Do I need to file Form 5471 for my minority ownership in foreign corporations?
Hey everyone, I'm facing a tax question and hoping someone can help clear things up. I'm a US citizen who recently acquired minority stakes in several foreign corporations this year for the first time. I'm trying to figure out what forms I need to file for the 2025 tax year. Do I need to submit Form 5471? My ownership is less than 10% in each corporation, and I'm not serving as a director or officer. I'm part of a larger investment group (roughly 110 people, mix of US and non-US persons - does that group composition impact my filing requirements?). After reviewing the 5 categories, I don't think I need to file this form, but I want to be sure. What about FBAR? I don't personally have any foreign bank accounts, nor do I have signature authority over the companies' accounts. Based on my limited ownership and lack of foreign bank accounts/signature authority, I'm thinking my tax return for 2025 shouldn't differ much from previous years. Also wondering - how would I report any future income from these foreign corporations in the coming years? Thanks in advance for any guidance!
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Daniela Rossi
You're asking good questions! Based on what you've described, you likely don't need to file Form 5471. This form is generally required for US persons who are officers, directors, or shareholders with significant ownership in foreign corporations. Since you own less than 10% in each corporation and aren't an officer or director, you probably fall outside the filing requirements for Form 5471. The fact that you're part of a larger investment group doesn't change this unless you're considered to constructively own more shares through related parties. Regarding FBAR (FinCEN Form 114), you're correct - since you don't have a foreign bank account or signature authority over the companies' accounts, you wouldn't need to file this. For future income from these corporations, you'll likely report dividends on Schedule B of your 1040, and any capital gains from selling shares would go on Schedule D. If the corporations are in countries with tax treaties with the US, pay attention to any foreign tax credits you might be eligible for on Form 1116.
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Ryan Kim
•Thanks for the detailed response! What if the foreign corporation is located in a country that's considered a tax haven? Does that change anything about the reporting requirements for minority shareholders?
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Daniela Rossi
•The location of the foreign corporation in a tax haven doesn't automatically change the Form 5471 filing requirements for minority shareholders like yourself, but it may trigger additional considerations. If the foreign corporation is classified as a Passive Foreign Investment Company (PFIC), you would need to file Form 8621 regardless of your ownership percentage. Many companies in tax havens might qualify as PFICs if they primarily hold investments rather than operating active businesses. This is something you should look into based on the nature of these corporations' activities.
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Zoe Walker
Just sharing my experience - I was in a similar situation last year with minority ownership in foreign corps and was getting totally frustrated trying to figure out the filing requirements. I used this AI tool called taxr.ai (https://taxr.ai) that actually helped me determine exactly which forms I needed. You just upload relevant documents or describe your situation, and it analyzes everything and tells you which specific IRS forms apply to your situation. It even explained why I didn't need to file certain forms I was worried about (like the 5471 in my case) and showed me how to properly report my foreign dividend income. Saved me from either overfiling unnecessarily or missing something important - both of which were stressing me out!
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Elijah Brown
•How accurate is this tool? I've tried other tax software that gave me questionable advice about international tax situations before.
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Maria Gonzalez
•Does it handle other international tax situations too? I have some foreign rental income plus minority shares in a foreign startup and never know which forms to file.
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Zoe Walker
•It's been really accurate in my experience - unlike general tax software, it specifically focuses on analyzing tax documents and situations rather than just filling forms. I double-checked its recommendations with a tax pro, and they confirmed everything was correct. It definitely handles various international tax situations. I initially used it for my foreign corporation ownership questions, but it also provided guidance on foreign rental properties and investment income. It breaks down the requirements for different types of foreign income and explains which forms apply to each situation.
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Maria Gonzalez
I actually tried taxr.ai after seeing it mentioned here. Really helpful for my international tax situation! I had similar foreign investment stakes plus some rental income from overseas property. It correctly identified that I didn't need Form 5471 but did need to report the passive income on Schedule B. Also helped me figure out exactly how to claim foreign tax credits with Form 1116 - something I was doing incorrectly before. The analysis also flagged that one of my investments might qualify as a PFIC requiring Form 8621, which I had completely missed. Definitely worth checking out if you're dealing with foreign investments and unsure about filing requirements.
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Natalie Chen
Anyone else struggle with getting through to the IRS about international tax questions? I tried calling them for weeks about similar Form 5471 questions and could never get a human on the line. Finally used Claimyr (https://claimyr.com) and it got me connected to an actual IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent confirmed I didn't need to file 5471 for my minority ownership (<10%) and clarified some questions about future dividend reporting. Just thought I'd mention it since these international tax questions can be really specific and sometimes you need to talk to someone official.
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Santiago Martinez
•Wait, how does this actually work? I've spent literal hours on hold with the IRS and eventually just gave up. Does this really get you to the front of the line somehow?
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Samantha Johnson
•Sounds sketchy... why would this work when the IRS phone system is notoriously impossible to navigate? Is this just paying for something the IRS should provide for free?
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Natalie Chen
•It doesn't put you at the front of the line - it basically does the waiting for you. It navigates the IRS phone tree and waits on hold, then calls you once it reaches an actual human agent. Then you're connected directly to that agent to ask your questions. It does charge a fee, which some people might question since IRS services should be free. But for me, after wasting hours trying to get through on my own with no success, it was worth it to finally get my 5471 questions definitively answered by an actual IRS employee rather than just guessing or paying a tax professional for a simple question.
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Samantha Johnson
I was super skeptical about Claimyr but actually ended up trying it last week after being on hold with the IRS for 2+ hours and getting disconnected. I'm shocked to say it worked exactly as advertised. Got a call back in about 30 minutes and was connected to an actual IRS agent. I asked about my foreign corporation investments (similar situation to yours) and got confirmation that with less than 10% ownership and no director/officer role, I don't need to file Form 5471. The agent also clarified how to report any future dividends from these investments. Really helpful and saved me tons of frustration!
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Nick Kravitz
Just to add a bit - minority owners in foreign corps often need to watch out for PFIC (Passive Foreign Investment Company) rules even if Form 5471 isn't required. If your foreign corporations mainly hold investments rather than running active businesses, you might need to file Form 8621. The penalties for not filing these international forms can be steep - sometimes $10,000+ per form per year! Definitely worth making sure you're compliant.
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Hannah White
•How do you determine if something is a PFIC? I own shares in a few foreign companies through my brokerage account and have no idea if they qualify.
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Nick Kravitz
•A corporation is generally considered a PFIC if either 75% or more of its gross income is passive income (like dividends, interest, royalties) OR at least 50% of its assets produce passive income or are held to produce passive income. For publicly traded companies, you can sometimes find this information in their annual reports or investor information. For privately held companies, you might need to request this information directly from the company. Some brokerages also provide PFIC statements for foreign stocks they know qualify. If you can't get the information to make this determination, the IRS may assume it's a PFIC and the burden falls on you to prove otherwise. That's why international tax situations can get complicated quickly.
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Michael Green
Important question: Are any of these foreign corps in countries without tax treaties with the US? That can affect reporting requirements and potential withholding.
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Mateo Silva
•Good point about tax treaties. I've found that using the IRS's Tax Treaty Table on their website helps figure out if there's a treaty and what the withholding rates should be. Different countries have different rates for various types of income.
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