Form 5471 Filing Exceptions & Limitations

Form 5471 Filing Exceptions & Limitations

Form 5471 Filing Exceptions & Limitations

Form 5471 is one of the most complicated of all the international information reporting forms. This is especially true in situations in which the person is considered to have an ownership interest in a Controlled Foreign Corporation (CFC)–– as this leads to much more complicated issues involving Subpart F, GILTI – and significantly more for 5471 attached schedules. Despite how complicated Form 5471 has become over the past few years, some US Taxpayers may be able to avoid or minimize the complications of filing this form in situations in which they meet certain exceptions, exclusions, or limitations. Let’s take a look at a few common ways a taxpayer may be able to minimize Form 5471 Filing:

Dormant Corporation

When a foreign corporation is dormant, then there are much more limited requirements for filing and reporting. While Form 5471 is still required, there is only a minimal amount of reporting necessary in order to comply with the requirements. There are specific rules that must be met in order for a foreign corporation to qualify as dormant, in accordance with Revenue Procedure 92-70.

Multiple Filers, Same Information

When there are multiple owners of a foreign corporation, and some of the owners are the same category of filer, then sometimes the same categories of owners can file together on a single Form 5471 to avoid the duplicity of multiple form reporting for the same category for the same foreign corporation.

As provided by the IRS:

      • Multiple filers of same information. One person may file Form 5471 and the applicable schedules for other persons who have the same filing requirements. If you and one or more other persons are required to furnish information for the same foreign corporation for the same period, a joint information return that contains the required information may be filed with your tax return or with the tax return of any one of the other persons.

        • For example, a U.S. person described in Category 5 may file a joint Form 5471 with a Category 4 or another Category 5 filer. However, for Category 3 filers, the required information may only be filed by another person having an equal or greater interest (measured in terms of value or voting power of the stock of the foreign corporation).

      • The person that files Form 5471 must complete Form 5471 in the manner described in the instructions for Item F—Alternative Information Under Rev. Proc. 2019-40.

      • All persons identified in Item F must attach a statement to their income tax return that includes the information

Certain Constructive Owners

Even if a person does not own the stock of the foreign corporation directly, they may still have a reporting requirement as a constructive owner. Despite this fact, there are certain exceptions to filing for some categories of filers in certain situations, when all necessary conditions are met.

As provided by the IRS:

      • A U.S. person described in Category 1, 3, 4, or 5 (“shareholder”) does not have to file Form 5471 if all of the following conditions are met:

      • The shareholder does not own a direct interest in the foreign corporation.

      • The shareholder is required to furnish the information requested solely because of constructive ownership (as determined under Regulations section 1.958-2, 1.6038-2(c), or 1.6046-1(i)) from another U.S. person.

      • The U.S. person through which the shareholder constructively owns an interest in the foreign corporation files Form 5471 to report all of the required information.

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