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2021 Form 5471 Deadline in 2022 | Foreign Business Tax Lawyer & Attorney

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IRS Form 5471 is one of the most important US international information returns. In this brief essay, I will discuss the tax year 2021 Form 5471 deadline in the calendar year 2022.

2021 Form 5471 Deadline: What is Form 5471

Form 5471 is a US international information return. In general, the IRS uses Form 5471 to collect information about certain US persons who are officers, directors, or shareholders in certain foreign corporations. These US persons, in turn, use Form 5471 to satisfy the reporting requirements of the IRC (Internal Revenue Code) §§965, 6038 and 6046 as well as related regulations. In other words, US taxpayers utilize Form 5471 to comply with their reporting obligations concerning their ownership of and transactions with a foreign corporation.

Form 5471, however, is more than just an international information return. It also contains the relevant schedules related to income recognition by US owners of foreign corporations through the operation of anti-deferral tax regimes such as Subpart F rules, 965 tax and GILTI tax.

2021 Form 5471 Deadline: Who Must File It

Determining whether you are required to file a Form 5471 and which schedules you must attach to it may also be very complicated. As a result of the 2017 tax reform, Form 5471 now sports a total of five categories of required filers; two of these categories contain three sub-categories. In other words, the instructions to Form 5471 describe now a total of nine categories of filers!

Once you determine that you fall into one of these categories, you must carefully determine which schedules, statements and attachments you must complete in order to fully comply with your Form 5471 obligations.

I should also note that a separate Form 5471 is required for each applicable foreign corporation. This is the case even if one foreign corporation owns the other; there is no consolidated group filing under Form 5471.

2021 Form 5471 Deadline: Complexity

Form 5471 is incredibly complex. It forces its filers to convert foreign financial statements to US GAAP. It further requires reporting of an astounding range of transactions between a foreign corporation and its US owners as well as the affiliates of US owners. Finally, as it was already mentioned above, US taxpayers use Form 5471 schedules to calculate the income that they must recognize under the various anti-deferral tax regimes.

Thus, completing a Form 5471 may require a significant effort and a lot of time. This is why you need plan well ahead to make sure that you file your Form 5471 timely.

2021 Form 5471 Deadline: Penalties

A failure to timely file an accurate Form 5471 may result in imposition of large IRS penalties. Moreover, since Form 5471 is used to satisfy a variety of tax obligations, different penalties may be imposed under different IRC sections.

For example, a failure to file Form 5471 Schedule M may result in the imposition of a $10,000 penalty pursuant to §6038(a). A failure to file Form 5471 Schedule O is a violation of §6046 and the IRS may assess a separate section 6046 is subject to a $10,000 penalty for each reportable transaction.

2021 Form 5471 Deadline: When to File and Where

All filers (unless they fall under an exception) must attach their Forms 5471 to their income tax returns (if applicable, a partnership return or tax exempt organization return). Both, the income tax return and Form 5471 must be filed by the due date, including extensions, for that return.

In other words, if you are an individual filing Form 1040, your 2021 Form 5471 deadline is April 18, 2022. If you file an extension, the deadline will shift to October 17, 2022.

Contact Sherayzen Law Office for Professional Help With Your 2021 Form 5471 Deadline

If you are required to file a Form 5471 for the tax year 2021, contact Sherayzen Law Office for professional help. We have successfully helped US taxpayers around the world with their Form 5471 compliance, and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!

Fundamental Form 5471 Concepts | Form 5471 Tax Lawyer & Attorney

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Form 5471 is the most important information return that the IRS uses to collect information about foreign corporations with substantial US ownership. US taxpayers must file a Form 5471 with their US tax returns; failure to do so may result in the imposition of significant IRS penalties. In order to identify whether the IRS requires them to file Form 5471, US taxpayers must at the very least understand the following three fundamental Form 5471 concepts: “US Person”, “US Shareholder” and “Controlled Foreign Corporation” (“CFC”). This article introduces readers to these fundamental Form 5471 concepts.

Fundamental Form 5471 Concepts: US Person

The definition of “US Person” is crucial to understanding your Form 5471 filing requirements. Generally, the definition of a US person includes the following categories of taxpayers: US citizens, US tax residents, a domestic partnership, a domestic corporation, certain trusts and certain estates. It should be pointed out that tax-exempt entities can also be US persons.

In order for a trust to be a US Person, it must not be a foreign trust; in other words, it must satisfy the legal tests set forth in the Internal Revenue Code (“IRC”) §7701(a)(30). The first test is that a court within the United States is able to exercise primary jurisdiction over the trust’s administrative issues. The second test is that a US person has authority to make all important discretionary decisions which cannot be vetoed by a non-US person.

