If you own a 50% stake in a foreign corporation, you may have several reporting obligations, including those on your personal U.S. tax return. Figuring out your foreign corporations’ reporting requirements can be complicated, so we have compiled a list to help you maintain IRS compliance.
Here are some key forms you may need to file:
Form 5471 (Information Return of U.S. Persons With Respect to Certain Foreign Corporations)
If you own 50% of the foreign corporation, the IRS considers you a Category 4 or 5 filer (a U.S. shareholder of a controlled foreign corporation (CFC)).
Taxpayers use Form 5471 to report financial information about the foreign corporation and your ownership stake.
Form 8938 (Statement of Specified Foreign Financial Assets)
If the total value of your foreign financial assets (including your stake in the corporation) exceeds certain thresholds, you must report it on Form 8938 as part of your personal tax return (Form 1040).
- $50,000 for single filers
- $100,000 for married filing jointly
FinCEN Form 114 (FBAR – Report of Foreign Bank and Financial Accounts)
If the foreign corporation has bank accounts that you:
- control or have signatory authority over, and
- the total in all foreign accounts exceeds $10,000 at any time during the year,
you must file an FBAR.
GILTI (Global Intangible Low-Taxed Income) and Subpart F Income
If the foreign corporation is classified as a CFC (U.S. shareholders own more than 50% collectively), you may be subject to GILTI tax on certain foreign income. This is reported on Form 8992.
The IRS may also tax certain types of passive income (like interest, dividends, rents, royalties) under Subpart F rules and must be reported on Form 1040.
Dividends and Other Income
If you receive dividends from the foreign corporation, report them on Schedule B (Form 1040) and possibly claim a foreign tax credit (Form 1116) if foreign taxes were paid on those earnings.
Next Steps:
These filings can be complex, and penalties for non-compliance are significant. You may want to consult a tax professional to ensure full compliance with IRS rules.
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