Form 8858 might sound intimidating, but it's essentially the IRS's way of keeping track of American business interests abroad. If you're a U.S. person who owns certain foreign entities or operates foreign branches, this form ensures you're reporting these activities properly. Let's break down everything you need to know about the 2013 version of Form 8858 in plain English.

What the Form Is For

Form 8858, officially titled "Information Return of U.S. Persons With Respect To Foreign Disregarded Entities," serves as a financial transparency tool for the IRS. Think of it as a detailed snapshot of your foreign business operations that aren't treated as separate companies for U.S. tax purposes.

You need this form if you own what's called a "Foreign Disregarded Entity" (FDE).
An FDE is essentially a foreign business entity that U.S. tax law treats as if it doesn't exist separately from you—the owner.

Form 8858 is also required for certain U.S. persons who own interests in foreign entities that themselves own FDEs.

It reports crucial information including the entity's income, assets, liabilities, and transactions with related parties.
The form must be attached to your income tax return or information return and is due when that return is due, including extensions.

When You'd Use It (Including Late and Amended Filings)

Original Filings

Form 8858 is due at the same time as your income tax or information return—typically April 15 for individuals (extensions available through October 15).

Late Filings

If you missed the deadline, you still need to file.
Penalties:

• $10,000 per FDE per year for failure to file.
• Additional $10,000 per 30-day period after 90 days of nonresponse (up to $50,000).
• Potential foreign tax credit reductions (10% to 25%) for continued noncompliance.

Amended Filings

If you discover errors or omissions:

• File a corrected version labeled “AMENDED.”
• Attach an explanation of changes.
• Submit the amended form with an amended return if needed.

The statute of limitations for penalties starts only when complete and accurate information is filed.

Key Rules for 2013

Multiple Direct Owners

If an FDE had more than one direct owner, you must attach a statement identifying each.

Who Must File

Three categories of filers:

1. Tax owners of FDEs.
2. U.S. persons filing Form 5471 (CFC owners).
3. U.S. persons filing Form 8865 (CFP owners).

Organizational Chart Requirement

Attach an ownership chart showing:

• Chain of ownership
• Entity names
• Ownership percentages
• Tax classifications
• Countries of organization

Reference ID Numbers

If no EIN exists, assign a reference ID (up to 50 characters).
Use it consistently in future filings.

Functional Currency Reporting

Report all financial info in both:

• The FDE’s functional currency, and
• U.S. dollars (using average exchange rate).

Section 987 Reporting

Use Schedule C-1 to report Section 987 gain or loss for qualified business units (QBUs).

Dormant FDE Relief

Announcement 2004-4 allows a summary filing for dormant entities with no activity.

Step-by-Step Guide (High Level)

Step 1: Determine If You Must File

Identify any disregarded foreign entities you own or control.

Step 2: Gather Required Information

Collect:

• Entity name, address, country
• Functional currency
• Financial statements
• Related-party transaction data

Step 3: Complete Identifying Information

Fill out filer and entity info (Sections 1–4).

Step 4: Prepare the Organizational Chart

Show ownership chains and relevant entities.

Step 5: Complete Schedule C (Income Statement)

Report income in both functional and U.S. currency using GAAP.

Step 6: Complete Schedule F (Balance Sheet)

Report assets, liabilities, and equity per GAAP.

Step 7: Complete Schedule G (Other Information)

Answer compliance questions about ownership, losses, and transactions.

Step 8: Complete Schedule H (E&P or Taxable Income)

Adjust for U.S. tax principles and translate income to USD.

Step 9: Complete Schedule M (If Required)

Report related-party transactions if applicable.

Step 10: Attach and Submit

Include Form 8858 with your tax return or file electronically.

Common Mistakes and How to Avoid Them

Mistake 1: Not Filing at All

Solution: Review foreign ownership annually; file if any FDEs exist.

Mistake 2: Wrong Exchange Rate Format

Solution: Use divide-by convention—units of foreign currency per USD.

Mistake 3: Missing the Organizational Chart

Solution: Always include detailed ownership charts.

Mistake 4: Confusing Tax Owner, Direct Owner, and Filer

Solution: Understand and correctly identify roles.

Mistake 5: Incomplete Schedule M Reporting

Solution: Maintain full records of related-party transactions.

Mistake 6: Forgetting Reference ID Numbers

Solution: Use consistent reference IDs for all non-EIN FDEs.

Mistake 7: Misunderstanding “Disregarded Entity” Status

Solution: Verify entity classification per IRS regulations.

Mistake 8: Using Wrong Financial Standards

Solution: Restate foreign GAAP to U.S. GAAP before filing.

Mistake 9: Late Filing Without Reasonable Cause

Solution: Include written reasonable cause statements with late filings.

What Happens After You File

If Filed Timely and Completely

The IRS includes it in your tax record; no separate acknowledgment.

If Information Is Missing or Inaccurate

The IRS may issue a notice requesting corrections.
Failure to respond triggers additional penalties.

If You're Selected for Examination

Expect review of foreign records and transactions.

Penalty Assessment Process

Penalties are assessable—no deficiency notice before assessment.

Appeal Rights

You can dispute penalties through IRS Appeals before or after payment.

Interaction with Statutes of Limitation

Incomplete or missing filings keep the statute open indefinitely.

Criminal Consequences

Applies only in willful or fraudulent noncompliance cases.

FAQs

Q1: I have a single-member LLC in Canada. Do I need Form 8858?

Yes. Most foreign single-member LLCs are FDEs and must file Form 8858.

Q2: What's the difference between Form 8858 and Form 5471?

Form 8858 = foreign disregarded entities.
Form 5471 = controlled foreign corporations.
Sometimes both are required.

Q3: Can I claim reasonable cause if I didn’t know about the requirement?

Possibly—but ignorance alone isn’t enough.
You must show ordinary business care and supporting evidence.

Q4: What if I can’t get financial info from the foreign entity?

You’re still required to file.
Lack of cooperation from partners doesn’t excuse non-filing.

Q5: Do I need to file if my entity was inactive?

Yes—unless it qualifies as a dormant FDE under Announcement 2004-4.

Q6: I made a “check-the-box” election mid-year. When do I start filing?

Start filing in the tax year the election takes effect.

Q7: What if multiple people must file for the same FDE?

One filer may submit on behalf of others, but all remain jointly liable for accuracy.