As a U.S. citizen or U.S. resident who are an officer, director, or shareholder in specific foreign Corporation, you are responsible for filing Form 5471.

You must note that Form 5471 is an informational return and not a tax return, which means the IRS uses it to track and have complete data of US persons who own foreign corporations.

Filing an IRS informational form shouldn’t be concerning. The paperwork can be demanding and complicated. But keep in mind that IRS charges you with a $10,000 penalty in the cases of not filing Form 5471 or filing it incorrectly.

The Form 5471 is an attachment to your individual income tax return or, if applicable, a domestic partnership, corporation or exempt organization return.
Both the tax return and the Form 5471 attachments must be filed by the due date (with the extensions) for that return.

Certain types of income (called Subpart F Income) may be taxed and flow through to US

shareholders. This would cause them to pay tax on that income on US personal tax returns. The rules for determining which types of income are considered Subpart F are
somewhat complicated. Any kinds of corporate income such as dividends, interest, rental income, insurance income, offshore shipping income and personal service income under certain conditions may be treated as Subpart F income. Subpart F income is taxable on the US shareholder’s personal 1040 tax return (or corporate return if a US corporation is the owner)

in the year it occurs as ordinary income. This happens even if the income was distributed. Dividends paid to shareholders of Foreign Corporations are occasionally eligible for reduced qualified dividend rate (same rate as capital gains) when paid from the foreign corporation that is located in a country with which the US has a tax treaty.

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