Resolve tax notice for non-resident LLC

I completed research on how to resolve a tax notice for a non-resident (foreign-owned) U.S. LLC.

The research collected authoritative federal and state guidance, practical steps to respond to federal and state notices, Form 5472 filing and penalty details, withholding and nexus issues at state level (emphasis on California, New York, Texas, and general notes for Florida), and remedies (penalty abatement, installment agreements, Offers in Compromise, TAS).

The materials below support a concise, actionable plan you can follow to resolve most notices for foreign-owned or nonresident-member LLCs.Short practical summary (action checklist)

I completed research on how to resolve a tax notice for a non-resident (foreign-owned) U.S. LLC.

The research collected authoritative federal and state guidance, practical steps to respond to federal and state notices, Form 5472 filing and penalty details, withholding and nexus issues at state level (emphasis on California, New York, Texas, and general notes for Florida), and remedies (penalty abatement, installment agreements, Offers in Compromise, TAS).

The materials below support a concise, actionable plan you can follow to resolve most notices for foreign-owned or nonresident-member LLCs.Short practical summary (action checklist)

Read the notice immediately and note the deadline and contact information.

Don’t ignore the notice — missing deadlines increases penalties/collection.

Compare the IRS/state assertion with your books and previously-filed returns.

Gather documents

LLC formation docs, EIN letter, bank records, invoices, K-1s, Form 5472/1120 (if filed), partnership returns (Form 1065) or 1040-NR/1040 filings, withholding paperwork. 5. If the notice is about missing Form 5472 or pro‐forma Form 1120, prepare and file them immediately (attach 5472 to a pro‐forma 1120, write “Foreign-owned U.S. DE” across the top) and include an explanation and supporting documentation. 6. If you don’t have an EIN/ITIN, apply (SS-4 for EIN; Form W‐7 for ITIN) as soon as possible — many filings and waivers require a TIN.

Pay what you can by the due date to limit interest/penalties; if you cannot pay, contact the IRS/state to request an installment agreement or short-term extension.

Request penalty abatement using “reasonable cause” explanation (document facts showing reasonable cause), or request relief under first-time penalty abatement (if eligible) or other IRS relief procedures.

If you can’t resolve by normal channels or face collection action, contact the Taxpayer Advocate Service (TAS).

Engage a U.S. tax attorney or international tax CPA experienced with foreign-owned LLCs to prepare filings, communications, and penalty relief requests.Key federal compliance / notice points- Form 5472

