International Tax Compliance: Forms 5471, 5472, 8865, FBAR

Reviewed by Brian Schwam, JD — Principal & National Managing Director of International Tax Services. Last reviewed: September 21, 2026.

WTP Advisors prepares and defends the US international information returns that carry the highest penalties for getting them wrong: Forms 5471, 5472, 8858, 8865 and 926, the net CFC tested income and §250 deduction calculations on Forms 8992 and 8993, foreign tax credit computations on Forms 1116 and 1118, and FinCEN Form 114 (FBAR).

These are not ordinary tax filings. Most of them carry a penalty of $10,000 to $25,000 per form, per year, assessed whether or not any tax is owed, and several also reduce the foreign tax credits you would otherwise claim. A profitable group with no US tax liability can still accumulate six figures of penalties for late or incomplete information returns.

What changed for tax years beginning after 31 December 2025

If your team is still working from a GILTI worksheet with a QBAI routine return, it is working from repealed law.

Public Law 119-21, enacted 4 July 2025, restructured both outbound anti-deferral regimes for tax years beginning after 31 December 2025:

	Through TY2025	TY2026 onward
§951A inclusion	Global intangible low-taxed income (GILTI)	Net CFC tested income (NCTI)
§250(b) benefit	Foreign-derived intangible income (FDII)	Foreign-derived deduction eligible income (FDDEI)
§250 deduction rate	50% GILTI / 37.5% FDII	40% NCTI / 33.34% FDDEI — now permanent
10% QBAI routine return	Reduces both	Eliminated from both
Deemed-paid FTC, §960(d)	80% of tested foreign taxes	90%

Three practical consequences: capital-intensive foreign operations lose the shelter that former §951A(b) provided; the foreign effective rate at which a CFC’s income is fully offset rises from roughly 13.125% to roughly 14%; and interest and R&E expense are no longer apportioned to the NCTI basket, which for groups with significant US interest expense is a meaningful increase in usable credits.

There is also a new 10% haircut on foreign taxes attributable to distributions of previously-taxed net CFC tested income, applying to distributions made on or after 28 June 2025 — an earlier date than the rest of the package.

A note on the forms. The statute changed; the IRS forms have not caught up. Forms 8992 and 8993 still carry GILTI and FDII in their titles. We prepare to the statute and reconcile to the form as issued.

Outbound — US persons with foreign operations

Form 5471 — US persons with interests in foreign corporations

Filed by US citizens, residents and entities who are officers, directors or shareholders of certain foreign corporations, across five categories. The ones most groups hit:

Category 4 — US persons with control of a foreign corporation, meaning more than 50% of vote or value, at any time during its accounting period.
Category 5 — US shareholders of a controlled foreign corporation, meaning 10% or more of vote or value.
Category 3 — US persons who acquire enough stock to cross the 10% threshold, or dispose of enough to fall below it.

There is no dollar threshold. The form attaches to your income tax return and is due with it, including extensions. More than one category can apply in the same year, and the schedules required differ by category.

Penalty — IRC §6038(b) and (c). $10,000 per foreign corporation per annual accounting period. If the failure continues more than 90 days after IRS notice, a further $10,000 for each 30-day period, capped at $50,000 per form. Separately, foreign taxes creditable under §§901 and 960 are reduced by 10%, with a further 5% for each three-month period the failure continues.

Form 8858 — foreign disregarded entities and foreign branches

Filed by US persons who are tax owners of a foreign disregarded entity or who operate a foreign branch, directly or indirectly — and by Form 5471 and Form 8865 filers whose CFC or foreign partnership owns one. No threshold of any kind.

This is the most commonly missed form in the set, because a single-member foreign LLC or an unincorporated overseas office does not feel like a reportable structure. It carries the same §6038 penalty as Form 5471: $10,000 per accounting period, the same $50,000 continuation cap, and the same 10% foreign tax credit reduction.

Form 8865 — US persons with interests in foreign partnerships

Four categories, of which the two with dollar tests matter most:

Category 3 — a §721 contribution to a foreign partnership where you hold 10% or more immediately after, or where the value of property contributed in the preceding 12 months exceeds $100,000, counting related persons.
Category 1 — more than 50% control. Category 2 — a 10% or greater interest while US persons each holding 10% or more control the partnership. Category 4 — a §6046A reportable event.

