Who has to file an US tax return?
- If you are a US citizen, you are required to file a US Income Tax Return regardless of where you live or your income level.
If you own a US property that is rented at any time during the year, you must report this amount on a US Return.
If you dispose of a US property, a US return needs to be filed
If you sell services or products to the US, there may be a requirement to file a US Return.
There may be various other situations in which an individual must file a US tax return.
In many cases, besides filing a Federal return, you would need to file State returns. We also help you preparing tax returns for every state.
IRS FORM 5471 FILING REQUIREMENTS WHEN A U.S. CITIZEN OR EXPATRIATE OWNS ALL OR PART OF A FOREIGN (OFFSHORE CORPORATION)
What is Form 5471?
This form is used for reporting financials of a foreign corporation in which an US person holds at least 10% of the shares. This includes any foreign corporation that operates your business or owns real property.
Do I need to file Form 5471?
If you own 10% or more shares of a foreign corporation, you are required to file form 5471 every year with your income tax return. This applies to an individual who has not taken any income out of the corporation as well. The individual may have deemed dividends for US reporting purposes. If US citizens own over 50% of a foreign corporation and you are at least a 10% shareholder, you should include your pro-rata share of the foreign corporation's income in your US tax return.
What is the potential penalty of not filing Form 5471?
Failure to file that Form, can have a potential penalty of $10,000 every year and could also put you in serious trouble.
How complicated is the Form 5471?
According to the instructions for Form 5471 note that it could take over 32 hours to complete this form. The form requires that you provide the IRS with the corporation's income statement, balance sheet, and data on its loans, operations and other shareholders. It also requires information on dividends and managerial payments made to shareholders, officers and directors.
Is there additional details I need to know regarding the Form 5471?
US accounting principles should be used for reporting which may differ from those used to produce foreign financial statements.
If I haven’t filed Form 5471, but want to file now, what are the consequences?
If you have failed to file the Form, you can avoid the penalty by showing your failure to file was due to "reasonable cause." However, there is no clear indication of what could be a ‘reasonable cause’.
Is there a way IRS may know about my foreign shareholding if I don’t file Form 5471?
Though in the past it has been difficult to secure ownership information on Foreign corporations, in the future it will become easier. The IRS is actively involved in securing more information of US citizens finances overseas, and will only increase its efforts in the future. There are many US-Foreign Country tax treaties which do provide for complete cooperation between the two nations with respect to the exchange of tax information on citizens domiciled in each.
If you own part or all of a Foreign corporation, and have not filed form 5471, you should start filing it immediately to avoid the $10,000 penalty.
Form 5471 for Foreign Corporations
IRS Instructions for Form 5471
We have been providing services to clients in preparing their US filing requirements for many years. Our team consists of professional accountants with years of experience. Call or e-mail us at 416-626-2727 and let us assess your situation to find out the benefits you can get by filing a US tax return.
Gary Booth CA Professional Corp.
555 Burnhamthorpe Rd. - Suite 406