source-document link, index, and legible export remain available. Preserve prior-system exports and migration documentation when software or providers change.
Year-End Close
- Confirm the entity classification, reporting corporation, related parties, and transaction-based filing trigger.
- Reconcile every bank, processor, card, wallet, loan, and due-to/from-owner balance.
- Resolve unclassified owner and related-party entries; do not roll “miscellaneous” into the return.
- Reconcile Parts IV, V, and VI totals to the ledger, U.S.-dollar bridge, and line 1f aggregate.
- Index contracts, invoices, valuations, payment proof, exchange-rate support, and reviewer sign-off.
- Archive the filed Form 5472, pro forma Form 1120, attachments, delivery proof, and final workpaper together.
Primary sources
Turn the reconciled workpaper into the return
Use the current form instructions or the guided filer only after the related-party map and supporting file are complete.
Start the Form 5472 filer
