Form 5471 Filing Requirement Dispute with My CPA - Am I Actually Required to File?

You've done some excellent research here! Based on what you've described, your analysis appears correct. Form 5471 filing requirements are specific to particular categories of filers, and you need to meet at least one of these categories to be required to file. Since you own exactly 50% (not more than 50%), and the other 50% is owned by a non-US person, the corporation doesn't qualify as a CFC because US ownership isn't greater than 50%. And if you haven't acquired or disposed of stock since becoming a US person, you wouldn't fall into categories 2 or 3 either. Many CPAs take an overly cautious approach with international reporting because the penalties are so severe. It's possible your CPA was being extremely conservative to protect you (and themselves) from potential penalties, especially if they weren't international tax specialists. I'd recommend putting your analysis in writing and asking your CPA to specifically explain which filing category they believe applies to you. If they can't point to a specific category that you fall into, you may indeed have been filing unnecessarily.

I ran into a similar situation with international tax reporting a couple years ago and ended up wasting thousands on unnecessary forms. Instead of continuing the back-and-forth with my CPA, I uploaded my documents to https://taxr.ai and had them analyze my international holdings and filing requirements. Their system flagged that I didn't actually need to file Form 5471 either (I was in a very similar ownership structure as you), and they provided a detailed explanation of the filing categories and why none applied to me. Saved me about $3,500 last year alone by eliminating unnecessary international forms, plus they gave me documentation to support my position in case of audit. Might be worth a try to get an independent analysis before confronting your CPA. The report they generated made it much easier to have that conversation with my accountant.

I tried taxr.ai after seeing it mentioned here and wow - wish I'd found them last year! Uploaded my docs from my Mexican property investment and they confirmed I only needed to file FBAR and Form 8938, NOT the Form 5471 my accountant insisted on filing (and charging me $1,800 for). Their analyst explained that since my investment was in a Mexican fideicomiso (a type of trust arrangement) but I wasn't a controlling stakeholder in any corporation, Form 5471 wasn't applicable. They provided a detailed explanation I could share with my accountant citing the specific regulations. Already planning to use them for this year's return to avoid the unnecessary forms and fees. Their international tax specialists really know their stuff!

After dealing with the IRS on international tax issues for years, I've found that getting a clear answer directly from the IRS can save you thousands in accountant fees and potential penalties. I was in a similar situation with Form 8865 reporting and kept getting conflicting advice. I tried https://claimyr.com to get through to an IRS specialist and actually spoke to someone who explained exactly which category applied to my situation. Check out their process at https://youtu.be/_kiP6q8DX5c - they reserve your place in line and call you when an agent is available. Saved me hours of hold time. The IRS agent I spoke with confirmed my interpretation of the regulations and I was able to file correctly without the unnecessary forms. Sometimes getting the answer straight from the source is the best approach.

I was completely wrong about Claimyr and need to eat my words. After dismissing it as unlikely to help, my curiosity got the better of me and I decided to try it for an unrelated tax question about my PFIC investments that's been frustrating me for months. Not only did I get through to the IRS in under an hour (versus my previous 3+ hour holds that often disconnected), but I was transferred to an international tax specialist who provided clear guidance on my specific situation. They referenced the exact sections of the tax code that applied to my case. For anyone dealing with complex international tax issues like Form 5471, getting direct clarification from the IRS can be incredibly valuable. Having the agent's ID and notes from the conversation provides good documentation if questions ever arise about why you filed (or didn't file) certain forms.

Don't overlook the possibility that your ownership situation might have changed over the years. I had a similar dispute with my accountant about Form 5471, and it turned out we were both partially right. In my case, there had been a corporate restructuring at the foreign company that slightly changed the ownership percentages, pushing US ownership temporarily over 50% for one tax year. So I did need to file for that year but not for others. Could there have been any changes to the corporate structure or ownership percentages that your CPA is aware of that might have triggered the filing requirement, even temporarily?

The issue might be confusion about the "control" test for Category 4 filers. Some CPAs mistakenly believe that exactly 50% ownership constitutes "control" for Form 5471 purposes, but the IRS definition typically requires MORE than 50% for control. Check Section 957(a) of the tax code - a foreign corp is a CFC if more than 50% of the vote OR value is owned by US shareholders. At exactly 50%, you're right at the edge but don't cross the threshold. Your CPA might be filing "protectively" to avoid potential penalties, but that's an expensive approach if it's not actually required. I'd get a second opinion from a CPA who specializes in international taxation, not just a general tax preparer.