Form 5471 Explained: Do You Need to Report Your Foreign Corporation?

You took the leap, set up a business abroad, and now you’re living the dream—until tax season rolls around and you hear about Form 5471. Suddenly, the IRS wants details about your foreign corporation, and missing this form could mean steep penalties.

If you’re a U.S. shareholder in a foreign business, there’s a good chance you need to file. But who exactly has to report? What counts as ownership? And how do you stay on the right side of evolving U.S. tax law without drowning in paperwork?

Let’s break it down—so you can focus on running your business, not running from the IRS.

What is IRS Form 5471?

Form 5471, officially titled Information Return of U.S. Persons With Respect to Certain Foreign Corporations, is a mandatory IRS form used to report foreign business interests. If you’re a U.S. shareholder with significant ownership in a foreign corporation, the Internal Revenue Code (IRC) requires you to disclose constructive ownership, financial transactions, and and income information that supports U.S. foreign income reporting.

This form is similar to a U.S. corporate tax return but applies to foreign corporations. Whether you own shares directly or have voting power through related persons or related parties, filing obligations depend on categories of filers and ownership thresholds.

Because failing to file can trigger steep IRS penalties, understanding whether you need to report your foreign income is crucial for compliance.

Who needs to file Form 5471?

If you’re a U.S. shareholder with ownership in a foreign corporation, you may be required to file Form 5471—but not everyone with foreign business ties has to. Filing obligations depend on ownership percentage, control, and the nature of the corporation’s activities and transactions for U.S. tax reporting purposes.

A foreign corporation is any corporation registered abroad where all members have limited liability. However, not all foreign business structures trigger Form 5471—for example, foreign partnerships require Form 8865 instead.

Who must file?

You’ll need to file Form 5471 if you meet any of the following criteria:

• You are a U.S. person (citizen, resident, or business entity) who owns at least 10% of a foreign corporation’s stock.
• You have ownership, including constructive ownership, in a Controlled Foreign Corporation (CFC) (more than 50% of the stock is owned by U.S. persons).
• You are an officer or director of a foreign corporation in which a U.S. person has gained or lost at least 10% ownership during the tax year.
• You controlled or held more than 50% of a foreign corporation for at least 30 days in the tax year.

Filing categories and reporting requirements

The IRS assigns filers into five categories, each with different reporting requirements. The category you fall under depends on your ownership percentage, voting power, and the nature of your ownership and reporting relationship with the foreign corporation.

Additionally, if your foreign corporation holds a foreign bank account, you may also need to file a Foreign Bank Account Report (FBAR) annually.

Key reporting thresholds

• 10% ownership rule: If a U.S. shareholder owns at least 10% of the stock or voting power of a foreign corporation, it may trigger a reporting requirement under Form 5471, depending on the filer’s category.
• 50% control rule (CFC status): If more than 50% of a foreign corporation’s stock is controlled by U.S. persons for at least 30 days in a tax year, it is classified as a Controlled Foreign Corporation (CFC).
• Special rules for disregarded entities: If a foreign business is structured as a single-owner entity, it may not require Form 5471 but instead be reported on Form 8858 as a disregarded entity.

Does filing Form 5471 create additional tax liability?

Filing Form 5471 itself does not create new U.S. tax liabilities, but certain types of foreign corporate income may be subject to U.S. taxation.

• NCTI (Net CFC Tested Income, formerly GILTI): Under rules introduced by the Tax Cuts and Jobs Act (TCJA), certain income of foreign corporations controlled by U.S. taxpayers may be subject to current U.S. taxation. Beginning in 2026, this regime is referred to as Net CFC Tested Income (NCTI), reflecting updated income inclusion rules.
• Distributions and dividends: If a foreign corporation pays salaries or dividends to a U.S. shareholder, these must be reported on Form 1040 and may be subject to U.S. income tax.
• Legal challenges: The U.S. taxation of foreign corporate income has been subject to legal and policy debate in recent years, particularly as it applies to closely held foreign businesses. Taxpayers should stay informed as guidance and interpretations continue to evolve.

When you may not need to file Form 5471

Not every U.S. shareholder with foreign business interests is required to file Form 5471. In some cases, filing may not be required based on the taxpayer’s ownership percentage, entity classification, and filing category.

Determining whether Form 5471 applies requires a careful review of ownership structures, entity classification for U.S. tax purposes, and the nature of the foreign entity. While certain situations fall outside the Form 5471 filing requirements, this determination must be made based on applicable U.S. tax rules rather than assumptions.

Situations where Form 5471 filing may not apply

• Ownership below reporting thresholds: In some cases, U.S. persons with less than 10% ownership may not fall into a Form 5471 filing category, depending on their role and changes in ownership during the year.
• Timing and reporting considerations: Differences between a foreign entity’s accounting period and the U.S. taxpayer’s tax year may affect how and when information is reported.
• Foreign entities classified differently for U.S. tax purposes: If a foreign business is classified as a disregarded entity or partnership for U.S. tax purposes, reporting may be required on a different form, such as Form 8858 or Form 8865, rather than Form 5471.

