Form 5471 is used by U.S. persons involved in foreign corporations to satisfy federal reporting requirements under Internal Revenue Code (IRC) sections 6038 and 6046. The IRS has delineated five categories of persons required to file Form 5471. A person that could be classified in multiple categories with respect to her involvement in a single foreign corporation is not required to file Form 5471 more than once; however, a single person must file Form 5471 for each foreign corporation that she is involved in. A joint Form 5471 may be filed when one or more persons are required to file information regarding the same foreign corporation for the same period. Each category has its own requirements of what extra documents must be filed along with Form 5471. In general, U.S. persons that hold stock in a foreign corporation, or that serve as officers or directors in a foreign corporation in which U.S. persons hold stock, may be required to file Form 5471 with their annual income tax returns. Exceptions to this filing requirement arise in situations of constructive ownership, or an election to be treated as a domestic corporation.

Failure to timely file Form 5471 can result in significant cash penalties ($10,000 for each annual accounting period or reportable transaction, plus an additional penalty of up to $50,000 for continued failure to file even after notice of deficiency from the IRS) and revocation of a portion of foreign tax credits available under IRC sections 901, 902, and 960.

Categories of Filers:
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Filing of Form 5471 is required by certain United States citizens and residents who become an officer or director of certain foreign corporations, and certain United States persons (as defined for FBAR reporting) who are shareholders in certain foreign corporations.* The form is used to satisfy the requirements of multiple sections of the Internal Revenue Code – primarily Section 6038, Section 6046 and Section 957. Since these sections have conflicting rules and definitions, this form is particularly challenging.

The requirements are applied to separate categories of filers, each category specifying separate, but sometimes overlapping conditions. There are five categories of filers, numbered 1 through 5. Category 1 requirements were repealed in 2004, but reinstated for a different purpose for the 2018 tax year. Here are the Instructions to Form 5471. If you’re having trouble sleeping, give this a try. You’ll be asleep in about five seconds.

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