foreign-owned single-member U.S. LLCs (disregarded entities) that have reportable transactions with related parties must file Form 5472 and a pro‐forma Form 1120. The form is due with the LLC’s Form 1120 due date (generally April 15 for calendar-year filers) and can be extended with Form 7004. (See IRS instructions for Form 5472.)- Penalties: IRS instructions state a $25,000 penalty is assessed for failure to file Form 5472 as required; if the failure continues more than 90 days after IRS notification, an additional $25,000 penalty can apply. Filing an incomplete Form 5472 may be treated as failure to file. Maintain books and records to substantiate Reportable Transactions. (See Form 5472 instructions.)- Notices and response: IRS notice pages (CP and LTR guidance) explain that you should read the notice, respond by the due date, supply supporting documents if disputing, and pay what you can to reduce additional interest and penalty charges. If the notice is a Notice of Intent to Levy (e.g., CP504), act immediately: pay, enter into an installment agreement, or appeal/contest as instructed. TAS is available when normal IRS channels do not resolve the matter. (See IRS notice guidance, CP504 page, and TAS.)State-level issues (high-level; state pages for details)- California (FTB): California has active nonresident partner/member withholding rules and an LLC annual tax/fee structure. Withholding rules generally require pass-through entities to withhold on nonresident members’ California-source income (FTB Publication 1017 and related guidance). California offers forms and a process to apply for reduced withholding or waivers (Forms 592-A, 592-F, 592-B, Form 588, Form 590). LLCs must also consider Form 568 filing, nonconsenting nonresident (NCNR) member tax rules, and potential withholding obligations even if the LLC pays the NCNR tax. (See FTB pages.)- New York (DTF): New York requires certain LLCs that have New York source income to meet filing and fee obligations (Form IT-204-LL and partnership/IT-204 filing rules). If an LLC has NY source income, the partnership/LLC filing requirements and withholding obligations must be evaluated. (See NY IT-204-LL instructions.)- Texas (Comptroller): Texas imposes franchise tax and sends notices for filing/payment problems; their franchise tax notices page explains the error messages and how to resolve notices (franchise reports, payments, reinstatement/termination). Texas has no personal income tax, but franchise tax compliance and notice response is critical for entities registered or doing business in Texas. (See Texas Comptroller guidance.)- Florida: Florida has no personal income tax, but businesses registered or doing business in Florida must comply with relevant state business taxes, sales taxes, and registrations; confirm Florida DOR business notice procedures where applicable. (Note: Florida is generally favorable for member income but state nexus and sales/excise taxes may still apply.)Remedies and administrative options- File missing forms promptly (e.g., Form 5472 + pro‐forma Form 1120, partnership Form 1065, 1040-NR where required). Follow IRS instructions for where/how to file (mail or fax for 5472/pro‐forma 1120). - Pay to limit interest and extra penalties; if unable to pay in full, propose an installment agreement (Form 9465 or online Payment Plan). - Request penalty abatement: prepare a reasonable‐cause letter with documentary support showing facts and circumstances (e.g., illness, natural disaster, erroneous professional advice, inability to obtain required TIN despite diligent effort). The IRS and state agencies review on a case-by-case basis. - Consider penalty relief programs and first-time penalty abatement if eligible. - If facing an imminent levy or lien, immediately contact the number on the notice; request a Collection Due Process appeal or Appeal/Collection Appeals Program (CAP) or TAS help. - For large or complex exposures, consider Offers in Compromise (OIC) or bankruptcy counsel in extreme cases — both require specialized advice.Practical drafting and evidence for responses- When you return correspondence: include the notice copy, a concise explanation of corrective actions taken (e.g., attached completed Form 5472 with pro‐forma 1120 and proof of mailing/fax), timeline of events, supporting documents (bank statements, invoices, trust/ownership documents), and a signed statement of reasonable cause if requesting abatement. - For Form 5472 filings sent late, include a cover letter explaining the reason, evidence of reasonable cause, proof of efforts to get an EIN/ITIN, and a request for penalty relief. - Keep certified mailing/fax confirmations and copies of everything sent.When to get professional help- Engage a U.S. international tax CPA or tax attorney immediately if: (1) penalties are large (e.g., $25k+), (2) notice threatens levy or lien, (3) you’re unsure about whether the LLC had a U.S. trade or business (ECI), (4) multi-state nexus/withholding issues exist, or (5) you need representation for appeals/TAS. Use firms or practitioners with demonstrated Form 5472 experience (see national firms and specialist firms referenced below).Sources and supporting excerpts (verbatim excerpts included below)- IRS Instructions for Form 5472 (12/2024): https://www.irs.gov/instructions/i5472 Excerpts: "Penalties for failure to file Form 5472. A penalty of $25,000 will be assessed on any reporting corporation that fails to file Form 5472 when due and in the manner prescribed. ... If the failure continues for more than 90 days after notification by the IRS, an additional penalty of $25,000 will apply." "Foreign-owned U.S. DEs ... you cannot file Form 5472 electronically... Form 5472 must be filed with a pro forma Form 1120."