Are you an American that has chosen to live in another country? Did you start or join a business in your new country? An expat may have many questions about your foreign registered company. One of those questions might be if you must report your companies to the IRS.
Americans are required to report all of their foreign registered companies to the IRS using Form 5471. A foreign registered company is any company that is registered overseas. Form 5471 is the way for the IRS to understand who has a stake in a foreign corporation.
Are All Expats Required To File A 5471 form?
You will only need to file Form 5471 if you meet the following criteria:
- During the year you are a director of a foreign corporation of which a S. person has 10% or more ownership.
- During the year you own 10% or more of a foreign corporation with half of its owners being from U.S. persons. (Also known as a Controlled Foreign Corporation, or CFC).
- During the year you are a director of a foreign corporation of which a U.S. person has 10% or more ownership, with a 10% rise or fall in stock ownership.
- During the year you control more than 50% of a foreign corporation for a minimum of 30 days.
- During the year you are married to a foreigner that has 50% or more ownership of a foreign corporation.
If you are unsure if you meet these qualifications for the 5471 form, you should reach out to a tax professional. A tax professional with knowledge of expat taxes will help you find and fill out all forms needed.
What Are The 5471 Form Deadlines and Penalties
There are tax deadlines that all expats must meet. Form 5471 is due at tax time, along with Form 1040. While most Americans file in April, Americans residing abroad get two extra months to file. These extra two months can be helpful when having to file foreign taxes first.
If you were supposed to file Form 5471 but forgot, or chose not to, you can face fines of $10,000 for each year that has been missed. If the IRS spots your mistake and requires you to file, and you still choose not to fill it out, they will charge you an extra $10,000 per month for up to 5 months. The maximum fine is $60,000 (per year)
If you are unsure about anything related to your expat taxes or Form 5471, check the IRS website. It will answer questions and have resources to help you along the way.
When it comes to U.S. taxes, it is important to be sure of what is required from you. When you move abroad there are more things that you need to do, so always check with an expat tax expert to be sure.