What You Need To Know About Irs Form 5471 Categories

The IRS Form 5471 is a form that is designed for United States citizens that are shareholders in foreign companies. It is a form that is used to report the share ownership that you have in the corporation as well as some information concerning the activities of the foreign corporation. Before one even considers to file the Form 5471, it is important to know in which category you fall or whether you are required to file this form. The following categories are required to file Form 5471.


Category 2 Filer

U.S. Citizens who are Officers or Directors and in certain foreign corporations are Category 2 filers.
Foreign corporations that are controlled by a small number of U.S. Shareholders are called Controlled Foreign Corporations or CFCs.   CFCs are defined as a corporation in which U.S. Shareholders own 50% of more of the total voting power or value of the corporation. U.S. shareholders are US Persons owning shares of stock in the corporation representing 10% of more of the voting power of the corporation.
Therefore, any US citizen that is an office or directory of a CFC is a category 2 filer.  In addition, even if the foreign corporation is not a CFC, if a U.S. Shareholder owns 10% of more of the vote of the corporation even though there a not enough U.S. Shareholders to meet the 50% ownership test, the officers or directors may nonetheless be required to file a 5471 as a Category 2 filer.

Category 3 Filer

Any U.S. Shareholder of a CFC on any day of the tax year.

Category 4 Filer

The Category 4 filer is any US person who had uninterrupted control of a foreign corporation for a period of 30 days or more during the yearly accounting period in the financial corporation. The US person having control in this period can be a resident or citizen of the US, a non-resident alien who is elected under section 6013 (g) to be considered as a US resident, a domestic corporation, a domestic partnership and an estate or trust that is not defined as a foreign estate in section 7701 (a)(31).

Who is considered to have control in this Category Filer?

A United States individual is said to have control if at any particular time of the individuals tax year, he/she has:
  • 50% ownership or more of the combined voting power in all the foreign corporations classes of stocks that enable one to be entitled to vote.
  • 50% of the total share value of the entire foreign corporations classes of stock. This also applies to any US person that owns this amount of shares in a corporation that further owns 50% or more of the combined voting power or total share value of another corporation.

Category 5 Filer

This is a category that is meant for a United States Shareholder owning stock in a CFC for an uninterrupted duration of 30 days or more of the foreign corporations tax year and owned the stock on the last day of that tax year. 
A category 5 U.S. Shareholder is a U.S. individual that constructively, directly or indirectly owns
10% or more of the combined voting power of the entire classes of voting stock in a CFC or
Any stock of a CFC under sections 953(c)(1)(B) as well as 957(b) that is also considered a captive insurance firm. 
A U.S. person includes:
  • A domestic partnership
  • A domestic corporation
  • A resident or citizen of the US or
  • A trust or estate that is not a foreign trust or estate as defined in section 7701(a)(31). A CFC is considered to be a foreign corporation with a U.S. shareholder that on any day of the tax year has a 50% ownership of the total stock value in the corporation or the total combined voting power of the corporations entire classes of the voting stocks.