What this form is (and isn’t)

Form 5471—Information Return of U.S. Persons With Respect to Certain Foreign Corporations—is an information return. It doesn’t compute a tax by itself, but the data you report can drive tax outcomes (e.g., Subpart F, GILTI, section 956, section 965 legacy items).

For 2021, the form fulfills reporting under IRC §§ 6038 and 6046 and captures:

• Ownership and control (including CFC status),
• Financials (income statement, balance sheet, E&P),
• Related-party transactions,
• Items affecting Subpart F, GILTI, §245A dividends, and §965 transition tax remnants.

Who files? U.S. citizens/residents, domestic corporations/partnerships, and certain trusts/estates that are officers, directors, or shareholders in specified foreign corporations, depending on filer category (see below).

Deadlines, late filings, and amendments

• Due date: Attach Form 5471 to your income tax return and file by that return’s due date including extensions (individuals: generally Apr 15 / Oct 15; corporations: 15th day of the 4th month after year-end, with possible extensions).
• If late: File asap with an amended return (Form 1040-X / amended 1120). Include a reasonable-cause statement. If you haven’t been contacted by the IRS, consider the Delinquent International Information Return Submission Procedures (DIIRSP).
• Amendments: If a filed Form 5471 was incomplete or wrong, file a corrected form with an amended return. Mark “AMENDED” and attach a brief explanation.

Penalty framework (high level):

• Base penalty $10,000 per form per year for failure to file or substantially incomplete filing.
• If not cured within 90 days of IRS notice, $10,000 per month (up to $50,000 additional) per form.
• Potential reduction of foreign tax credits.
• Statute impact: If a required Form 5471 is missing or substantially incomplete, the statute of limitations on your entire tax return remains open.

Filer categories (2021)

The IRS uses categories to determine who files and which schedules are required. In 2021, Categories 1 and 5 were subdivided to reflect direct vs. constructive ownership relief rules.

• Category 1 (1a/1b/1c): Certain shareholders related to §965 (transition tax) corporations.
• Category 2: U.S. citizen/resident who is an officer/director when a U.S. person acquires ≥10% stock.
• Category 3: U.S. person who acquires or disposes of stock moving to/from ≥10% ownership (or becomes a U.S. person while already ≥10%).
• Category 4: U.S. person with control (>50% vote or value) for ≥30 consecutive days.
• Category 5 (5a/5b/5c): U.S. shareholders (≥10%) of a CFC for ≥30 consecutive days and owning stock on the last day of the CFC’s year.
  • “b” and “c” subcategories address unrelated §958(a) shareholders and related constructive shareholders under Rev. Proc. 2019-40 relief.

Tip: You can be in multiple categories—you must satisfy all schedules triggered by each.

2021 highlights & schedules to expect

• GILTI (Schedule I-1): Report tested income/loss and QBAI for CFCs.
• §965 / §245A remnants: Schedule I and Schedule G questions (e.g., extraordinary reductions) continue to track legacy items.
• Schedules Q & R: Required where applicable for CFC income grouping (Q) and distributions (R) to improve transparency.
• Look-through rule (§954(c)(6)) in force for years beginning before 1/1/2026, affecting FBCI calculations.

Core schedules (by function):

• Ownership: A (stock), B (U.S. shareholders), O (org./reorg., acquisitions/dispositions), P (PTEP).
• Financials: C (income stmt), F (balance sheet), H (current E&P), J (accumulated E&P).
• Taxes & inclusions: E (foreign taxes), I (shareholder income), I-1 (GILTI), Q (CFC groups).
• Transactions: M (related-party transactions).
• Other: G (yes/no disclosures), R (distributions).

How to file (step-by-step)

1. Determine your category(ies). Map direct, indirect, and constructive ownership. Confirm CFC status and §965 relevance.
2. Assemble financials. Obtain the foreign corporation’s income statement, balance sheet, and E&P reconciliations. Prepare in functional currency and translate to USD as required.
3. Complete the main form. Pages 1–6: identifying info, filer category boxes, functional currency code, etc.
4. Prepare required schedules. Use the instructions’ matrix to ensure no schedule is missed (especially M, I/I-1, Q, R for CFC contexts).
5. Compute U.S. tax effects. Determine Subpart F, GILTI, §956, and §245A consequences; coordinate foreign tax credits (e.g., §960 deemed-paid).
6. Attach & file with your income tax return by the deadline (including extensions). If using joint filing for identical requirements, others must attach reliance statements.
7. Retain records (financials, translations, intercompany agreements) ≥6 years; longer if a form was incomplete in any year.

Quick compliance checklist (2021)

• Correct filer category (including 1a/1b/1c and 5a/5b/5c distinctions)
• Complete/accurate Schedules A, B, C, E, F, G, H, I, I-1, J, M, O, P, Q, R as applicable
• Functional currency properly set and consistently used
• Exchange rates applied correctly (divide-by convention; income vs. balance-sheet timing)
• Related-party transactions fully captured on Schedule M
• CFC inclusions (Subpart F, GILTI, §956) computed and tied to return
• Foreign tax credits coordination (Forms 1116/1118) and E&P/PTEP tracking
• Attach to return, extend if needed, and document reasonable cause if late

Common mistakes (and easy fixes)

1. Missing the filing (or assuming inactivity exempts you)
   Fix: File even for dormant entities unless you clearly qualify for narrow dormant/relief procedures.
2. Wrong category → missing schedules
   Fix: Re-check ownership chains; apply constructive ownership rules; use the schedules matrix.
3. Incomplete financials/E&P
   Fix: Reconcile beginning to ending E&P; ensure the balance sheet balances; avoid estimates.
4. Schedule M omissions
   Fix: Inventory all intercompany flows (loans, services, royalties, mgmt fees, cost-sharing, dividends).
5. Currency/translation errors
   Fix: Use the divide-by exchange rate format (foreign currency per $1), with correct timing.
6. Ignoring §965/GILTI remnants
   Fix: Keep tracking PTEP, extraordinary reduction/disposition items, and GILTI tested items each year.
7. No reasonable-cause narrative when late
   Fix: Provide a concise, factual explanation (efforts to obtain data, reliance on advice, obstacles).

After you file

• Processing: No separate acknowledgment; the form integrates into IRS international compliance systems.
• Notices: Expect CP15 penalty notices for late/incomplete filings; respond within the stated window.
• Audit window: Typically 3–6 years, but the statute can remain open if a required Form 5471 is missing/substantially incomplete.
• Data sharing: Information can be exchanged with treaty partners and cross-matched against FBAR (FinCEN 114) and Form 8938.

FAQs (concise)

Do I file if there was no activity?
Usually yes. “Inactive” rarely equals exempt—verify narrowly tailored dormant relief.

I own exactly 10%. Am I Category 5?
You’re a U.S. shareholder at 10%+, but Category 5 applies only if the corporation is a CFC (>50% owned by U.S. shareholders).

Is this the same as FBAR/Form 8938?
No—separate regimes. Many filers must do both.

Can I claim the corporation’s foreign taxes?
Potentially via §960 deemed-paid credits on income you include (Subpart F/GILTI), coordinated on your return.

Another shareholder filed—am I off the hook?
Only if you have identical requirements and properly rely via a joint filing statement. Otherwise, you must file your own.

Found errors from prior years—what now?
File amended returns with corrected Forms 5471 and explanations. Consider DIIRSP if you’ve not been contacted.

This guide is an educational overview tailored to 2021 rules. For case-specific advice, consult a qualified international tax professional.