In order for an estate to be a US person, it must not be a foreign estate as defined in the IRC §7701(a)(31).

Fundamental Form 5471 Concepts: US Shareholder

The concept of US shareholder is also very important for understanding one’s Form 5471 obligations. The definition of a US shareholder was recently modified by the 2017 Tax Cuts and Jobs Act (“TCJA”).

A “US shareholder” is a US Person who owns either: (a) 10% or more of the total combined voting power of all classes of voting stock of a foreign corporation; or (b) 10% or more of the value of all the outstanding shares of a foreign corporation. The latter rule (10% ownership of the total value of shares) is applicable starting a tax year of a foreign corporation that begins after December 31, 2017.

It is important to point that “ownership” can be direct, indirect or constructive within the meaning of IRC §958(a) and §958(b).

Fundamental Form 5471 Concepts: Controlled Foreign Corporation

Owners of shares in a CFC face a far greater Form 5471 compliance burden than owners of shares in foreign corporations which are not CFCs. Hence, the concept of CFC is extremely important to identifying your Form 5471 obligations.

A CFC is a foreign corporation with US shareholders that own on any day of its tax year, more than 50% of either (1) the total combined voting power of all classes of its voting stock, or (2) the total value of its stock. Again, the “ownership” can be direct, indirect or constructive within the meaning of IRC §958(a) and §958(b).

The 2017 tax reform made profound changes to the definition of CFC. Many foreign corporations which were not CFCs under the pre-TCJA rules have been re-classified as CFCs starting tax year 2018.

Contact Sherayzen Law Office for Professional Help With Your Form 5471 Compliance

If you are a US person with an ownership interest in a foreign corporation of 10% or more, you may have extensive Form 5471 reporting obligations. Given the extreme complexity of the form and the high penalties associated with Form 5471 noncompliance, it is important secure the professional and experienced help of Sherayzen Law Office.

Contact Us Today to Schedule Your Confidential Consultation!

IRS Revenue Procedure 92-70 (1992-2 C.B. 435)

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SECTION I. PURPOSE

This revenue procedure provides a summary filing procedure for filing Form 5471 with respect to dormant foreign corporations described in section 3 below. Persons complying with this revenue procedure satisfy their Form 5471 filing obligations under sections 6038(a)(1), 6038(a)( 4), and 6046(a)(3) with respect to dormant foreign corporations and will not be subject to penalties related to the failure to timely file a complete Form 5471 and to timely furnish information requested thereon.

SEC. 2. BACKGROUND

.01 Section 6038(a)(l) imposes information reporting requirements on any United States person who controls a foreign corporation. Pursuant to section 6038(a)(4), the information reporting requirements prescribed in section 6038 (a)( 1) also are imposed on any United States person who is treated as a United States shareholder of any foreign corporation that is treated as a controlled foreign corporation for any purpose under subpart F.

.02 Section 6046(a)(3) imposes reporting requirements on each person who is treated as a United States shareholder of a controlled foreign corporation under section 953(c).

.03 Section 1.6038-2 of the Income Tax Regulations requires a United States person controlling a foreign corporation to file an annual information return on Form 5471 specifying certain identifying information, stock, shareholder, earnings and profits, and financial information about the foreign corporation, as well as transactions between the foreign corporation, the filer, certain other shareholders, and entities related to the filer or the foreign corporation.

.04 Section 1.6038-2(j)(1) of the regulations allows two or more U.S. persons who are required to furnish information with respect to the same foreign corporation and for the same period to satisfy this obligation by filing a joint return. Pursuant to section 1.6038-2(j)(2) of the regulations, a U.S. person required to furnish information solely by reason of stock ownership attribution from another U.S. person is excepted from furnishing information if he does not directly own an interest in the corporation and all such required information otherwise is furnished by the person from whom the ownership is attributed. Section 1.6038-2(j)(3) of the regulations requires any U.S. person relying on section 1.6038-2(j)(1) or (2) to file a statement with his income tax return indicating that his filing liability will be satisfied by another return, identifying that return, and identifying the place of return filing.

.05 Section 1.6046-1(e)(1) of the regulations allows two or more U.S. persons who are required by section 1.6046-l(c) of the regulations to file a return with respect to the same corporation to satisfy this obligation by filing a joint return. Under section 1.6046-l(e)(4)(iii) of the regulations, a U.S. person required to file a return under section 1.6046-1(c) is excepted from this filing requirement if he is required to file solely by reason of stock ownership attribution from another U.S. person, he does not directly own an interest in the foreign corporation, and the information required by section 1.6046-1(c) is otherwise furnished by the U.S. person from whom the ownership is attributed. Pursuant to section 1.6046-1(e)(5) of the regulations, any U.S. person required by section 1.6046-1(c) to furnish information regarding a foreign corporation may, if such information is furnished by another person having an equal or greater stock interest (measured in terms of value of such stock) in such corporation, satisfy such requirement by filing a statement with his return on Form 5471 indicating that such liability has been satisfied and identifying the return in which such information was included .

