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Form 8858 reports U.S. ownership and operation of Foreign Disregarded Entities (FDEs) and Foreign Branches (FBs) to the IRS. Failure to file triggers the same $10,000 per-form penalty as Form 5471 under IRC Section 6038(a), with continuation penalties capped at $50,000 and the statute of limitations on the entire tax return staying open under IRC
A foreign corporation can be both a Controlled Foreign Corporation (CFC) and a Passive Foreign Investment Company (PFIC) at the same time. Without invoking the overlap exclusion under IRC Section 1297(d), a U.S. shareholder can face double taxation: PFIC excess distribution tax with interest charges on the same income that is also captured by CFC
IRC Section 6038(b) imposes an automatic $10,000 penalty for each annual accounting period a U.S. person fails to file Form 5471 for a Controlled Foreign Corporation, plus an additional $10,000 per 30-day period (capped at $50,000) after IRS notification. The statute of limitations on the entire tax return never begins under IRC 6501(c)(8) until the
Unfiled Form 5471 Penalties Can Grow Fast. Streamlined Filing May Help. Read More »
Subpart F income (passive and certain other categories of CFC income) is taxed to U.S. shareholders in the year the CFC earns it, regardless of whether any distribution is made. The categories include foreign personal holding company income (dividends, interest, rents, royalties), foreign base company sales and services income, and insurance income under IRC Sections
GILTI (Global Intangible Low-Taxed Income), renamed NCTI under the 2026 One Big Beautiful Bill Act, taxes U.S. shareholders on their share of a Controlled Foreign Corporation’s income above a deemed return on tangible assets, even when no distribution is made. Individual shareholders face the full ordinary income rate (up to 37%) on this phantom income.
Unreported GILTI Income? Streamlined Filing May Help Limit IRS Penalty Exposure Read More »
A rejected streamlined filing eliminates the 5% penalty reduction permanently for the assets covered in the submission. There is no formal appeal process, the IRS retains every document submitted, and the standard penalty structure applies in full. Total exposure after rejection typically increases by five to ten times the streamlined penalty. Voluntary Disclosure or reasonable
Rejected Streamlined Filing? Your IRS Exposure Can Escalate Quickly Read More »
Form 14654 is the IRS certification used for the Streamlined Domestic Offshore Procedures. It combines three high-risk elements into one document: the non-willful certification narrative, the 5% penalty calculation, and the eligibility statement. A mistake in any of the three can lead the IRS to reject the entire submission, eliminate streamlined penalty relief permanently, and
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Section 962 is an election that lets individual U.S. shareholders of a Controlled Foreign Corporation (CFC) pay tax on GILTI and Subpart F inclusions at the 21% corporate rate instead of the 37% individual rate. The catch: when the CFC later distributes those earnings, you get taxed again as a qualified dividend. For prior unfiled
The Streamlined Foreign Offshore Procedures (SFOP) carry a zero penalty, while the Streamlined Domestic Offshore Procedures (SDOP) impose a 5% penalty on the highest aggregate year-end balance of unreported foreign financial assets. Eligibility is based on a residency test. U.S. citizens and green card holders qualify for SFOP only if they spent at least 330
Domestic vs Foreign Streamlined Filing: Choosing the Wrong Program Can Be Costly Read More »
A Passive Foreign Investment Company (PFIC) includes most foreign mutual funds, ETFs, and investment funds held outside the U.S. If you sold or received distributions from one without filing Form 8621, the IRS applies the excess distribution method: all gains are taxed at the highest ordinary income rate of up to 37%, plus a compounding
Unreported PFICs? How Streamlined Filing May Help Reduce Brutal IRS Taxes and Penalties? Read More »