What to do if you are late or failed to file an IRS Form 5471

Why do I have to file a Form 5471 anyway?

The IRS can tax you on your income from anywhere in the world, but it is difficult for the IRS to ascertain your income in other countries. The IRS created this requirement so they could keep a closer eye on your worldwide affairs. Additionally, failing to furnish this information allows the IRS an indefinite amount of time to assess additional taxes. And they can make money off of the penalties associated with unfiled or misfiled forms.


Am I going to go to jail for unfiled Form 5471s?


Not likely.


Do I have to enter into an Standard Offshore Disclosure Program (OVDP) or a Streamlined Disclosure if I have missing 5471s?


Not always. If you have missing Form 5471s, you may just be able to file the delinquent returns. It depends on whether or not your foreign corporations earned income. If however, you have to enter into a offshore disclosure program for reasons other than unfiled Form 5471s, those previously unfiled Form 5471s will be part of your submission package.


If I file delinquent returns only, isn't that a soft-disclosure — the thing the IRS warns not to do?


No. The delinquent returns procedure is a protocol set up by the IRS in cases where the only non-compliance is missing forms. It is a legitimate procedure that can greatly reduce the risk of criminal and civil penalties.


Assuming I am non-willful, is the Streamlined program always better than the Full OVDP?


If you qualify for the Streamlined Foreign Offshore Procedures (SFOP), the answer is probable yes. If, however, you are living in the US, then there are instances where a Full OVDP can lead to a lower penalty base, and a lower penalty. Read this article to learn the reasons why.


I have dormant Foreign Corporations. Do I still have a Form 5471 problem?


Yes, but the solution may be straight-forward. If your foreign corporations meet the test of dormant foreign corporations you can file a much simplified Form 5471.


I made mistakes on Form 5471s. What should I do?


There are a lot of mistakes you can make on a Form 5471. You could have categorized yourself as the wrong type of filer and not filed the correct Schedules. You could have thought another US Form 5471 filer filed the required schedules. The good news is that Form 5471 can be amended.


Will I raise any red flags by correcting Form 5471 mistakes?


Let's get some perspective on this. You already raised the biggest red flag by being a US person subject to the universal tax jurisdiction of the IRS. You then raised a huge red flag by having investments overseas, where the IRS's default position is that you "are up to something." What you want to do is to lower those red flags by showing compliance to the IRS. "Laying low" isn't really laying low; you are laying exposed, thinking you are camouflaged.


Also, think about this: If you know there are errors on your form and you choose not to do anything about it, you go from being "non-willful" to "willful". There are big differences in penalty bases that are dependant on that status.


What are Form 5471 penalties?


$10,000 per each missing or for those that are not substantially complete, with a possibilty of up to $60,000 per violation.


More questions about Form 5471?

You can contact us to schedule a confidential consultation with one of our attorneys. Call us at 888-727-8796 or email info@irsmedic.com.