Form 5471

Form 5471 – Information Return of US Persons with respect to Certain Foreign Corporations:

If a US person, citizen, resident, green card holder, is an owner of another foreign company, they could responsible for filing form 5471 with their US tax return.

Quick FAQ –

  1. How much does a US Person need to own of the Certain Foreign Corporation (CFC) for form 5471?
    • If they own more than 10%
  2. Who, or what is a US Person that must file form 5471 when owning 10% or more of a CFC?
    • Citizen or Resident of the United States
    • Nonresident alien for whom an election in effect under section 6013(g) to be treated as a resident of the United States. (Think of an HI1 person or L1 person wanting to be taxed the same way as Green card holder or Citizen)
    • An individual for whom an election is in effect under section 6013(h), relating to nonresident aliens who come residents of the United States during the tax year and married at the close of the tax year to a citizen or resident of the United States.
  3. A Domestic Partnership
    • 5471 Instructions may not expand on this, but a domestic partnership can be a Domestic LLC, LLP, LP, or general partnership.
      1. Partnerships be any combination of 2 or more individual peoples, other partnerships, corporations, or trusts.
    • A Domestic Corporation
    • An estate or trust that is not foreign estate or trust defined in section 701(a)(31).

There are also control test for determining if a US Person must file form 5471. A US Person has control of a foreign corporation and must file 5471 if:

  1. If at any time the US person has stock ownership of a CFC more than 50% of the total combined voting power of all classes of stock of the CFC
  2. More than 50% of the total value of shares of all classes of stock of the foreign corporation
  3. The person is in control of a corporation that itself owns more than 50% of the combined voting power, or the value, of all classes of stock of another corporation is also treated as being in control of such other corporation.

Also, know what a CFC truly is:

It is a foreign corporation that has US shareholders that own (directly, indirectly, or constructively, within the meaning of sections 958(a) and (b)) on any day of the tax year of the foreign corporation, more than 50% of:

  1. The total combined voting power of all classes of its voting stock or
  2. The total value of the stock of the corporation.

Form 5471 is a very intricate, and complicated form, and a advice of professinal should be seeked. There exceptions, and waiver rules in place to avoid or be relieved from the high penalties.

With the strong enforcement of FATCA, overseas reporting, international business, form 5471 is becoming more apparent on US tax returns, especially in a global economy.