Form 5471, officially called the Information Return of U.S. Persons with Respect to Certain Foreign Corporations, is an information return (as opposed to a tax return).
Form 5471 is used by certain U.S. citizens and residents who are officers, directors, or shareholders in certain foreign corporations. The form and schedules are used to satisfy the reporting requirements of Sections 6038 and 6046, and the related regulations, as well as to report amounts related to Section 965.
Form 5471 is required to be filed in the following scenarios:
A U.S. shareholder who owns (directly, indirectly, or constructively) 10% or more of the total combined voting power of a foreign corporation at any time during any tax year.
A U.S. citizen or resident who is an officer or director of a foreign corporation in which any U.S. company or person has acquired stock which meet the 10% stock ownership or acquired an additional 10% or more of the outstanding stock of the foreign corporation.
A U.S. person disposes of stock in a foreign corporation to reduce his or her ownership below the 10% stock ownership requirement. The acquisition or disposition of stock detailed information need to be disclosed on Form 5471.
A U.S. person who had control (more than 50% of the total combined voting power or total value of shares) of a foreign corporation during the annual accounting period of the foreign corporation.
The identity information of the U.S. company and the foreign corporation is required for all the taxpayers. Some other schedules are required depends on how much ownership of the foreign corporation is held by the U.S. company.
For example, if a U.S. company is having more than 50% ownership (by voting power or total value of stocks) in a foreign corporation during the annual accounting period of the foreign corporation, the following information will be prepared:
Stock of the foreign corporation: including the total number of shares and the number of shares held by the U.S. shareholders and direct shareholders.
Balance sheet and Income Statement of the foreign corporation presented with U.S. dollars.
General information to describe the foreign corporation.
The U.S. company’s pro rata shares of income from the foreign corporation.
Transactions between the foreign corporation and the U.S. company.
Transactions between the foreign corporation and other controlled participants.
Attach Form 5471 to the company’s income tax return and file both by the due date (including extensions) for that return.
Failure to file information required on Form 5471 is subject to the following penalties:
A $10,000 penalty is imposed for each annual accounting period of each foreign corporation.
If the information is not filed within 90 days after the IRS has mailed a notice of the failure to the U.S. company, an additional $10,000 penalty (per foreign corporation) is charged for each 30-day period, or fraction thereof, during which the failure continues after the 90-day period has expired. The additional penalty is limited to a maximum of $50,000 for each failure.
Criminal penalties may apply for serious situations.
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