- 1 5 Important FAQs About 5471 Overseas Entity Reporting
- 2 Who Has to File Form 5471?
- 3 When is the Form 5471 Due?
- 4 Can I be More than One Category of Filer?
- 5 Several Different 5471 Schedules for Filing
- 6 Penalties for Noncompliance with Form 5471 Filing
- 7 Form 5471 Amnesty Program Summary
- 8 Can I Just Start Filing Form 5471 This Year Instead?
- 9 International Tax Lawyers Represent Clients Worldwide
5 Important FAQs About 5471 Overseas Entity Reporting
Is 5471 Required for All US Persons with Foreign Corporations: When US Persons have ownership of a Foreign Corporation — their U.S. tax returns and IRS filings become infinitely more complicated. The level of difficulty varies, depending on the type of foreign corporation the US person owns and the extent of ownership. From a preparation standpoint, the range of emotions for Taxpayers ranges form “not so bad,” to I’m just going to bury my head in the sand — and hope they change the law. There are various different international information forms and schedules that a US person may have to use in order to report a foreign corporation — but the most common form is an Internal Revenue Service Form 5471 (Information Return of U.S. Persons With Respect To Certain Foreign Corporations). While our International Tax Lawyers have authored several articles on issues involving form 5471, let’s focus on some of the basics of Form 5471:
Who Has to File Form 5471?
Form 5471 is filed annually by US persons who fall into one (or more) of the five (5) categories of filers. It is important to note, that the term “US person” is not limited to individuals. While the reporting requirements for U.S. Persons (U.S. citizens, Lawful Permanent Residents, and Foreign Nationals who meet the Substantial Presence Test) is usually bearable — if not tedious — when domestic corporations have ownership of foreign corporations (SFCs) — it can be incredibly complex.
When is the Form 5471 Due?
For individuals, the Form 5471 is due at the same time the tax return is due. If a taxpayer files an extension to file their tax return, the form 5471 automatically goes on extension as well — in other words, taxpayer does not have to file a separate Form 7004, as they would for a foreign trust.
Can I be More than One Category of Filer?
Yes, depending on the specific year in which the Taxpayer acquired the interest, disposed of the ownership — or is a controlled foreign corporation, will help determine which categories of filers they qualify as.
Several Different 5471 Schedules for Filing
With the introduction of the TCJA came several different international tax laws, rules and regulations. If the foreign corporation has GILTI for example, then they may have to file additional forms as well. As far as Schedules go, there are some schedules that are included as part of the Form and then there are additional schedules as well — which are not part of the main Form 5471, but have to be included as well.
Penalties for Noncompliance with Form 5471 Filing
Of course. the IRS has significantly increased enforcement of international information reporting forms — including Form 5471. the penalties usually start out at around $10,000 per form, per year — and they can go up from there. But, the IRS has also developed various offshore amnesty programs which may minimize or eliminate any penalty.
Form 5471 Amnesty Program Summary
The Form 5471 Amnesty Programs are programs developed by the Internal Revenue Service to assist Taxpayers who are already out of compliance for non-reporting.
Some of the more common programs, include:
- Voluntary Disclosure Program (VDP or “New” OVDP)
- Streamlined Domestic Offshore Procedures
- Streamlined Foreign Offshore Procedures
- Delinquency Procedures
- Reasonable Cause
Can I Just Start Filing Form 5471 This Year Instead?
No, unless the current year is the first-year you had a Form 5471 Reporting requirement. If you had a prior year reporting requirement, but only begin to start filing in the current year (Filing Forward) it is illegal. In the world of offshore disclosure, this is referred to as an Quiet Disclosure. The IRS has warned taxpayers that if they get caught in a Quiet Disclosure situation, it may lead to willful penalties and even a criminal investigation by the IRS Special Agents.
International Tax Lawyers Represent Clients Worldwide
Our International Tax Lawyer team specializes exclusively in international tax, and specifically IRS offshore disclosure.
Contact our firm for assistance.