Form 5471: US Person Filing for Foreign Corporation

Certain U.S. individuals who own an interest in a foreign company may be required to report their interest to the IRS by including Form 5471 with their annual U.S. tax return. It is important to keep in mind that entities that are not considered corporations under foreign law may be considered corporations for U.S. tax purposes and thus may fall within the U.S. tax rules related to foreign corporations.

In general, Form 5471 assists the IRS with gaging the scope of a U.S. taxpayer’s foreign holdings that may facilitate U.S. tax deferral. The form is useful for keeping track of the earnings and profits of U.S.-owned foreign corporations, determining whether a foreign entity is a controlled foreign corporation (“CFC”) generating so-called “subpart F income” (generally passive-type income of a CFC that a 10% U.S. shareholder must include currently in gross income), and tracking possible IRC Section 956 inclusions (i.e., investments in U.S. property by CFCs that can trigger a current inclusion in a 10% U.S. shareholder’s gross income).

Who must file Form 5471?

As a general rule, Form 5471 is required to be filed when there is at least one 10% U.S. shareholder in the relevant foreign corporation.

The following is a brief description of the categories of taxpayers who are required to file Form 5471:

Category 1 – This category has been repealed.

Category 2 – U.S. citizen or resident who is an officer or director, and a U.S. person has acquired stock that meets a 10% ownership requirement or a U.S. person has acquired an additional 10% of the stock.

Category 3 – U.S. citizen or resident who acquires a 10% ownership interest, sells the stock and drops below 10%, or becomes a U.S. person while owning 10%.

Category 4 – a U.S. person that had “control” of the corporation for at least 30 uninterrupted days during its taxable year. For this purpose, “control” is considered to be ownership of more than 50% of the foreign company while taking into account attribution rules.

Category 5 – a U.S. person who was a “United States shareholder” of a “Controlled Foreign Corporation” for at least 30 uninterrupted days, and who owned stock on the last day of the foreign corporation’s taxable year. A United States Shareholder is defined as a U.S. person owning 10% or more of the voting power of the corporation’s stock. (We note that starting with the 2017 tax year, the definition of “United States Shareholder” is expanded to include U.S. persons owning 10% or more of the total value of the corporation’s stock.) A CFC is defined as any foreign corporation where United States Shareholders own more than 50% of the vote or value of the corporation.

Special attribution rules (which include attribution between spouses and, in some cases, attribution from non-U.S. spouses) may apply to expand the scope of taxpayers that fall within these categories. It is important for U.S. individuals who own shares in a foreign corporation to determine if they fall into any of such categories.

What is the due date for Form 5471?

Form 5471 must be attached to your income tax return and must be filed by the due date (including extensions) for that return.

What are the penalties for not filing Form 5471?

The following penalties, among others, may apply for failure to accurately file Form 5471 (or Schedule O to Form 5471 if required):

  1. A civil penalty of $10,000 for each year’s failure. If the information is not filed within 90 days after the IRS has mailed a notice of the failure to the U.S. person, an additional $10,000 penalty (per foreign corporation) is charged for each 30-day period, or fraction thereof, during which the failure continues after the 90-day period has expired. The additional penalty is limited to a maximum of $50,000 for each failure.
  2. 10% reduction in any foreign tax credits claimed from the relevant foreign corporation.
  3. Failure to file keeps the audit statute of limitations open indefinitely when information is required to be reported
  4. Criminal penalties may also apply in certain circumstances.


IRS Form 5471 is not the kind of tax document you should handle on your own.

Even if you followed all of the Form 5471 instructions down to the finest detail, you are better off hiring a professional.

The Trump tax reform has made it more difficult to use a foreign corporation and maintain maximum tax benefits. And, even if you’re not that concerned about taxes and you just want to be done with the paperwork burden, you really only have one option: renunciation.

If taxes or paperwork are a serious issue for you, you might want to consider renouncing your US citizenship.

Whether you need help finding the right tax professional to help you fill out Form 5471 or want to consult TheTaxBooks to determine your best course of action to create a holistic tax strategy, feel free to reach out and get some help. We are ready to help you out with filing Form 5471 to be considered one of the most difficult tax forms of the IRS.

