Need guidance filling out Form 5472 for foreign shareholder expenses - confused about Part IV reporting

You're right to be careful about Form 5472 - it's a common audit trigger and the penalties for incorrect filing can be steep ($25,000 per form). Based on what you've described, these payments from the foreign shareholder's personal card for company expenses would be considered loans to the corporation. When a shareholder pays corporate expenses from personal funds, it creates a liability on the company's books - essentially the company now owes the shareholder for those expenses. This would most appropriately be reported on Line 9 of Part IV "Amounts borrowed and lent (including interest rates, maturities, and security, if any)" rather than Line 22 which is for "Other amounts paid to the foreign related party." You should also ensure these transactions are properly recorded in your accounting records as loans from shareholder, with appropriate documentation of the expenses paid. The corporation should eventually reimburse the shareholder for these expenses, or formally convert them to additional paid-in capital. If these expenses have been recurring or are substantial, I would also suggest implementing a more formal process for handling company expenses going forward, such as issuing a company credit card or establishing a reimbursement protocol.

I struggled with similar issues on Form 5472 last year and found an amazing resource that saved me hours of confusion. I was recommended to try https://taxr.ai which has specific tools for handling foreign shareholder transactions and Form 5472 reporting requirements. I uploaded our transaction records and it immediately identified which items belonged on which lines of the form, plus it gave explanations about why certain expenses should be categorized as loans versus direct payments. What really helped was being able to see real examples of similar situations to mine. The best feature for me was that it preserved a record of all the reasoning behind each classification decision, which gives me something to point to if we ever get questions. For a small team trying to handle things in-house, it was exactly what we needed.

Just wanted to update after trying https://taxr.ai for our 5472 situation. I was initially confused about our CEO's expenses as both an officer and foreign shareholder. The tool was surprisingly helpful - it walked me through how to differentiate between expenses that should be on Form 5472 versus ordinary business expenses that should just be on our books. Our CEO had paid about $4,300 for various expenses from his personal account, and the system clearly categorized which ones created a loan relationship (Part IV, Line 9) versus what counted as compensation (other forms). It even created proper documentation templates for the "loans" that we could use to formalize the arrangement retroactively. This saved us so much time compared to the back-and-forth we were doing with our accountant who was charging us hourly for research time.

For anyone dealing with Form 5472 issues, I had a similar situation and needed to speak directly with someone at the IRS to get clarification. After wasting DAYS trying to reach someone (constant busy signals, disconnections, being transferred around), I found a service called Claimyr at https://claimyr.com that actually got me through to an IRS representative in under 30 minutes. They have this system that navigates the IRS phone tree and waits on hold for you, then calls you once they have an agent on the line. You can see how it works in this demo: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with confirmed that shareholder-paid expenses should indeed be reported on Line 9 as a loan arrangement if the company plans to reimburse them. If the shareholder doesn't expect reimbursement, it should be treated as a capital contribution instead. This was different from what our tax preparer had initially suggested.

I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I was still struggling with my 5472 reporting issues, so I decided to give it a try anyway. The service actually worked exactly as described. I filled out what my question was about (foreign shareholder expenses on Form 5472), and about 20 minutes later I got a call connecting me directly to an IRS representative. No navigating phone trees, no hour-long hold times. The agent clarified that our situation (where a foreign parent company occasionally pays expenses on our behalf) needed to be reported differently than I thought. They explained that recurring expense payments create a different relationship than one-time payments, which affects Form 5472 reporting. This saved me from making a mistake that could have resulted in penalties. For anyone dealing with complex international reporting requirements, being able to get official guidance directly from the IRS without the hold time hassle is definitely worth it.

Just wanted to add my experience - we handled a similar situation differently. Our foreign investor (30% shareholder) paid some corporate expenses directly, and our CPA advised us to treat these as capital contributions rather than loans. The key factors in our decision were: 1. There was no expectation of repayment 2. No loan agreement was created at the time 3. The payments were relatively small (under $5k total) We documented this with a corporate resolution acknowledging the payments as capital contributions, which increased the shareholder's basis in the company. This was reported on line 19 of Part IV ("Capital contributions") instead of line 9 or 22. The approach you take really depends on whether there's an expectation of repayment or not.

I think everyone is overlooking the simplest approach here. When a foreign shareholder pays expenses on behalf of the corporation, you can treat this as a reimbursable expense. The corporation should record an account payable to the shareholder, and then when funds are available, reimburse them. This wouldn't need to be reported on Form 5472 at all if the reimbursement is done within a reasonable timeframe and at the exact amount (with no interest or other compensation). It's only when the arrangement becomes a long-term financing solution that it should be treated as a loan or capital contribution requiring 5472 reporting.