.06 Section 6038(b)(l) imposes monetary penalties for a failure to timely furnish any information required by section 6038(a)(l) with respect to a foreign corporation (including entities treated as controlled foreign corporations under sections 957 and 953). Additional penalty amounts may apply under section 6038(b)(2) where the failure to furnish information continues for more than 90 days after notification by the Secretary.

.07 Section 6038(c) mandates a reduction in certain foreign tax credits for a failure to timely furnish information required by section 6038(a)(l) absent a showing of reasonable cause for the delay. Additional credit reductions may apply where such failures continue for more than 90 days after notice by the Secretary.

.08 Section 6679 imposes monetary penalties for a failure to timely file a return or to provide information specified in any return required by section 6046 absent a showing of reasonable cause for the failure.

. 09 Criminal penalties (fines and imprisonment) are imposed by section 7203 for a willful failure to file a return, including an information return required by section 6038 or 6046.

SEC. 3. SCOPE

This revenue procedure applies to persons required under section 6038(a)(1), 6038(a)(4) or 6046(a)(3) to file a Form 5471 with respect to a foreign corporation that is a dormant foreign corporation. For purposes of this revenue procedure, a foreign corporation is a dormant foreign corporation if, at all times during the foreign corporation’s annual accounting period (within the meaning of section 6038(e)(2)):

(1) the foreign corporation conducted no business and owned no stock in any other corporation other than another dormant foreign corporation;

(2) no shares of the foreign corporation (other than directors’ qualifying shares) were sold, exchanged, redeemed, or otherwise transferred, nor was the foreign corporation a party to a reorganization;

(3) no assets of the foreign corporation were sold, exchanged, or otherwise transferred, except for de minimis transfers described in (4) and (5) below;

(4) the foreign corporation received or accrued no more than $5,000 of gross income or gross receipts;

(5) the foreign corporation paid or accrued no more than $5,000 of expenses;

(6) the value of the foreign corporation’s assets as determined pursuant to U.S. generally accepted accounting principles (but not reduced by any mortgages or other liabilities) did not exceed $100,000;

(7) no distributions were made by the foreign corporation; and

(8) the foreign corporation either had no current or accumulated earnings and profits or had only de minimis changes in its beginning and ending accumulated earnings and profits balances by reason of income or expenses specified in (4) or (5) above.

SEC. 4. GENERAL PROCEDURE

.01 In lieu of filing a complete Form 5471 for each dormant foreign corporation, the filer may use the summary filing procedure described in this section. A filer may not use this summary filing procedure to report an interest in a foreign corporation that was a dormant foreign corporation in a prior year but that does not meet the requirements of section 3 above in the current filing year.

.02 To elect the summary filing procedure, the filer must attach and file Page One of the Form 5471 (the summary return) for each dormant foreign corporation with its regularly filed income tax return. The filer also must file a copy of each summary return with the Internal Revenue Service Center, Philadelphia, PA, along with the filer’s other Forms 5471 (if any). The top margin of each summary return must be labeled “Filed Pursuant to Rev. Proc. 92-70 for Dormant Foreign Corporations.”

.03 The summary return must be completed for the following filer items: the filer’s name and address, identifying number, filing category, stock ownership percentage, and tax year.

.04 The summary return must be completed for the following corporate items: the dormant foreign corporation’s annual accounting period (within the meaning of section 6038(e)(2)), name and address, employer identification number (if any), country of incorporation, and date of incorporation.

.05 By using the summary filing procedure, the filer agrees that it will provide any information required by sections 6038 and 6046, the regulations thereunder, or on Form 5471 and not specified in sections 4.03 or 4.04, within 90 days of being asked to do so on audit.

SEC. 5. RELIEF

.01 Persons complying with the summary filing procedure described in section 4 satisfy their Form 5471 filing obligations arising under sections 6038(a)(1), 6038(a)(4), and 6046(a)(3) as to the specified dormant foreign corporations. Accordingly, sections 6038(b)(1), 6038(c), 6679, and 7203 will not apply to a filer properly employing the procedure. However, penalties and foreign tax credit reductions under sections 6038(b)(2) and 6038(c)(1) can be imposed (pursuant to sections 1.6038-2(k)(l)(ii) and l.6038-2(k)(2)(iv) of the regulations) for a failure to timely furnish information under section 4.05 of this revenue procedure.

