What is Form 5471?

Form 5471 or more specifically “Information Return of U.S. Persons With respect to Certain Foreign Corporations” allows you as director, official or shareholder of certain foreign companies to provide all the necessary information required by the IRS (Inland Revenue Service). Accurate completion of Form 5471 is essential in determining your tax obligations and whether or not an audit will be necessary. Form 5471 is available here on the IRS website. Once completed the form must be filed with the IRS along with your annual tax declaration.

Who is required to file Form 5471?

A comprehensive answer to this question is beyond the scope of this article, the filing requirements are broad and in some cases highly complex. Listed below are some common situations in which Form 5471 must be submitted.

• Any U.S person who holds shares of more than 10% in a CFC (controlled foreign corporation)  must file form 5471.  Although this is generally only an information disclosure.
• Any U.S. person who holds the position of officer or director of a foreign company.
• Family members may have to file Form 5471 if you hold shares in a foreign company and vice versa.
• U.S. persons who have some degree of control over a foreign company for an un interrupted period of  30 days per year.
• U.S persons who have acquired interest in a foreign company that exceed current prescribed thresholds.

This list is by no means complete, there are currently 5 categories of filer, the category you fall into determines which schedules and attachments you are required to submit alongside form 5471. The company’s structure in terms of ownership and interest are  also used to determine your filing obligations. Please note the amount of control or interest you have in a foreign company will determine how much information you are required to disclose to the IRS. I.e., the more interest or control you have in a company, the greater the level of transparency required. For more information to help you determine the type of filer you are and which schedules you need to submit, you can visit the IRS information and instructions page for Form 5471 here.

When to file Form 5471

For U.S. expats the deadline for filing form 5471 alongside your income tax declaration is June 15th, as the IRS grants an automatic two month extension for U.S. taxpayers living abroad when tax season begins on April 15th. A further extension until October is available on request.

Penalties

If you meet the filing criteria for Form 5471, it’s essential that this is done in a timely and accurate manner. Failure to do so could result in significant financial penalties ranging from $10,000 to as much as $60,000 for multiple violations. Filing your taxes as a U.S expat or U.S foreign business owner can be daunting and is often complex, we highly recommend consulting an accountant or tax professional.

Further information

Complete instructions on how to complete and file Form 5471 are available here on the IRS website. Form 5471 can be downloaded (here) in pdf format. Would you like to know more about the business culture in the Netherlands, in this article, Moneywood discusses some of the benefits and challenges, for entrepreneurs here in Holland. Alternatively in our article Paying taxes in the Netherlands, we have provided an overview of the tax system in the Netherlands, and how it can work for your business. If you have questions or need advice when submitting form 5471, here at Moneywood our experts have many years of experience supporting our valued U.S. expat community when tax season comes around. Please don’t hesitate to contact us. We are here to help.