Penalty. Categories 1 and 2 follow §6038: $10,000 per partnership per year, a $50,000 continuation cap, and the 10% credit reduction. Category 3 follows §6038B: 10% of the fair market value of the contributed property, capped at $100,000 unless the failure was due to intentional disregard, plus gain recognition as though the property had been sold.

Form 926 — transfers of property to a foreign corporation

Required when a US person transfers property to a foreign corporation in a §367 exchange. §367(a)(1) switches off corporate nonrecognition on outbound transfers, so gain that would ordinarily be deferred under §§332, 351, 354, 356 or 361 is recognised. §367(d) treats an outbound transfer of intangibles as a deemed sale for contingent payments commensurate with income. The active trade or business exception was repealed by the 2017 Act.

Cash transfers are reportable if you hold 10% or more of vote or value immediately after the transfer, or if cash transferred in the 12 months ending on the transfer date exceeds $100,000.

Penalty — IRC §6038B(c). 10% of the fair market value of the property at the time of the exchange, capped at $100,000 absent intentional disregard — and the limitation period on the transfer stays open until three years after the required information is filed.

Forms 8992 and 8993 — the §951A inclusion and the §250 deduction

Form 8992 computes the US shareholder’s §951A inclusion: net CFC tested income for tax years beginning after 2025, GILTI before that. Domestic partnerships no longer file it — the inclusion flows through Schedules K-2 and K-3. Consolidated groups file one form with Schedule B.

Form 8993 claims the §250 deduction: 40% of the NCTI-related amount and 33.34% of FDDEI for tax years beginning after 31 December 2025, against 50% and 37.5% before. Domestic corporations file it, as do individuals who make a §962 election.

Form 8883 — §338 elections

Where a stock acquisition is treated as an asset purchase under §338(g) or §338(h)(10), both old target and new target file an asset allocation statement. Where the target is foreign, copies attach to the respective Forms 5471.

Inbound — foreign-owned US operations

Form 5472 — 25% foreign-owned US corporations

Filed by a reporting corporation — a US corporation with at least one direct or indirect 25% foreign shareholder measured by vote or value at any time in the year, a foreign corporation engaged in a US trade or business, or a foreign-owned US disregarded entity — that had a reportable transaction with a related party. There is no dollar threshold on the transaction.

A foreign-owned US disregarded entity that owes no US tax and files no US return still has this obligation. It files a pro forma Form 1120 with Form 5472 attached.

Penalty — IRC §6038A(d). $25,000, raised from $10,000 by the 2017 Act, plus $25,000 per related party for each 30-day period the failure continues after 90 days’ notice. Any source still quoting $10,000 for Form 5472 is pre-2018.

Form W-8BEN-E and treaty claims

A foreign entity receiving US-source income gives Form W-8BEN-E to the withholding agent or payer, not to the IRS, certifying its chapter 3 and chapter 4 (FATCA) status and claiming treaty benefits including limitation-on-benefits eligibility. A separate form goes to each withholding agent.

A form is generally valid from the date it is signed through the last day of the third succeeding calendar year, unless a change in circumstances makes the information incorrect. The practical failure is rarely the first form — it is the renewal cycle nobody owns, which surfaces as 30% withholding on a payment somebody expected to be treaty-exempt.

Foreign tax credits

Form 1116 or Form 1118

Individuals, estates and trusts claim the credit on Form 1116. Corporations claim it on Form 1118, as do individuals who make a §962 election.

Individuals can skip Form 1116 entirely under the de minimis election, where all foreign-source gross income is passive category, is reported on qualified payee statements, and total creditable foreign taxes are $300 or less, or $600 on a joint return.

Expense allocation under Treas. Reg. §1.861-8

The §904 limitation caps the credit at US tax on foreign-source taxable income, so where deductions land determines how much credit is usable. Treasury Regulation §1.861-8 governs how expenses, losses and other deductions are allocated and apportioned between US and foreign source and among statutory groupings.

For tax years beginning after 31 December 2025, only the §250 deduction and directly allocable deductions are apportioned to the NCTI basket. Interest expense and research and experimentation expense are no longer allocated against it.

Overall foreign loss and overall domestic loss recapture

Under §904(f), a taxpayer with an overall foreign loss must resource foreign-source taxable income in later years as US-source, up to the lesser of the unrecaptured loss or 50% of that year’s foreign-source taxable income, which shrinks the credit limitation.