.02 To the extent that a Form 5471 filing by a filer could satisfy the filing obligation of another person (the “other person”) under section 1.6038-2(j) of the regulations, such other person may use the provisions of section 1.6038-2(j) if the other person satisfies the requirements of section 1.6038-2(j)(3) and the filer complies with this revenue procedure and attaches a statement providing the name, address, identifying number, and corporate status of the other person. If the provisions of section 1.6038-2(j) are used as provided in this section 5.02, the other person on whose behalf the Form is filed satisfies his Form 5471 filing obligations arising under sections 6038(a)(1) and 6038(a)(4) as to the specified dormant foreign corporations and is not liable for penalties as specified in section 5.01 above.

.03 Persons described in section 6046(a)(3) are treated, for purposes of this revenue procedure, as described in section 1.6046-1(c)(1) of the regulations. Therefore, to the extent that a Form 5471 filing by a filer could satisfy the filing obligation of another person (the “other person”) under section 1.6046-1(e) of the regulations, such other person may use the provisions of section 1.6046-1(e) if the other person satisfies the filing requirement of section 1.6046-1(e)(5) (if applicable) and the filer complies with this revenue procedure and attaches a statement providing the name, address, identifying number, and corporate status of the other person. If the provisions of section 1.6046-l(e) are used as provided in this section 5.03, the other person on whose behalf the Form is filed satisfies his Form 5471 filing obligations arising under section 6046(a)(3) as to the specified dormant foreign corporations and is not liable for penalties as specified in section 5.01 above.

.04 The relief afforded by this revenue procedure relates solely to a filer’s information reporting obligations and does not affect a filer’s liability for tax on income distributed or deemed distributed from a dormant foreign corporation. Thus, for example, de minimis amounts of subpart F income derived by a controlled foreign corporation that qualifies as a dormant foreign corporation under section 3 above are taxable to the corporation’s United States shareholders to the extent provided in sections 951 and 952 and should be reported on each shareholder’s federal income tax return.

SEC. 6. EFFECTIVE DATE

This revenue procedure is effective for Forms 5471 required to be filed (including extensions) on or after September 15, 1992.

Form 5471: General Overview of the Required Information

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The individuals who fall within the four categories of U.S. persons who are required to file Form 5471 find out very fast just how incredibly complex this Form is. In addition to various problems associated with GAAP compliance, tax year adjustments, understanding very complex corporate tax and accounting rules (as well as the difference between them), and the logistical concerns with respect to obtaining the information, the sheer volume and variety of the information that Form 5471 requires the files to supply makes the Form one of the most difficult compliance requirements in the Internal Revenue Code.

In this essay, I intend to provide a very general overview of the information that needs to be disclosed on Form 5471.

1. General Information

Form 5471 generally requires you to disclose your personal information (such as Social Security Number, address, tax year, and so on), corporate information (name of the corporation, when organized, its business and so on), as well as on whose behalf Form 5471 is being filed.

Despite its apparent innocence, there are at least two pernicious issues in this seemingly basic section. First, there are detailed rules on whose behalf Form 5471 may be filed.

Second, the Form requires you to state your ownership share of the corporation at the end of the year. Sounds simple? Not so fast – there are specific attribution rules which may increase your share ownership in the corporation. Failure to apply those rules may result in choosing incorrect filing category and, ultimately, IRS penalties for non-compliance.

2. Category of Filers

There are generally four categories of filers who are required to file Form 5471 (there used to be five, but the first category was repealed by Congress).

From the outset, Form 5471 requires you to choose the category of filers that apply to you. This is not a simple process as each category has specific requirements. Moreover, you may (and most taxpayers actually do) fit into more than one category. If this is the case, then you may have to file additional schedules that require more disclosures to the IRS.

3. Stock of the Foreign Corporation

In this Schedule A of Form 5471, you are required to describe the stock of the corporation – number and class of stocks. Usually, this is one of the most benign sections of Form 5471. Nevertheless, some of my clients have had problems with Schedule A because they never properly documented all of the classes of stocks and their attributes. This resulted in substantial delays and proactive business planning.

4. U.S. Shareholders of the Foreign Corporation

In Schedule B, you will need to provide the name of each shareholder according to Form 5471 instructions. For each listed shareholder, you will need to provide the name, address, identifying number (for example, social security number), number of shares held (at the beginning and the end of the annual accounting period), and the class of shares. Moreover, for each shareholder, you will need to supply the pro rata share of Subpart F income (which, in itself, is a complex matter).

