Own an Interest in a Foreign Corporation? Form 5471 Looks Different This Year

This post was originally published on December 21, 2018. It was updated December 29, 2020. 

Every U.S. shareholder (including, U.S. citizens, tax residents, and U.S. entities) who owns an interest in a Controlled Foreign Corporation (CFC) or who dispose of or acquire a 10% interest in a foreign corporation, must file Form 5471 with their tax return – and that filing requirement looks different this year.

Form 5471 has increased in complexity since the enactment of the Tax Cuts and Jobs Act (TCJA) in December 2017. For the 2020 tax year, there is a new Schedule Q that must be filed with the Form 5471 in addition to other schedules that were introduced in prior years. Filing instructions are still pending.

Schedule Q will require a CFC to present its annual operations, broken down by category of income.

Neglecting to file this new schedule could render your Form 5471 incomplete, resulting in significant penalties: $10,000 per form.

If you think you may be required to file Form 5471 with your 2020 tax return, contact me or another member of Kaufman Rossin’s international tax team for assistance.