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What you need to know about IRS Forms 5472, 1040NR, and 8858

January 15, 20233 minute read
What you need to know about IRS Forms 5472, 1040NR, and 8858
What you need to know about IRS Forms 5472, 1040NR, and 8858
What you need to know about IRS Forms 5472, 1040NR, and 8858

Form 5472, also known as the “Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business,” is a tax form that some foreign-owned U.S. corporations and partnerships are required to file. It is used to report transactions that take place between the entity and its foreign-related partners.

If the foreign-owned U.S. corporation or partnership had any reportable transactions with foreign-related parties during the tax year, or if it is required to keep books and records in accordance with Treasury Regulation Section 1.6038A-3, Form 5472 must be filed annually with the entity’s income tax return.

Certain information, such as the names and addresses of foreign-related parties, the nature of transactions between the entity and foreign-related parties, and the dollar amounts of such transactions, must be reported on the form.

Penalties for failing to file Form 5472 can range from $10,000 to $25,000, thus it is critical that companies that are required to file the form do so on time and correctly. It is recommended that you get the advice of a tax professional on how to complete the form and ensure compliance with US tax regulations.

Form 1040NR (U.S. Nonresident Alien Income Tax Return) is a tax form used by those who are neither US citizens nor green card holders but have income from within the US. This form is used to record and pay U.S. federal income tax on income earned in the United States. Nonresident aliens who earn more than a specific amount in the United States must file this form.

Form 8858

Form 8858, commonly known as the “Information Return of U.S. Persons With Respect To Foreign Disregarded Entities (FDEs),” is a tax form used by U.S. citizens who own or have a stake in a foreign disregarded enterprise (FDE).

An FDE is a foreign entity that is not treated as a separate entity from its owner for tax purposes in the United States. This means that the FDE’s income, deductions, and credits are treated as those of the owner, and the FDE is not taxed separately in the United States.

The FDE’s income, deductions, and credits, as well as any transactions between the FDE and its foreign-related parties, are reported on Form 8858. In order to comply with US tax rules, US citizens who are required to file Form 8858 must do so yearly, along with their income tax return. Penalties for failing to file Form 8858 can be severe, therefore it is critical to seek advice from a tax professional on how to complete the form and maintain compliance with US tax regulations.

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