Form 5471 Penalty Calculator IRC § 6038

The initial penalty for failing to file Form 5471 (Information Return of U.S. Persons With Respect to Certain Foreign Corporations) is $10,000 per form, per tax year, per foreign corporation. If the IRS sends a notice and you don't file within 90 days, an additional $10,000 penalty applies for each 30-day period of continued non-compliance, up to a maximum total penalty of $60,000 per return.

Form 5471 must be filed by U.S. persons who are: (1) Officers or directors of a foreign corporation with a U.S. shareholder owning 10%+ stock; (2) U.S. shareholders who own 10%+ of a Controlled Foreign Corporation (CFC); (3) U.S. persons who acquire 10%+ stock in a foreign corporation; (4) U.S. persons who dispose of stock reducing ownership below 10%; or (5) U.S. persons who control a foreign corporation for an uninterrupted 30-day period.

A Controlled Foreign Corporation (CFC) is any foreign corporation where U.S. shareholders (each owning 10%+ of voting power or value) collectively own more than 50% of the voting power or value of the corporation. If you own stock in a CFC, you likely have Form 5471 filing requirements and may also have Subpart F income inclusion requirements.

Yes, reasonable cause relief is available under IRC § 6038 if you can demonstrate the failure was due to reasonable cause and not willful neglect. However, the threshold is high. You must show you exercised ordinary business care and prudence but were unable to comply. Simply not knowing about the requirement is generally NOT sufficient reasonable cause.

Beyond the dollar penalties, failing to file Form 5471 can result in a 10% reduction of foreign taxes available for credit under IRC § 6038(c). If non-compliance continues 90+ days after IRS notice, the reduction increases by an additional 5% for each 3-month period, potentially eliminating 100% of your foreign tax credit. This can result in double taxation.

Yes, critically. If you fail to file Form 5471 or file it incorrectly, the statute of limitations for your ENTIRE tax return remains open indefinitely for that year. The IRS can assess additional taxes, penalties, and interest at any time until a complete and accurate Form 5471 is filed. This is true even if the underlying return was filed on time.

File an amended return (Form 1040-X for individuals) with the corrected Form 5471 attached. Include a reasonable cause statement explaining why the original filing was late or incorrect. Consider using IRS Streamlined Filing Compliance Procedures if you qualify—these can reduce or eliminate penalties for non-willful non-compliance by U.S. taxpayers living abroad.

Form 5471 has five filer categories: Category 1 (certain 10%+ shareholders of specified foreign corporations), Category 2 (officers/directors of a foreign corporation with 10%+ U.S. shareholder), Category 3 (acquires 10%+ stock), Category 4 (has control of a foreign corporation for 30+ days), and Category 5 (10%+ shareholder of a CFC at any time). Each category has different reporting requirements.