U.S. Shareholders in Foreign Corporations May Complete IRS Form 5471 Based on Company Dividends

April 10, 2012 — 1,245 views  
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The Internal Revenue Service (IRS) requires U.S. citizens who are shareholders of foreign corporations to complete Form 5471 annually. The document may appear challenging, but understanding its purpose along with the foreign corporation tax can help you complete your return successfully.

The form varies based on your role in a foreign corporation. If you're a minor shareholder, you may need to provide only the name and address of the foreign corporation. However, an extensive balance sheet and income statement could be required if you're a major investor.

Failing to complete the form could result in fines and penalties of up to $10,000 from the IRS. The agency uses the material from the document for reporting purposes because you may have earned revenue as a result of your foreign investment.

The foreign corporation tax dictates whether you need to complete this form. A U.S. resident can be a shareholder in a corporation without paying national income taxes on the company's income - until the American citizen receives a dividend. The agency also provides Form 1120-F so you can file a foreign corporation return.