Who Must Use This Form?
US persons who are shareholders, officers or directors of a foreign
international business company) may be required to file this form.
Form 5471 is similar in some
respects to the information return for
a partnership, an S corporation or a trust. Unlike a regular C
the income of a foreign corporation may be either taxed to the
or tax deferred until there is a distribution or a liquidation. If the
foreign corporation has U.S. source income, that income will be subject
to U.S. tax the same as a domestic corporation.
The term "foreign
corporation" includes an "International Business Company"
or IBC that is owned in part by US persons. It also includes a foreign
limited liability company that does not make an election to be treated
as a foreign partnership (multiple owners) or as a foreign disregarded
entity (one owner).
The term "US Person" is used
here to include a U.S. citizen or resident
or a U.S. corporation, partnership, trust or estate.
The form is designed to
serve multiple purposes and therefore is often
very confusing and even intimidating to the novice. There are four
of persons (including corporate shareholders) that may be required to
1. A US person who is an
officer or director of a foreign corporation
in which any US person owns or acquires 10% or more of the stock of the
2. A person who becomes a
US person while owning 10% or more of the
stock of the foreign corporation.
3. A US person who had
control of a foreign corporation for at least
4. A US shareholder who
owns stock in a foreign corporation that is
a controlled foreign corporation for an uninterrupted period of at
30 days and who owned that stock on the last day of the that year.
information is required?
required information may be as minimal as the identification of
the US shareholder and the name and address of the foreign corporation
-- or as extensive as a comprehensive balance sheet and income
converted from multiple foreign currencies into US dollars and also
into a GAAP method of accounting.
If the corporation is controlled by five
or fewer US shareholders (each of whom owns 10% or more of the foreign
corporation), it will be deemed a controlled foreign corporation (CFC)
and all or part of the corporation's income may be taxable to certain
on a current basis.
When is it
is due with the income tax return of the affected shareholder.
For most corporations, that would March 15th or the extended due date.
For most individuals, that would be April 15th or the extended due date.
Should it be Filed?
One copy of Form 5471
and required schedules should be filed with the
taxpayer's tax return (Form 1040, 1120, 990 or 1065) and one copy
be filed with the International Division of the IRS in Philadelphia, PA.
Does it Take to Prepare?
The IRS estimate of
the average time to prepare this form is about
38 hours, exclusive of record keeping time and the time required to
about the relevant law and the instructions. The learning time could be
much longer for someone who is not familiar with the pertinent sections
of the tax law.
However, for an operating business with extensive transactions, it
take much longer and for a CFC that is owned by one person and used as
an investment entity, it could take as few as five hours by someone
with the form. It might only take an hour or two to prepare the form
for a dormant foreign corporation.
The penalties for
failing to file this form are severe, even though
no tax may be due. There is a penalty of $10,000 for each year for
to file the form. The penalties may be waived by the IRS on a showing
reasonable cause for failing to file the form.
If the taxpayer is notified by the IRS of a duty to file, the penalty
is $10,000 per month up to a maximum of $50,000. There are additional
that are described in the instructions to the form.
Big Discounts for 1st
Ten Advance Registrations