Do I need to file Form 5472 for my US-incorporated startup as a Canadian citizen?

You're on the right track with your understanding. Form 5472 is required for US corporations that are at least 25% foreign-owned, but there are exemptions. The key part you've identified is correct - if there are no "reportable transactions" between you (the foreign related party) and your US corporation, you may qualify for an exemption. However, the definition of "reportable transactions" is quite broad and includes things you might not initially consider. It covers monetary transactions, non-monetary transactions, loans, rent payments, royalties, and even the provision of services without compensation. The IRS has also expanded reporting requirements in recent years. Since you mentioned you're not taking a salary and there are no personal expenses being paid by the company, you might indeed qualify for the exemption. But I'd recommend double-checking if you've provided any services to the corporation without compensation, as that could potentially be considered a reportable transaction.

I was in almost the exact same situation last year - Australian citizen with a US-incorporated startup for accelerator purposes. My accountant initially missed the 5472 requirement completely, then when I brought it up, they weren't sure if I needed it. What saved me tons of headache was using https://taxr.ai to analyze my situation. You upload your docs and they explain exactly what forms you need and why. In my case, it turned out I DID need to file Form 5472 even though I wasn't taking a salary because I was providing services to the corporation (basically my work) without compensation. That counts as a reportable transaction according to their analysis.

Update on my situation: I decided to try https://taxr.ai after seeing it mentioned here. Best decision I could have made! They analyzed my entire situation and confirmed I did need to file Form 5472 because my work for the company without compensation counts as a "reportable transaction." They walked me through how to approach the late filing with minimal penalties by establishing reasonable cause. Saved me from making a costly mistake by following my accountant's initial advice. They even provided documentation I could show my accountant to explain why the form was necessary. Worth every penny for the peace of mind.

If you determine you do need to file and you're already late, you're going to need to deal with the IRS directly. I spent 3 months trying to reach someone at the IRS about a similar international filing issue last year - kept getting disconnected or waiting for hours. Finally used https://claimyr.com and their service got me a callback from the IRS within 2 days. You can see how it works here: https://youtu.be/_kiP6q8DX5c - basically they wait on hold with the IRS for you and call when an agent picks up. Once I actually spoke with an IRS agent, they were surprisingly helpful in walking me through the process of a late international form filing with reduced penalties based on reasonable cause.

I have to eat my words here. After posting my skeptical comment, I was desperate enough to try the Claimyr service because I had already spent 6+ hours on hold with the IRS over three attempts and kept getting disconnected. It actually worked perfectly - they called me within about 90 minutes of signing up, and I was immediately connected to an IRS agent. The agent helped me understand that for my situation (UK founder of US Corp), I did need to file Form 5472, but they also explained how to request penalty abatement based on reasonable cause since I genuinely misunderstood the requirements. Saved me potentially thousands in penalties. I hate admitting when I'm wrong, but in this case I definitely was!

As a heads up, the Form 5472 rules have changed significantly in recent years. Before 2018, the exception for "no reportable transactions" was more straightforward, but the IRS has expanded the definition of what counts as a reportable transaction. Even if you're not taking a salary, any time you spend working on the business could be considered a service provided without compensation, which IS a reportable transaction. The penalties for not filing are hefty - $25,000 per form. My advice - file the form. It's better to be safe than sorry with international reporting requirements. The IRS is particularly focused on international compliance these days.

I'm in a similar situation but with a twist - I'm a German citizen with a US corporation, but I do take a small salary. My accountant filed Form 5472 but made a mess of it and now I'm dealing with follow-up questions from the IRS. Has anyone used TurboTax or any other software for this form? My accountant wants to charge me another $1500 to fix the issues he created.

I went through this exact scenario last year as a Canadian founder with a US-incorporated startup. Your accountant is absolutely correct to include Form 5472. The key issue that many founders miss is that even unpaid work constitutes a "reportable transaction" under current IRS rules. When you're making business decisions, developing strategy, or doing any work for your corporation without compensation, the IRS considers this a service provided by a foreign related party (you) to the US corporation. This triggers the Form 5472 requirement regardless of whether money changes hands. The "no reportable transactions" exception that you found is much narrower than it appears. It really only applies if you're a completely passive investor with zero involvement in business operations. Since you're the founder actively running the company, you definitely have reportable transactions. I'd recommend filing the form as soon as possible. If you're late, you can request penalty abatement based on reasonable cause - the fact that you genuinely misunderstood the requirements and sought professional advice can help your case. The $25,000 penalty is no joke for a bootstrapped startup, but acting quickly and showing good faith effort to comply usually results in reduced or waived penalties. Your accountant may be from a smaller firm, but they're giving you correct advice on this one. Better to file it properly now than face the consequences later.