IRS Form 5471
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Table of Contents
Do you need to file anything if you own part of a company outside the US?
Yes. If you’re a US citizen, Green Card holder, or resident and you own at least 10% of a foreign corporation, you likely need to file Form 5471 with your US tax return. This isn’t an optional disclosure—it’s a mandatory part of IRS reporting.
The IRS uses this form to monitor US taxpayers with overseas business interests and to make sure all income, especially from controlled foreign corporations (CFCs), is reported and taxed correctly.
Why does the IRS require you to report foreign business ownership?
Form 5471 exists to ensure that foreign income and profits connected to US persons don’t go unreported. It’s part of the US government’s broader effort to:
- Prevent offshore tax evasion
- Monitor foreign business structures that US taxpayers control
- Apply specific rules like Subpart F income or GILTI, which may impact how foreign earnings are taxed in the US
Even if the company had no income for the year, the reporting may still be required based on your ownership or control status.
What kind of foreign business relationships require filing Form 5471?
You must file Form 5471 if you meet any of the following criteria:
- You own 10% or more (directly or indirectly) of a foreign corporation
- You are a director or officer, and a US person has acquired at least 10% of the company
- You bought or sold shares, pushing your ownership above or below the 10% threshold
- You are a US shareholder of a company where US persons collectively own over 50% (making it a Controlled Foreign Corporation)
In any of these cases, you’re expected to file the form every year as long as the criteria apply.
Are there any tax advantages to reporting this properly?
Yes—while the form is mainly a reporting obligation, filing it properly can help with tax planning:
- You may qualify for foreign tax credits, reducing your US tax bill on income already taxed abroad
- You’ll avoid overpaying on income that falls under GILTI or Subpart F rules if handled correctly
- Filing on time reduces your audit risk and shows you’re complying with IRS rules
- It can help ensure your company isn’t misclassified as a PFIC (Passive Foreign Investment Company), which brings heavier reporting and tax consequences
- Proper filing supports smoother coordination with international tax advisors
What mistakes should you watch out for when filing Form 5471?
Form 5471 is complex—there are multiple filing categories and schedules, and mistakes are common. Here are the ones that cause the most trouble:
- Missing the requirement entirely – Many expats don’t realize they need to file, especially if their foreign business isn’t profitable
- Using the wrong filing category – The form has several categories based on your relationship to the business; choosing the wrong one means missing key sections
- Leaving out schedules – Each category requires specific parts of the form; if you skip required sections, you may face penalties
- Inaccurate ownership reporting – The IRS wants exact figures on how much of the company you own, even indirectly
- Filing late – This form is due with your tax return, and the penalties for missing it start at US$10,000 per form
When is Form 5471 due and can you get an extension?
The deadline depends on who’s filing:
- For individuals: The form is due when your tax return is due—typically April 15, or June 15 if you live abroad
- For corporations or partnerships: The deadline is March 15
You can get more time to file, but not more time to pay:
- Individuals can file Form 4868 to extend the deadline to October 15
- Businesses can use Form 7004 for an extension
Even with an extension, any tax owed must still be paid by the original due date to avoid penalties and interest.
When do Form 5471 and Form 5472 apply, and what’s the difference?
Form 5471 and Form 5472 are both used to report cross-border business activity, but they serve very different purposes depending on who owns what.
- Form 5471 is for US persons (citizens, residents, Green Card holders) who own or help manage foreign corporations.
- Form 5472 is used by US companies that are owned at least 25% by foreign individuals or entities, or have transactions with foreign-related parties.
If your client owns a foreign company, Form 5471 is likely the right one. If they run a US company with foreign shareholders or cross-border activity, Form 5472 is usually required.
Make sure you’re filing Form 5471 the correct way. Connect with our tax specialists today.
What steps should be followed to complete Form 5471 correctly?
Filing Form 5471 requires more than just checking a box—it involves determining your exact role and ownership level in the foreign company. Here’s what you need to do:
- Check if you’re required to file
- You likely need to file if you own 10% or more of a foreign corporation or are involved when another US person reaches that threshold.
- Directors or officers may also need to file if certain ownership changes occur.
- Identify your IRS filing category
- There are five filing categories, and each one has different reporting requirements.
- Your ownership level, role, and the type of transaction determine which one you fall under.
- Complete the necessary schedules
- Based on your category, you’ll fill out specific sections covering company income, balance sheets, shareholder info, and foreign taxes.
- Attach it to your main tax return
- Individuals attach it to Form 1040; businesses include it with Form 1120 or their entity return.
- Submit it by your regular tax deadline
- Extensions are available, but only for filing—not for paying taxes owed.
What do the schedules on Form 5471 cover?
Form 5471 is made up of several components, called schedules, each collecting specific information. Depending on your filing category, you’ll complete some or all of these:
- Schedule A – Tracks ownership of the foreign company
- Schedule B – Lists all US shareholders
- Schedule C – Reports profits, losses, and income activity
- Schedule E – Lists foreign income taxes paid
- Schedule F – Provides a balance sheet of the company’s assets and liabilities
- Schedule G – Covers basic company details and organizational info
- Schedule H – Reports on earnings and profits (E&P)
- Schedule I – Summarizes the US shareholder’s share of income
- Schedule J – Tracks earnings over time and dividend distributions
- Schedule M – Reports financial transactions between the foreign entity and US owners
- Schedule O – Used when there are ownership changes or reorganizations
How do GILTI and Subpart F affect your tax reporting on Form 5471?
US shareholders of Controlled Foreign Corporations (CFCs) need to pay close attention to how certain types of income are taxed—even if the income isn’t paid out.
Here’s how the two main rules work:
- Subpart F income
- Refers to passive or easily moveable income (like interest, rents, and dividends).
- You must report and pay US tax on it even if you didn’t receive a distribution.
- GILTI (Global Intangible Low-Taxed Income)
- Applies to excess profits earned by a CFC, especially in low-tax jurisdictions.
- This income is included in your US return, even if the funds remain with the company.
Both types of income are disclosed through Schedule I-1 on Form 5471 and can significantly increase a taxpayer’s US tax bill if not managed properly.
What are the consequences of not filing Form 5471 or filing it incorrectly?
Penalties for noncompliance are steep and often automatic:
- US$10,000 per form, per year – This applies even if the business had no income.
- Up to US$50,000 in additional penalties – If the form isn’t filed within 90 days of an IRS notice, penalties increase every 30 days.
- Foreign tax credits may be reduced – Meaning you could end up paying US taxes on income already taxed abroad.
- Criminal penalties are possible – In extreme cases where the failure is considered willful, criminal charges may apply.
Is it possible to fix a missed or late Form 5471 without penalties?
Yes—there are options if the missed filing wasn’t intentional.
- “Reasonable cause” explanation – If you can show you didn’t file due to an understandable oversight, illness, or lack of information, the IRS might waive penalties.
- Streamlined Filing Compliance Procedures – This program helps expats who unintentionally failed to file international information forms like 5471.
- Voluntary disclosure – If you realize the mistake before the IRS does, submitting it voluntarily (with full disclosure) often leads to better outcomes.
