Form 8858: Foreign Disregarded Entities
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Table of Contents
What is Form 8858?
Form 8858 is an information return that U.S. taxpayers use to report ownership of foreign disregarded entities (FDEs) and foreign branches (FBs). It is not a tax form itself, but rather a disclosure attached to your U.S. tax return. The IRS uses it to understand the activities, finances, and transactions of your non-U.S. business operations.
Example: You’re a U.S. person (citizen, green card holder, or U.S. resident) who owns a 100% single-member company in Australia to invoice local clients. That company is a foreign disregarded entity and you must file Form 8858 with your U.S. tax return, even if it only breaks even.
Why does the IRS require it?
The IRS wants transparency about income, expenses, assets, liabilities, and transactions between you and your foreign entity or branch. This includes things like loans, payments, or services between you and the FDE or branch.
What information does Form 8858 include?
- Details about the owner and the foreign entity or branch (name, country, address, dates, and tax owner)
- Functional currency and U.S. dollar translations
- Income and expenses (Schedule C)
- Balance sheet (Schedule F)
- Other details like accounting method and local filings (Schedule G)
- Earnings and profits, if relevant (Schedule H)
- Related-party transactions (Schedule M)
Who needs to file Form 8858? Does a single-member company overseas count?
You must file if you are the U.S. tax owner of a foreign disregarded entity or operate a foreign branch. This includes single-member foreign LLCs treated as disregarded for U.S. tax purposes. If the foreign entity is treated as a corporation for U.S. tax, Form 5471 may be required along with a Form 8858.
What if there’s no legal entity at all?
You may still have a foreign branch if you operate directly in another country with a fixed place of business and separate books. In that case, Form 8858 is required for the branch.
How do tiered structures work?
If your foreign disregarded entity is owned through another business (like a partnership or corporation), the filing may happen at that entity’s level. For example, a U.S. partnership files Form 8858 for any FDE it owns, and the information flows through to the partners. Attribution rules can also require indirect U.S. owners to file, so ownership chains must be traced carefully.
Where and when do you file it?
Attach Form 8858 to the tax return of the U.S. owner (Form 1040 for individuals, Form 1065 for partnerships, Form 1120 for corporations). The due date matches your main tax return, including extensions.
Need help filing Form 8858? Contact us today.
Do I file Form 8858 if I own a foreign LLC by myself or run a sole-proprietor foreign branch?
If you are the U.S. tax owner of a foreign LLC that’s treated as disregarded or operates a sole proprietorship abroad with a fixed place of business and separate books, you generally must file Form 8858.
What does NOT require Form 8858?
A foreign corporation that’s treated as a corporation for U.S. tax purposes does not use Form 8858. Instead, other forms like Form 5471 may apply.
How does Form 8858 differ from FBAR and Form 8938?
These forms cover different pieces of your cross-border picture. It’s common to need more than one. Many taxpayers confuse these forms, but each covers a different reporting requirement.
- Form 8858: Reports operations of foreign disregarded entities or branches.
- FBAR (FinCEN 114): Reports foreign financial accounts if balances exceed certain thresholds; filed electronically with FinCEN, not the IRS.
- Form 8938: Reports specified foreign financial assets over certain thresholds; attached to your U.S. tax return.
When is Form 8858 due and how do you prepare it?
It is due with your regular U.S. tax return. Gather local financials, currency translation details, intercompany transactions, and supporting ledgers. Your numbers should line up across Form 8858, FBAR, and Form 8938.
What happens if you don’t file
The penalty for failing to file Form 8858 starts at $10,000 per year and can increase if the failure continues. Not filing can also keep the statute of limitations open on related items until the form is filed.
How to fix late filings
File any missing Form 8858s as soon as possible. Attach a short explanation (a ‘reasonable cause’ statement) describing why it was late. Make sure your FBAR and Form 8938 filings match your Form 8858 records. Amend prior returns if necessary.
FAQs
Do I file one Form 8858 per FDE/branch, or can I combine them?
File a separate Form 8858 for each FDE or branch.
My FDE had no bank account or activity this year, do I still need Form 8858?
Where does the FDE’s profit actually hit my US return, on Form 8858 or elsewhere?
What exchange rates should I use for 8858?
If I change my foreign single-member company’s classification to a corporation, does Form 8858 stop?