5. Schedule C: Income Statement

Schedule C is one of the most important and time-consuming parts of Form 5471. The complications are numerous.

First, the Income Statement should be prepared and reported on the Form in accordance with U.S. GAAP. If the foreign company used GAAP to prepare the original statements, the task is not very hard. If, however, the foreign company did not initially use GAAP, the conversion of financial statements to the GAAP standard can be incredibly complex, especially in a foreign context.

Second, the Income Statement should be reported in the Functional Currency and US dollars. The currency translation issues (especially according to GAAP) may become very difficult.

Third, the Net Income part of the Income Statement on Form 5471 presents its separate challenges with its separation of net income from current income per books according to the GAAP standard.

Finally, you need to make sure that the Income Statement corresponds to the Balance Sheet, especially given all of the currency translation issues.

Remember, various items on the income statement must be supported by attached schedules.

6. Schedule E: Taxes

The first common challenge in this section is to correctly identify the taxes that need to be reported. The second common issue is that you need to consult the instructions to make sure that the currency translation rate is correctly identified and presented on the form. I have seen even experienced international tax accountants make mistakes in this area.

7. Schedule F: Balance Sheet

Schedule F may be the most difficult part of Form 5471 (although schedules H and I are very close in this dubious contest).

The problems are so numerous that I will not even attempt to list them in this essay. Rather, I want to point out several common themes that you are likely to deal with in preparing Form 5471.

First, the Balance Sheet should be prepared according to GAAP and all amounts should be reported in U.S. dollars.

Do not be surprised if this means using as many as three or four different currency translation rates according to GAAP. The end result will be that your Balance Sheet does not appear to balance out, forcing you to engage in highly complex accounting.

Second, there will be a shortage of available space to properly reflect all of the Balance Sheet issues.

Third, Retained Earnings may become your best friend and your worst enemy. In the hands of a sophisticated tax professional (accountant or attorney), Retained Earnings may be used to resolve outstanding issues. A novice, however, may spend long hours trying to figure out how to use Retained Earnings and still fail in this task.

Finally, remember that certain items on the Balance Sheet must be supported by attached statements.

8. Schedule G Questions

There are various types of questions listed in Schedule G. In some situations, they may easily be answered, whereas other situations will require a more detailed analysis.

9. Schedule H: Current Earnings and Profits

You should be prepared to spend a significant amount of time on this section. This is another highly complex part of Form 5471. Earnings and Profits is an esoteric part of accounting which has a complex relationship with taxation. When it comes to Form 5471, the foreign context and GAAP rules greatly exacerbate the difficulty of the issues involved.

At the end of Schedule H, you will need to translate the amounts into US dollars and provide the translation rate.

10. Schedule I: Subpart F Income

Another challenging section of Form 5471. Treaties have been written on Subpart F income. I will just mention here that this is a highly complex section on which you should prepared to spend some time.

11. Schedule J: Accumulated Earnings and Profits

Although this part of Form 5471 maybe time-consuming, it is not very complex. One common difficulty that I have encountered in my practice is a practical one – lack of properly prepared records. If the foreign corporation has not been subject to 5471 requirements in the prior years or not for all years of its existence, it may not have the records to calculate the accumulated earnings and profits. This may result a “snowball” effect that it is more and more difficult to comply with Schedule J requirements unless one goes back many years to calculated the accumulated Earnings and Profits.

12. Schedule M

This form only applies in the context of a controlled foreign corporation (CFC). This is another time-consuming part of Form 5471 which concentrates on the transactions between the CFC and the shareholders and other related persons. It may take awhile before you figure out just what exactly should go on this form, especially if there are outstanding loans from and/or to shareholders.

13. Schedules O: Parts I and II

This part of Form 5471 allows the IRS to keep track of any corporate re-organizations, acquisition and disposition of the corporation’s stock, and other organization and asset related matters. Relatively speaking, this is not a complex part of the Form, but it has its own issues that may arise during its preparation.

Conclusion: Contact Sherayzen Law Office NOW for Help With Drafting Form 5471

Based on the very general overview of 5471 requirements, it becomes clear that you should not attempt to complete Form 5471 on your own. Nor should you expect any help from the IRS. There is not a single department that you can call to have your questions answered. Form 5471 specialists are limited to examiners to whom you will not have direct telephone access.

Therefore, if you fall within one of the categories of taxpayers who are required to file Form 5471, please contact Sherayzen Law Office. Our experienced international tax firm will help you prepare the necessary documentation, complete Form 5471 and file it on your behalf. If you have not filed your Forms 5471 for prior years, we will help you deal with this situation and guide you through the IRS voluntary disclosure process.