What to do if you think Form 5471 may not apply

• Verify your stock ownership: Review your ownership percentage and voting rights in the foreign corporation. In some situations, ownership below certain thresholds may mean you do not fall into a Form 5471 filing category.
• Confirm filing category: Form 5471 filing obligations depend on specific filer categories, each with its own reporting requirements and schedules. Carefully confirm which category, if any, applies to your situation.
• Consult a tax professional: Form 5471 requirements can be complex, and incorrect assumptions may lead to penalties. If you’re unsure whether filing is required, professional guidance can help ensure compliance and avoid unnecessary filings.

Key differences: Form 5471 vs. Form 8938

Both Form 5471 and Form 8938 involve reporting foreign financial interests, but they serve different purposes and apply in different scenarios.

• Form 5471 → Reports ownership, stock transactions, and detailed financial information of a foreign corporation that supports U.S. foreign income reporting. It is required for U.S. shareholders who meet certain ownership thresholds.
• Form 8938 → Reports specified foreign financial assets, including foreign bank accounts, investment accounts, and interests in foreign entities, when the total value exceeds IRS filing thresholds.

When do you need to file both?

• You own an interest in a foreign corporation that triggers Form 5471 filing requirements, and
• The value of your specified foreign financial assets, including interests in foreign corporations, exceeds the IRS reporting thresholds for Form 8938.

When does only one apply?

• File Form 5471 but not Form 8938 if your foreign corporation ownership triggers Form 5471 filing requirements, but the value of your specified foreign financial assets remains below the IRS reporting threshold for Form 8938.
• File Form 8938 but not Form 5471 if you hold foreign financial assets (such as bank accounts or foreign securities) but do not fall into a Form 5471 filing category for a foreign corporation.

How do I file IRS Form 5471?

Filing Form 5471 requires gathering key financial records and carefully completing the form’s multiple sections. Because it’s a detailed six-page document with 30+ hours of estimated preparation time, expert assistance is highly recommended.

Steps to file Form 5471

1. Collect required documents: Ensure you have income statements, balance sheets, stock ownership records, and details of your foreign corporation’s annual accounting period.
2. Complete the necessary schedules: Depending on your filing category, you may need to complete separate schedules for income, stock transactions, or related party transactions.
3. Attach to your U.S. tax return: File Form 5471 with your income tax return (Form 1040 or 1120) by the IRS due date (April 15 or October 15 with an extension).
4. Avoid common mistakes: Errors in prior year reporting, misclassification of stock ownership, or missing a specified foreign corporation requirement can lead to IRS penalties.

Understanding the key schedules in Form 5471

Form 5471 includes multiple separate schedules that provide details on ownership, income, and financial transactions of a foreign corporation. Here’s a quick breakdown of the most important ones:

• Schedule A: Identifies U.S. shareholders and their stock ownership in the foreign corporation.
• Schedule B: Reports changes in stock ownership during the tax year.
• Schedule C: Serves as the income statement, detailing profits, losses, and expenses.
• Schedule F: Reports the balance sheet, showing the corporation’s assets and liabilities.
• Schedule G: Discloses transactions between the foreign corporation and related persons or related parties.
• Schedule H: Summarizes current earnings and profits (E&P) and related adjustments relevant to U.S. foreign income reporting.
• Schedule I-1: Provides detailed information used to calculate Subpart F income and Net CFC Tested Income (NCTI) for specified foreign corporations (SFCs).
• Schedule J: Tracks accumulated earnings and profits across the current and prior tax years.
• Schedule M: Documents financial transactions between U.S. persons and the foreign corporation.
• Schedule O: Reports organizational changes, stock transfers, and capital contributions involving the foreign corporation.
• Schedule P: Tracks previously taxed earnings and profits (PTI), including amounts attributable to Subpart F income and Net CFC Tested Income (NCTI), for controlled foreign corporations (CFCs).

Penalties for not filing Form 5471

Failing to file Form 5471, or filing an incomplete or incorrect return, can result in significant penalties:

• An initial penalty of $10,000 per form, with additional penalties of $10,000 for each 30-day period of continued noncompliance after IRS notice, up to a maximum of $50,000 in additional penalties per form.
• Potential additional penalties related to underreported foreign income, including amounts attributable to Subpart F income or Net CFC Tested Income (NCTI).
• Increased IRS audit risk and potential compliance enforcement actions for ongoing non-filers.

How to catch up if you missed filing

If you’ve fallen behind, the IRS Streamlined Procedure offers an amnesty option for expats who failed to file unintentionally.

To qualify, you must:

• File your last three years of federal income tax returns.
• Submit your last six years of FBARs (if applicable).
• Self-certify that your non-compliance was non-willful (i.e., not intentional tax evasion).

Stay compliant and avoid costly mistakes

Navigating Form 5471 isn’t just about ticking boxes—it’s about ensuring compliance, avoiding hefty penalties, and staying on top of evolving U.S. tax reporting requirements. Understanding your ownership thresholds, filing category, and reporting obligations is key to keeping your foreign corporation in good standing with the IRS.

Not sure if you need to file? Bright!Tax can help. Our team specializes in U.S. expat tax preparation, ensuring accuracy and compliance so you can focus on growing your business. Get in touch today for expert guidance.

FAQs: Filing Form 5471