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International tax · IRC §§ 6038, 6046
If you own, run or helped form a foreign corporation, you may need to file Form 5471 every year. It is one of the most complex returns in the tax system, and the penalty for missing it starts at $10,000 per form per year.
Serving United States, Virginia, Washington, DC, Maryland.
What we handle
US citizens and residents who are officers, directors or shareholders of a foreign corporation may have to file Form 5471, depending on the filing category. Common examples are a family company or startup in India, a holding company abroad, or a foreign subsidiary of a US business. Owners of controlled foreign corporations may also owe current US tax on Subpart F income and on tested income under section 951A even when nothing is distributed.
The form requires financial statements converted to US accounting and tax rules, earnings and profits, related-party transactions and income inclusions. Individual owners can sometimes reduce tax with a section 962 election to be taxed like a corporation. Missing forms also keep the related return open under section 6501(c)(8).
Speak with an advisorWhere we help
The Tax Court held the IRS could not assess section 6038(b) penalties for missing Forms 5471 without going to court.
The D.C. Circuit reversed, holding the penalties are assessable. Penalties of $10,000 per form per year remain a real risk.
$10,000 per form per year, plus up to $50,000 more after IRS notice, and possible reduction of foreign tax credits.
The statute of limitations stays open until the required form is filed.
Our approach
A senior advisor reviews your facts and documents.
Scope, fees and timeline in an engagement letter.
Returns, elections and forms prepared and reviewed.
IRS contact and planning all year.
Questions
If your question isn't here, call (703) 880-8412 and you'll reach a person.
Possibly. It depends on your ownership percentage, whether US persons together control the company, and whether you are an officer or director. We review the shareholding to determine your category.
If the company is a controlled foreign corporation, US shareholders may owe tax on certain income each year even without dividends. A section 962 election can reduce that tax in some cases.
Penalties can be large, but the delinquent international information return procedures and Streamlined procedures can often resolve missed years with reduced or no penalties.
Yes. The US parent files Form 5471 for each controlled foreign subsidiary.
Latest updates
FinCEN issued a final rule revising BOI reporting. Business owners should confirm whether their entities still have a filing obligation.
Source: Federal Register
The IRS took down the page that described penalty relief for late FBARs when all income had been reported. Get advice on reasonable cause or the Streamlined procedures before filing late FBARs.
Source: EY Tax News
Related
Streamlined Domestic Offshore Procedures (SDOP), Streamlined Foreign Offshore Procedures, late FBAR and international information return filings, and voluntary disclosure support for foreign accounts and assets.
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