A Dive into the IRS Form 5471 Schedule F

A Dive into the IRS Form 5471 Schedule F

Tax Law
By Anthony Diosdi Form 5471 is used by certain U.S. persons who are officers, directors, or shareholders of foreign entities that are classified as corporations for U.S. tax purposes. The schedules of Form 5471 are used to satisfy the reporting requirements of the Internal Revenue Code. Schedule F of Form 5471 is required to be filed by filers. Schedule F of Form 5471 requires the shareholders of a foreign entity classified as a controlled foreign corporation (“CFC”) to prepare a balance sheet for the entity. The balance sheet of the foreign corporation should be prepared and translated in accordance with the U.S. GAAP.This article will take review into each column and line of 2020 Schedule F of the Form 5471. Who Must Complete the Form 5471 Schedule FThere are five…
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A Line-by-Line Review of the IRS Form 5471 Schedule M

A Line-by-Line Review of the IRS Form 5471 Schedule M

Tax Law
By Anthony Diosdi Schedule M is designed to measure Controlled Foreign Corporation (“CFC”) intercompany payments. Schedule M requires the majority U.S. owner to provide information on transactions between the CFC and its shareholders or other related persons. This article is designed to provide a basic overview of the Internal Revenue Service (“IRS”) Form 5471, Schedule M. Who Must Complete Schedule MForm 5471 and its accompanying schedules must be completed and filed by the following categories of persons:Category 1 FilerU.S. persons who are officers, directors or ten percent or greater shareholders in a CFC. Category 1 includes U.S. shareholders of a Section 965 “specified foreign corporation” at any tax year of the foreign corporation, and who owned that stock on the last day in that year. A SFC includes 1) a…
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A Brief Introduction to the Brand New Schedule Q and Schedule R for IRS Form 5471

A Brief Introduction to the Brand New Schedule Q and Schedule R for IRS Form 5471

Tax Law
Since the Tax Cuts and Jobs Act was enacted, Internal Revenue Service (“IRS”) Form 5471 has given tax practitioners fits. Much of this confusion is the result of the Section 959 ordering and basketing rules. Things are not likely to improve next tax season. This is because the IRS has decided to add two more schedules to Form 5471. Beginning in this tax season, controlled foreign corporation (“CFC”) shareholders could be required to attach all new Schedule Q and Schedule R to the Form 5471. Category 4 and Category 5 filers will be required to attach Schedule Q and Schedule R to their Form 5471. A Category 4 filer is a U.S. person who had “control” of a foreign corporation for an uninterrupted period of at least 30 days during…
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What is a CFC for Purposes of Filing a Form 5471?

What is a CFC for Purposes of Filing a Form 5471?

Tax Law
By Anthony Diosdi IntroductionU.S. taxpayers that have an interest in a “controlled foreign corporation” (“CFC”) that are “U.S. shareholders” must file an Internal Revenue Service (“IRS”) Form 5471. Completing a Form 5471 is no easy task and there are serious penalties associated with not accurately filing this form. In addition, the federal tax consequences associated with filing a Form 5471 may be significant. Consequently, anyone with an interest in a foreign business organization must determine if that entity can be classified as a CFC and the U.S. tax consequences of the foreign entity being classified as a CFC.A foreign corporation is a CFC if more than 50 percent of the total combined voting power of all classes of such corporation entitled to vote, or of the total value of the…
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The IRS Makes Significant Changes to Schedule H of Form 5471

The IRS Makes Significant Changes to Schedule H of Form 5471

Tax Law
By Anthony Diosdi Recently, the Internal Revenue Service (“IRS”) issued a draft of a new Schedule H for Form 5471. Schedule H is used to report a controlled foreign corporation’s (“CFCs”) current earnings and profits (“E&P”). Category 4 and Category 5 filers are required to attach a Schedule H to their Form 5471. A Category 4 filer is a U.S. person who had “control” of a CFC for an uninterrupted period of at least 30 days during the foreign corporation’s annual accounting period. Control for purposes of Category 4 is defined as more than 50 percent of voting power or value utilizing the attribution rules of Section 958. A Category 5 filer is a U.S. person who is a ten percent or greater shareholder in a corporation that was a…
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Demystifying the Form 5471 Part 12. Schedule H Calculating the E&P of a Controlled Foreign Corporation

Demystifying the Form 5471 Part 12. Schedule H Calculating the E&P of a Controlled Foreign Corporation

