See below to see if you are required to file Form 5471 to avoid the $10,000 penalty for failure to file.
Form 5471 and its related schedules is another attempt by the US government to make sure US persons and entities are properly accounting for US taxes due on foreign-sourced income. Four categories of U.S. persons/entities are required to complete this form:
1. Officers or directors of foreign corporations in which a US person/entity owns or has purchased 10% of the stock value or voting power of the foreign corporation.
2. A US shareholder who acquires 10% of the combined voting power or stock value of the foreign corporation.
3. A US person who controlled a foreign corporation for an uninterrupted 30 day period. Control of a foreign corporation is defined as ownership of more than 50% of the value of classes of stock or of the voting power of the corporation.
4. A US shareholder who owns for an uninterrupted 30 days or more and on the last day of the year owns 10% or more of total combined voting power of a CFC. A CFC is a foreign corporation that 50% or more of the corporations’ shares or voting power are owned by a US shareholder.
