What Form 5471 Is For

Form 5471 is the IRS's way of keeping track of Americans who have significant connections to foreign corporations. Think of it as an international disclosure form—it's not about paying taxes right away, but about reporting your relationship with companies based outside the United States.

The form serves several key purposes:

• It helps the IRS monitor whether you might owe U.S. taxes on income from foreign corporations, even if that money hasn't been distributed to you yet.
• It tracks ownership changes in foreign companies involving U.S. persons.
• It ensures compliance with complex international tax rules, including provisions related to controlled foreign corporations (CFCs) and special tax calculations under Section 965 (the 2017 tax reform transition tax).

Who needs to file depends on your specific relationship with the foreign corporation. You might need to file if you're an officer or director when certain ownership changes occur, if you control a foreign company, or if you own at least 10% of a controlled foreign corporation's stock.

The form comes with multiple schedules—think of them as detailed attachments—that collect specific financial information about the foreign company and your stake in it.

The information reported on Form 5471 feeds into broader international tax compliance, helping the IRS ensure that U.S. taxpayers aren't hiding income offshore and are properly reporting their worldwide income as required by law.

When You’d Use Form 5471 (Including Late and Amended Filings)

Regular Filing Timeline

You must attach Form 5471 to your regular income tax return (Form 1040 for individuals, Form 1120 for corporations, or the appropriate partnership or exempt organization return) and file both by the due date, including extensions.

When to File a Late Return

If you missed the original deadline, you should file Form 5471 as soon as possible, even if it's late. Attach it to your tax return if you haven't filed yet, or submit it with an amended return if you've already filed.

Amended Filings (Correcting Errors)

If you filed Form 5471 but later discovered it was incomplete or contained errors, you must file a corrected version.
Follow these steps:

1. File an amended tax return (Form 1040-X or equivalent).
2. Attach a corrected Form 5471 marked “Corrected” at the top.
3. Include a detailed statement explaining the corrections.
4. Submit all required schedules, not just the corrected ones.

Key Rules and Requirements for 2020

The Five Categories of Filers

Understanding which category applies to you determines your filing requirements:

Category 1

U.S. shareholders of a “Section 965 specified foreign corporation.”

Category 2

U.S. citizens or residents who are officers or directors when a U.S. person acquires 10% or more of a foreign corporation.

Category 3

U.S. persons who acquire or dispose of enough stock to cross the 10% ownership threshold.

Category 4

U.S. persons who controlled a foreign corporation (more than 50% ownership) during the year.

Category 5

U.S. shareholders owning 10%+ of a controlled foreign corporation (CFC) at any time during the tax year.

What Qualifies as a Controlled Foreign Corporation (CFC)?

A CFC is a foreign corporation where U.S. shareholders collectively own more than 50% of voting power or stock value during the year.

Schedule Requirements by Category

• Categories 1, 4, and 5: Require most schedules (A–P).
• Categories 2 and 3: Limited to ownership and identifying information.

2020-Specific Updates

Revenue Procedure 2019-40 provided exceptions for certain U.S. shareholders with only constructive ownership. This addressed unintended CFC status created by 2017 tax reform.

Step-by-Step Filing Process (High Level)

Step 1: Determine Your Filing Category

Identify which of the five filer categories apply to you—possibly more than one.

Step 2: Gather Required Information

Collect:

• Financial statements (balance sheet, income statement)
• Ownership records
• Transaction details
• Translations and currency conversions

Step 3: Complete the Main Form

Fill in identifying information on page 1, including:

• Your name
• The corporation’s name, address, country, and TIN
  Then complete Schedule A and Schedule B.

Step 4: Complete Required Schedules

Depending on your category:

• Schedules C & F: Financial statements
• Schedule E: Foreign taxes
• Schedule G: Other information
• Schedule H: Current earnings and profits
• Schedule I / I-1: Income and GILTI
• Schedule J: Accumulated earnings
• Schedule M: Related transactions
• Schedule O / P: Organizational and historical info

Step 5: Apply Exchange Rates Correctly

Use the divide-by convention (foreign currency per 1 USD) to four decimal places.

• Average rate for income items
• Year-end rate for balance sheets

Step 6: Attach to Your Tax Return

Attach all pages and schedules to your tax return.
If multiple filers share responsibility, one may file on behalf of others (with proper statements attached).

Common Mistakes and How to Avoid Them

Mistake #1: Misidentifying Your Filing Category

Double-check definitions and include constructive ownership.

Mistake #2: Not Recognizing When Exceptions Apply

Review the “Exceptions From Filing” section carefully.

Mistake #3: Incomplete Schedules

Use the IRS checklist to ensure every required schedule is complete.

Mistake #4: Exchange Rate Errors

Always use the divide-by convention and consistent methodology.

Mistake #5: Missing Deadlines or Not Correcting Errors

File late or corrected forms promptly to reduce penalties.

Mistake #6: Not Coordinating with Other International Forms

Avoid duplicate reporting but ensure all international forms (e.g., Forms 8938, 8865) are filed as required.

What Happens After You File

IRS Processing

Form 5471 is processed with your return and used to verify proper reporting of foreign income and credits.

Potential for Additional Scrutiny

International filings may face extra review. Respond promptly to any IRS inquiries.

Coordination With Other Compliance Efforts

The IRS shares data with foreign tax authorities—accuracy is essential.

If You Discover Errors Later

File a corrected Form 5471 with an amended return, marked “Corrected,” and include an explanation.

Ongoing Obligations

You must file Form 5471 annually for as long as the foreign relationship exists.

FAQs

Q1: What are the penalties for not filing or filing incorrectly?

Initial $10,000 per form, increasing up to $50,000 with continued noncompliance. You may also lose foreign tax credits.

Q2: Can I file Form 5471 electronically?

Yes, if your tax return is e-filed, Form 5471 can be attached electronically depending on your tax software.

Q3: What if multiple U.S. persons need to file for the same corporation?

One filer may submit on behalf of others with the same filing obligations, as long as proper statements are attached.

Q4: I only have constructive ownership—do I still have to file?

Not if all three conditions apply:

1. You have no direct ownership.
2. Your filing requirement exists only due to attribution.
3. The actual U.S. owner files a complete Form 5471.

Q5: The foreign corporation uses a different currency and tax year. How do I report?

Use the corporation’s accounting period and convert to USD using the average exchange rate for income items and year-end rate for balance sheets.

Q6: What’s the difference between a CFC and a Section 965 SFC?

• CFC: 50%+ U.S. ownership; triggers Subpart F and GILTI rules.
• SFC: Related to the 2017 transition tax on accumulated earnings.

Q7: Can penalties be waived for reasonable cause?

Yes, if you can prove good faith and circumstances beyond your control. Relief under Rev. Proc. 2019-40 may apply in limited cases.

Final Thoughts

Form 5471 is one of the most complex IRS filings due to international tax rules introduced by the 2017 Tax Cuts and Jobs Act. The potential penalties are significant, so compliance and accuracy are critical.

If you have any relationship with a foreign corporation—whether as an owner, officer, or director—determine your filing category early and consult a qualified international tax professional.

For the most current forms and guidance, visit IRS.gov/Form5471.