IRS Form 5471
Information Return of U.S. Persons With Respect to Certain Foreign Corporations
What is Form 5471?
The IRS requires certain U.S. citizens and residents who are officers, directors, or shareholders in certain foreign corporations to file form 5471 and the schedules to satisfy the reporting requirements of sections 6038 and 6046, and the related regulations. The form is stated by IRS as an information-only return and it can help the IRS select companies to be audited and companies that should be subject to Sub part F income.
Does Form 5471 Apply to You?
U.S. citizens and U.S. residents who are officers, directors, or shareholders in certain foreign corporations are responsible for filing Form 5471. The determination relates to the type of control a person has in these companies.
Form 5471 is needed for US Persons who have these situations:
- becomes a director or officer of a foreign corporation
- acquires an ownership interest in a foreign corporation in excess of the prescribed limits
- disposes of stock in a foreign corporation that reduces his or her interest in the foreign corporation to less than the prescribed limits
- in control of a foreign corporation for an uninterrupted period of at least 30 days in a year
- is a 10% or more shareholder in a foreign corporation that is a “controlled foreign corporation” for an uninterrupted period of at least 30 days in a year and that person owns that stock on the last day of the year
When Do You Need to File Form 5471?
Anyone who must file form 5471 must file with their individual return, according to the same filing dates and extensions. For example, most people would need to file by April 15th or October 15th with extension.
What If You Don’t File Form 5471?
The IRS has several levels of punishment for those people who must file but don’t or don’t file on time.
- Your individual return is considered Not Filed without form 5471 if required. This allows penalties to be applied to the rest of your individual return.
- Failure to file can be penalized up to $10,000 per year that you need to file.
- Repeated failure to file (repeated years) can be hit with up to $50,000 in additional fines.
- Any person who fails to file or report all of the information required within the time prescribed will be subject to a reduction of 10% of the foreign taxes available for credit.
- In some cases, criminal penalties may also apply for failure to file the requisite information.
Avoid Costly Mistakes with Form 5471
Contact us to discuss your situation and let us help you stay on the right side of the IRS with form 5471.