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Changes to 2020 form 5471- US owners of foreign corporations

The IRS released the draft form 5471 and instructions for 2020, which show a myriad of updates to the form.

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New Categories

Categories 1 and 5 have been expanded to 1a, 1b, 1c, 5a, 5b and 5c in order to separate those filers who are under some relief and may not need to file the same schedules.

  • 1a – Category 1 filer who is not defined in 1b or 1c – For example, a greater than 50% owner of the specified foreign corporation (SFC).
  • 1b – Unrelated section 958(a) US shareholder- For example, a unrelated person would not control (more than 50% vote or value) the SFC or be controlled by the same person which control the SFC.
  • 1c – Related constructive US shareholder- For example, an entity controlled by (more than 50% vote or value) the same person which controls the SFC and files only due to this downward attribution.
  • 5a – Category 5 filer who is not defined in 5b or 5c – For example, a greater than 50% owner of the controlled foreign corporation (CFC).
  • 5b – Unrelated section 958(a) US shareholder- For example, a unrelated person would not control (more than 50% vote or value) the CFC or be controlled by the same person which control the CFC.
  • 5c – Related constructive US shareholder – For example, an entity controlled by (more than 50% vote or value) the same person which controls the CFC and files only due to this downward attribution.

These new categories will distinguish, for example, those 5471 filers who only need to file the 5471 due to downward attribution caused by the repeal of IRC Section 958(b)(4) and therefore are not required to include certain schedules.

New Schedules

You will also see new schedules added to the 5471 this year.

  • Schedule Q – To report CFC income by income groups, which is designed to provide information to US shareholders that will be helpful when completing Form 1118
  • Schedule R – To report distributions from foreign corporations.

In addition to the above-mentioned changes, questions have been added and many more updates have been made to numerous pages and schedules of the 5471. Changes have been made throughout the draft instructions to reflect these numerous changes. You can see all the new updates on the first couple pages of the draft 5471 instructions as well as interlaced within the specific line instructions here:  https://www.irs.gov/pub/irs-dft/i5471–dft.pdf.

Please consult a qualified tax professional for assistance with Form 5471.  This information is general in nature and should not be relied on.

Jill A. Helm, CPA