Form 5471: Reporting Interests in Foreign Corporations

Form 5471 must be filed by certain US persons who have an ownership interest in a foreign corporation — specifically, US shareholders who own 10% or more, officers and directors of foreign corporations in which a US person owns 10%+, and US persons who acquire or dispose of a 10%+ interest during the year. The form is extensive and requires detailed information about the foreign corporation's income, expenses, assets, liabilities, and transactions with US persons. Even if the foreign corporation had no income, the form is required if the ownership threshold is met, and the penalty for not filing is $10,000 per form per year, increasing to $50,000 if the failure continues after IRS notice. For expats who own their local business through a foreign corporation, Form 5471 is one of the most burdensome annual reporting requirements. Given the complexity and the high penalties, having a tax professional prepare Form 5471 is strongly advisable.