U.S. Reporting Requirements for Foreign Entities: Forms 5471, 8865, and 3520/3520-A
If you are a U.S. person (citizen, resident, or certain domestic entities) with interests in foreign corporations, partnerships, or trusts, you may have significant annual IRS reporting obligations. These requirements are complex and carry substantial penalties for noncompliance. Here’s what you need to know:
Foreign Corporations – Form 5471
U.S. persons who are officers, directors, or certain shareholders of foreign corporations may be required to file Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations.
Who must file? Generally, if you own at least 10% of the stock (by vote or value) or have control of the foreign corporation at any time during the year.
What is reported? Ownership, control, and certain transactions with the foreign corporation.
When is it due? With your annual U.S. income tax return, including extensions.
Penalties: Failure to file can result in significant penalties and may extend the statute of limitations on your entire tax return.
Foreign Partnerships – Form 8865
U.S. persons with certain interests in foreign partnerships must file Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships.
Who must file? If you control the partnership (owning more than 50%), own at least a 10% interest while U.S. persons collectively control the partnership, or if you transfer property to a foreign partnership.
What is reported? Ownership, control, and certain transactions with the foreign partnership.
When is it due? With your U.S. tax return.
Penalties: Noncompliance can result in substantial monetary penalties and reductions in foreign tax credits.
Foreign Trusts – Forms 3520 and 3520-A
U.S. persons who create, transfer assets to, receive distributions from, or are treated as owners of foreign trusts must file Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts.
Who must file? Anyone who creates, transfers to, receives distributions from, or is treated as an owner of a foreign trust.
What is reported? Transactions, ownership, and distributions related to the foreign trust.
Form 3520-A: If you are treated as the owner of a foreign trust, the trust must file Form 3520-A, reporting information about the trust, its U.S. beneficiaries, and the U.S. owner.
When is it due? Form 3520 is filed with your tax return; Form 3520-A is filed separately.
Penalties: Failure to file can result in severe penalties, often based on a percentage of the value of the trust assets or distributions.
Key Takeaways:
U.S. persons with interests in foreign corporations, partnerships, or trusts must comply with strict annual IRS reporting requirements.
Forms 5471, 8865, and 3520/3520-A are complex and require detailed information about ownership, transactions, and distributions.
Penalties for noncompliance are substantial and can include monetary fines and extended audit periods.
If you have interests in foreign entities, our team can help you navigate these complex reporting requirements and avoid costly penalties. Contact to schedule a call with a cross-border tax specialist.