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Frequently Asked Questions

Form 5471 is a U.S. tax form used to report information about certain foreign corporations. It helps the Internal Revenue Service (IRS) gather details on the ownership and operations of these foreign entities.

U.S. citizens, residents, and domestic corporations who meet specific ownership or control requirements of a foreign corporation are required to file Form 5471. This includes individuals and entities that have significant ownership in a controlled foreign corporation (CFC).

A Controlled Foreign Corporation (CFC) is a foreign corporation in which U.S. shareholders own more than 50% of the total combined voting power or the total value of the corporation’s stock. CFCs are subject to special tax rules in the United States to prevent tax avoidance.

Form 5471 and Form 5472 are both tax forms required by the United States Internal Revenue Service (IRS) to report certain foreign activities, but they serve different purposes. Here are ten sentences highlighting the key differences between the two forms:

Form 5471 is used to report ownership in a foreign corporation, while Form 5472 is used to report transactions with a foreign-owned domestic corporation.

  1. Form 5471 applies to U.S. persons (including individuals, partnerships, corporations, or trusts) who have a certain level of ownership or control in a foreign corporation.
  2. Form 5472 applies to a foreign-owned U.S. corporation (a corporation that is at least 25% foreign-owned) and requires the reporting of transactions with related foreign parties.
  3. Form 5471 provides information on the U.S. person’s ownership interest, financial position, and earnings in the foreign corporation.
  4. Form 5472, on the other hand, focuses on transactions between the foreign-owned U.S. corporation and related foreign parties, including sales, expenses, and loans.
  5. Form 5471 is more comprehensive and requires more detailed information, such as balance sheets, income statements, and other financial details of the foreign corporation.
  6. Form 5472 is relatively shorter and requires reporting only on specific transactions between the foreign-owned U.S. corporation and its related foreign parties.
  7. Both forms have different filing thresholds. Form 5471 generally applies when a U.S. person owns at least 10% of a foreign corporation, while Form 5472 applies to foreign-owned U.S. Corporations.
  8. Failure to file Form 5471 or Form 5472 when required can lead to significant penalties imposed by the IRS.
  9. Form 5471 is primarily used for informational purposes, Form 5472 is essential for the IRS to monitor and ensure proper reporting of transactions involving foreign-owned U.S. corporations.

The purpose of Form 5471 is to provide the IRS with information about U.S. taxpayers’ ownership interests and transactions with foreign corporations. It helps the IRS identify taxpayers who may be trying to avoid U.S. taxation by using offshore entities.

Form 5471 reports various details related to the foreign corporation, such as its income, balance sheet, ownership structure, and transactions with related parties. It provides a comprehensive overview of the foreign corporation’s operations and helps the IRS ensure compliance with U.S. tax laws.

The penalties for not filing or inaccurately completing Form 5471 can be significant. Failure to file the form can result in penalties of up to $10,000 per form per year, with additional penalties for continued non-compliance. It is crucial to meet the filing requirements and ensure accurate reporting to avoid these penalties.

The IRS provides detailed instructions for completing Form 5471. These instructions guide taxpayers through the various schedules, requirements, and reporting thresholds. It is essential to review the instructions carefully and seek professional assistance if needed to ensure accurate and compliant filing.

Starting in the tax year 2020, the new separate Schedule Q (Form 5471), CFC Income by CFC Income Groups, is used to report the CFC’s income in each CFC income group to the U.S. shareholders of the CFC so that the U.S. shareholders can use it to properly complete Form 1118 (to compute the high-tax exception, high-tax kick out, and section 960 deemed paid taxes).

This update clarifies that:

Separate Schedule(s) Q (Form 5471) are required to be filed only by Category 4, 5a, and 5b filers. It is not required to be filed by Category 1a or 1b filers.

On page 5 of the Instructions for Form 5471, footnote 1 in the table entitled “Filing Requirements for Categories of Filers” does not apply to category 5b filers who are required to complete separate Schedule(s) Q (Form 5471).

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