The filing requirements for Form 5471 are categorized by categories. If a US person having an interest in a foreign corporation is described on any of these categories, Form 5471 should be filed.
A US person includes: a citizen or resident of the United States, domestic partnership, domestic corporation, and an estate or trust that is not a foreign estate or trust.
There are four categories of filers: Category 2, 3, 4, and 5. in the past, it used to be five but category 1 was repealed by congress.
Category 2 Filer
A U.S. citizen who is an officer or director of a foreign corporation must file Form 547 if a U.S. person acquires a 10-percentstock ownership in that corporation.
Category 3 Filer
Form 5471 must be filed in the year that a US person acquires or disposes of a 10-percent interest in a foreign corporation.
Category 4 Filer
This includes a U.S. person who had control of a foreign corporation for an uninterrupted period of at least 30 days during the annual accounting period of the foreign corporation.
Control of a foreign corporation (CFC) is when a US person has more than 50 percent of the total combined voting power of all classes of stock, or 50 percent of the total value of the stock of the corporation.
Category 5 Filer
This includes a U.S. shareholder who owns stock in a foreign corporation that is a control foreign corporation for an uninterrupted period of 30 days or more during any tax year of the foreign corporation, and who owned that stock on the last day of that year.
Penalties for failure to timely file are $10,000 to $50,000 per form, plus possible loss of foreign tax credits. The penalties also apply If you file a late Form 5471 or have unfiled back tax returns that should have included Form 5471.
If under reasonable cause Form 5471 was not filed, the IRS will consider an abatement of the penalties associated with the form. Reasonable cause is based on all the facts and circumstances in each situation and allows the IRS to provide taxpayers relief from a penalty that would otherwise be assessed. Reasonable cause relief is generally granted when taxpayers exercised ordinary business care and prudence in determining their tax obligations but nevertheless failed to comply with those obligations.