Tax Law
By Anthony Diosdi In order to provide the Internal Revenue Service (“IRS”) with a foreign corporation’s current earnings and profits (“E&P”) for US tax purposes, each year certain US person with interests in foreign corporations must attach a Schedule H to IRS Form 5471 otherwise known as “Information Return of U.S. Persons With Respect to Certain Foreign Corporations.” This is the 12th of a series of articles designed to provide a basic overview of Form 5471. This article is designed to supplement the IRS instructions to the Form 5471.Who Must Complete Schedule HForm 5471 and its schedules must be completed (to the extent required by each schedule) and filed by the following categories of persons:Category 1- US persons who are officers, directors or ten percent or greater shareholders in a…
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Demystifying the Form 5471 Part 11. Schedule E-1 Calculating a CFC’s E&P for Purposes of Reporting Foreign Tax Credits

Demystifying the Form 5471 Part 11. Schedule E-1 Calculating a CFC’s E&P for Purposes of Reporting Foreign Tax Credits

Tax Law
By Anthony Diosdi IntroductionJust about all Controlled Foreign Corporations (“CFCs”) generate subpart F income and/or Global Intangible Low-Taxed Income (“GILTI”). In most cases, subpart F and GILTI income become reclassified as Previously Tax Earnings and Profits (“PTEP”). Each PTEP then needs to be placed into a separate Section 904(d) category basket. In addition, each PTEP is subject to a certain set of ordering rules that clarifies how distributions of such a PTEP is treated to each CFC shareholder.The classification of PTEPs and the ordering rules are important to calculate foreign tax credits and to determine the creditability of foreign taxes allocable to each Section 904(d) basket. It is also important to determine any Section 904(a) limitation with respect to each specific basket. For example, any foreign taxes paid or accrued…
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Schedule J of Form 5471- Preparing the Schedule Before and After International Tax Reform

Schedule J of Form 5471- Preparing the Schedule Before and After International Tax Reform

Tax Law
By Anthony Diosdi In 2017, Congress enacted the 2017 Tax Cuts and Jobs Act. The 2017 Tax Cuts and Jobs Act dramatically changed the way cross-border transactions are taxed and reported to the Internal Revenue Service (“IRS”). Nowhere is this more true than with Schedule J of Form 5471. Schedule J is used to report accumulated earnings and profits (“E&P”) of controlled foreign corporations. This article will compare the pre-2017 Tax Cuts and Jobs Act Schedule J with the post-2017 Tax Cuts and Jobs Act Schedule J. I. Pre-2017 Tax Cuts and Jobs Act Schedule J Introduction Prior to 2018, Category 4 and 5 filers of a “controlled foreign corporation” (“CFC”) had to attach a Schedule J to their Form 5471. Section 957(a) defined a CFC as a foreign corporation…
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Demystifying the IRS Form 5471 Part 5. Schedule I-1

Demystifying the IRS Form 5471 Part 5. Schedule I-1

Tax Law
By Anthony Diosdi Each year certain U.S. persons with interests in foreign corporations must file an IRS Form 5471 otherwise known as “Information Return of U.S. Persons With Respect to Certain Foreign Corporations.” This is the fifth of a series of articles designed to provide a basic overview of the Form 5471. This article will focus on Schedule I-1, and is designed to supplement the IRS instructions to Schedule I-1.Who Must Complete the Form 5471 Schedule JSchedule I-1 is used to report information determined at the CFC level with respect to amounts used in the determination of GILTI inclusions by U.S. shareholders. The information from Schedule I-1 is used by U.S. shareholder(s) of a CFC to file Form 8992, U.S. Shareholder Calculation of GILTI, and may assist in the completion…
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Demystifying the IRS Form 5471 Part 4. Schedule J

Demystifying the IRS Form 5471 Part 4. Schedule J

Tax Law
By Anthony Diosdi In order to provide the Internal Revenue Service (“IRS”) with the information necessary to ensure compliance with the subpart F rules and global intangible low-taxed income (“GILTI”) provisions, each year certain U.S. persons with interests in foreign corporations must file an IRS Form 5471 otherwise known as “Information Return of U.S. Persons With Respect to Certain Foreign Corporations.” This is the fourth of a series of articles designed to provide a basic overview of the Form 5471. This article will focus on Schedule J. Schedule J tracks the earnings and profits of a controlled foreign corporation (“CFC”). This article is designed to supplement the IRS instructions to Schedule J. Schedule J has dramatically changed for the 2018 tax season. Schedule J now includes Part 1 entitled “Accumulated…
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