- IRS Understanding your IRS notice or letter: https://www.irs.gov/individuals/understanding-your-irs-notice-or-letter Excerpt: "Review it carefully and keep it for your records. If we ask you to respond, act by the due date. ... If you don't agree, follow the instructions in the notice to dispute what it says. Include information and copies of documents for us to review when we consider your dispute."- IRS CP504 (Notice of Intent to Levy) page: https://www.irs.gov/individuals/understanding-your-cp504-notice Excerpt: "This notice is your Notice of Intent to Levy ... If you don't pay the amount due immediately, the IRS can levy your income and bank accounts, as well as seize your property ... Read your notice carefully. It explains how much you owe and your payment options. ... Make a payment plan if you can't pay the full amount. Contact us if you disagree by calling the toll-free number shown on your notice."- Taxpayer Advocate Service (TAS): https://www.taxpayeradvocate.irs.gov/ Excerpt: "We’re here to ensure that every taxpayer is treated fairly and that you know and understand your rights. Our advocates can help if you have tax problems that you can’t resolve on your own. ... Did you get a notice from the IRS? Enter the notice or letter number below to find out more about it, what action you may need to take, and where on the taxpayer roadmap it falls."- IRS Instructions for Form 1120 (2024): https://www.irs.gov/instructions/i1120 Excerpt: "If the corporation receives a notice about penalties after it files its return, send the IRS an explanation and we will determine if the corporation meets reasonable-cause criteria. Do not attach an explanation when the corporation's return is filed. Interest is charged on taxes paid late even if an extension of time to file is granted."- Holthouse Carlin & Van Trigt LLP alert on Foreign-Owned Single-Member US LLC tax filing (Feb 18, 2025): https://www.hcvt.com/alertarticle-Foreign-Owned-Single-Member-US-LLC-Tax-Requirement Excerpt: "Due Date: Form 5472 is due every year on April 15 ... Tax ID Requirement: The LLC must obtain a US Taxpayer Identification Number (TIN) to submit Form 5472 or request an extension on Form 7004. Pro Forma Form 1120: Form 5472 must be filed along with a simplified version of Form 1120. The penalty of $25,000 will be imposed ..."- LLC University guide on Form 5472 (updated July 24, 2025): https://www.llcuniversity.com/irs/form-5472-foreign-owned-llc/ Excerpt: "A Single-Member LLC that is Disregarded and owned by a non-US resident ... must file Form 5472 and Form 1120. ... Your LLC must have an EIN in order to file Form 5472 and Form 1120. If you don’t have an SSN or ITIN you can still get an EIN for your LLC. ... The IRS increased the penalty to $25,000. The IRS penalizes LLC Members (owners) that don’t file Form 5472 on time."- California Franchise Tax Board (FTB) withholding guidance and Publication 1017: https://www.ftb.ca.gov/pay/withholding/withholding-on-nonresidents.html and https://www.ftb.ca.gov/forms/misc/1017.html Excerpts: "Withholding requirements for a foreign nonresident ... Submit the tax withheld by the specific due date for each period of tax withheld ... Foreign partner or member income types: If you receive income from a partnership or LLC, that income may be subject to withholding." "Nonresident Members ... LLCs must file FTB 3832, Limited Liability Company Nonresident Members’ Consent... If an LLC fails to obtain the consent signature of a nonresident member, the LLC must pay tax on that member’s distributive share ..." (FTB Pub. 1017)- New York Department of Taxation & Finance — IT-204-LL instructions: https://www.tax.ny.gov/forms/current-forms/it/it204lli.htm Excerpt: "You must file Form IT-204-LL ... if you are an LLC that is a disregarded entity for federal income tax purposes that has income, gain, loss, or deduction from New York State sources; or domestic or foreign LLC ... that is required to file a New York State partnership return and that has income, gain, loss, or deduction from New York State sources."- Texas Comptroller — Franchise Tax FAQ and Notices: https://comptroller.texas.gov/taxes/franchise/faq/ Excerpt: "When franchise tax reports are filed or payments are made, sometimes errors or omissions occur. Our office sends notices letting the taxpayer know that there is a problem with the account. You can find information on our [franchise tax notices] webpage that explains what the error message means and how to resolve it."Notes about dates and recent rule changes- The Form 5472 reporting requirement for foreign-owned single-member LLCs has been emphasized since the 2017 regulations (TD 9796) and enforcement has increased. Penalty increases and stricter enforcement have been noted in 2018 and later guidance. Sources above include guidance and commentary through 2025 and early 2026.Recommended next steps for you (customizable depending on the notice)1. Send me (or your tax professional) the exact notice text (redact sensitive info if needed) and a short timeline of filings you have done (EIN, Form 5472 filed years, state returns filed). I will produce a tailored response letter and checklist you can use to respond to the IRS/state.

If you prefer immediate action and face a looming levy/lien, contact a U.S. international tax CPA or a tax attorney now and provide the notice. If you want, I can produce a recommended search list for specialists by state.

If the issue is late/no Form 5472, prepare to file Form 5472 + pro‐forma 1120 immediately and include a reasonable‐cause letter and documentation to ask for penalty abatement. If you want the next deliverable, I can immediately

(A) draft a sample response letter to an IRS notice that you can send with late Form 5472 and supporting docs, (B) draft a penalty abatement request (reasonable cause letter) template tailored to likely scenarios, or (C) draft a step-by-step state-specific checklist for CA/NY/TX/FL. Tell me which you prefer and provide the notice text (redacted) or state(s) of interest.