Form 5471 — Information Return of U.S. Persons With Respect to Certain Foreign Corporations

Form 5471 Overview

Form 5471 is an information return filed by U.S. persons (citizens, residents, corporations, partnerships, trusts, and estates) who have certain ownership interests in foreign corporations. The form is filed annually with the U.S. person's federal income tax return. Failure to file Form 5471 triggers a $10,000 penalty per form per year, with an additional $10,000 penalty for each 30-day period of continued non-filing after IRS notice (up to $50,000 per form per year). The IRS has been aggressively enforcing Form 5471 filing requirements in recent years.

Form 5471 is one of the most complex international information returns. The form has multiple schedules (A through Q) that report different aspects of the foreign corporation's income, assets, and transactions with related parties. Practitioners who prepare Form 5471 must understand the controlled foreign corporation (CFC) rules, Subpart F income, and the Global Intangible Low-Taxed Income (GILTI) regime.

Filing Categories

There are five categories of filers for Form 5471, each with different filing requirements:

Controlled Foreign Corporation (CFC) Rules

A foreign corporation is a CFC if more than 50% of its total combined voting power or total value is owned by U.S. shareholders (each owning 10% or more). The CFC rules under Subpart F (IRC §951–965) require U.S. shareholders to include certain types of CFC income in their gross income currently, regardless of whether the CFC distributes the income. Subpart F income includes: foreign personal holding company income (dividends, interest, rents, royalties); foreign base company sales income; foreign base company services income; and certain insurance income.

The GILTI regime under §951A requires U.S. shareholders to include in gross income their share of the CFC's global intangible low-taxed income — broadly, the CFC's income above a 10% return on tangible assets. The GILTI inclusion is subject to a 50% deduction for C-Corps (reducing the effective rate to 10.5%) but no deduction for individuals (who pay the full 37% rate on GILTI). Individuals with CFC interests should consider making a §962 election to be taxed as a corporation on GILTI income.

Penalties for Non-Filing

The penalty for failure to file Form 5471 is $10,000 per form per year. If the failure continues for more than 90 days after IRS notice, an additional $10,000 penalty is imposed for each 30-day period of continued non-filing, up to $50,000 per form per year. The IRS can also reduce foreign tax credits by 10% for each year Form 5471 was not filed. The statute of limitations on the entire tax return is suspended until Form 5471 is filed — meaning the IRS can audit the entire return indefinitely if Form 5471 is missing.

Practitioners should conduct an annual review of each client's foreign corporation interests to ensure Form 5471 filing requirements are met. Common situations that trigger Form 5471 requirements: U.S. person forms a foreign holding company; U.S. person acquires shares in a foreign corporation; U.S. person inherits shares in a foreign corporation.

Frequently Asked Questions