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Taxpayers should remember the informational forms for Foreign Corporation, Foreign Partnership and Foreign Disregarded Entities.

Start of 2015 Tax Filing Season – International Forms to Think About

With the start of the 2015 tax filing season at hand, here is a reminder of the most common foreign informational forms taxpayers are required to file. These forms are overlooked all too often.

Form 5471 – Information Return of U.S. Person with Respect to Certain Foreign Corporations

Who must file
:

  • U.S. persons qualifying under one or more of the Categories of Filers. Generally, U.S. persons who acquired or disposed of a 10% or more interest in a foreign corporation or U.S. persons who own 50% or more of the foreign corporation at any point during the year or at year-end.

Due date of return:

  • Due with the standard federal tax return for each person/entity meeting the above requirements.

Penalty for failure to timely file:

  • $10,000 for each information form per tax year.

Form 8865– Return of U.S. Persons with Respect to Certain Foreign Partnerships

Who must file

  • U.S. persons qualifying under one or more of the categories of filers.  
    Generally, U.S. persons who acquired or disposed of a 10% or greater interest in stock or voting power of a foreign partnership, U.S. persons who own 50% or more of the foreign partnership, and U.S. persons who contributed cash or property to a foreign partnership in exchange for an ownership interest.

Due date of return:

  • Due with the standard federal tax return for each person/entity meeting the above requirements.

Penalty for failure to timely file:

  • $10,000 for each information form, per tax year.

Form 8858 – Informational Return of U.S. Persons with Respect to Foreign Disregarded Entities

Who must file:
U.S. persons that are tax owners of foreign disregarded entities (“FDEs”).

  • An FDE is an entity that is not created or organized in the U.S. and that is disregarded as an entity separate from its owner for U.S. income tax purposes.

Due date of return:

  • Due with the standard federal tax return for each entity meeting the above requirements.

Penalty failure to timely file:

  • $10,000 for each information form, per tax year.

Each of the above forms is informational in nature with no separate tax calculation. These forms are to be filed concurrently with the owner’s tax return including any extended due dates.

As noted above, penalties for failing to file all informational forms are severe. If the taxpayer receives a notice for failure to file one of the informational forms, they then have a 90-day window to file the form late. After the 90-day period expires, an additional $10,000 penalty is imposed and again for each additional 30-day period that the form continues to be late, up to a maximum of $50,000. In certain instances the statute of limitations for returns missing these foreign information  forms does not start to run until the information is reported to the IRS.

Limited relief may be available for U.S. persons that have not timely filed these forms under the IRS’s Delinquent International Information Return Procedures.

Matthew Halpern is a Tax Manager working in various industries such as professional services, information technology, and manufacturing and distribution. He also works with expatriates and foreign individuals with U.S. activity.

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