§904(g) is the mirror image: an overall domestic loss recharacterises later US-source income as foreign-source, up to the lesser of the unrecaptured loss or 50% of that year’s US-source income, which expands it.

Both balances persist for years and are frequently mistracked through advisor changes and system migrations. An OFL or ODL study reconstructs them, and the ODL side is one of the few places in international compliance where the work produces a refund rather than a filing.

Foreign currency — §987

Final regulations under §987 (T.D. 10016, published 11 December 2024) apply to tax years beginning after 31 December 2024 — so calendar-year taxpayers first applied them for tax year 2025. A mandatory transition computation under Treas. Reg. §1.987-10 applies to every taxpayer subject to §987 regardless of the method previously used, with a de minimis exception at the lesser of $3 million or 2% of gross income.

The framework is still moving. Notice 2026-17, issued 25 February 2026, announced forthcoming proposed regulations offering an elective equity-and-basis-pool method and relaxed loss-suspension thresholds. It does not defer the applicability date of the 2024 regulations.

Foreign accounts — FinCEN Form 114 (FBAR)

Any US person — including corporations, partnerships, LLCs, trusts and estates — with a financial interest in or signature authority over foreign financial accounts files an FBAR if the aggregate value of those accounts exceeded $10,000 at any point in the calendar year. Aggregate, not per account, and the test is the highest balance at any moment, not the year-end balance.

It is due 15 April with an automatic extension to 15 October, requires no extension request, and is filed electronically through FinCEN’s BSA E-Filing System — not with the federal tax return. It is a separate filing on a separate system, which is why it is the most commonly missed obligation on this page.

Penalty — 31 U.S.C. §5321(a)(5). The statutory maxima are $10,000 for non-willful violations and, for willful violations, the greater of $100,000 or 50% of the account balance at the time of the violation. Those figures are inflation-adjusted under 31 C.F.R. §1010.821; for penalties assessed on or after 17 January 2025 the adjusted amounts are $16,536 non-willful and $165,353 willful, or 50% of the balance if greater. A reasonable-cause exception is available for non-willful violations.

Penalty exposure at a glance

Filing	Penalty	Authority
Form 5471	$10,000 per corporation per year; +$10,000 per 30 days after notice, max $50,000; 10% foreign tax credit reduction	IRC §6038(b), (c)
Form 5472	$25,000; +$25,000 per related party per 30 days after notice	IRC §6038A(d)
Form 8858	$10,000 per accounting period; same continuation cap and credit reduction as Form 5471	IRC §6038(b), (c)
Form 8865, Categories 1–2	$10,000 per partnership per year; max $50,000; 10% credit reduction	IRC §6038
Form 8865, Category 3	10% of FMV of contributed property, capped $100,000; plus gain recognition	IRC §6038B
Form 926	10% of FMV of transferred property, capped $100,000; limitation period stays open	IRC §6038B(c)
FBAR, non-willful	Up to $16,536 as adjusted	31 U.S.C. §5321(a)(5); 31 C.F.R. §1010.821
FBAR, willful	Greater of $165,353 as adjusted or 50% of the account balance	31 U.S.C. §5321(a)(5); 31 C.F.R. §1010.821

Caps apply per form and per year. A group with four CFCs, two foreign branches and a missed FBAR is not looking at one penalty. It is looking at seven.

Penalty amounts are subject to inflation adjustment. Figures current as of the last reviewed date above.

Frequently asked questions

Which Form 5471 category applies to me?

Category 4 if you control more than 50% of the foreign corporation by vote or value at any time in its accounting period. Category 5 if you are a 10% US shareholder of a controlled foreign corporation. Category 3 if you crossed the 10% threshold in either direction during the year. Category 2 applies to US officers and directors when another US person crosses the threshold, and Category 1 to US shareholders of §965 specified foreign corporations. More than one category can apply in a single year, and the schedules required differ by category.

Form 8858 or Form 5471 — which does a foreign single-member LLC need?

Form 8858. A foreign entity that is disregarded for US tax purposes is not a corporation, so Form 5471 does not apply; the tax owner files Form 8858 instead. If the disregarded entity is owned by a CFC, the Form 8858 attaches to that CFC’s Form 5471. Foreign branches are treated the same way, which catches groups that opened an overseas office without forming an entity at all.

Do we file Form 5472 if the US entity had no income?

Yes, if there was a reportable transaction with a related party. The obligation attaches to the transaction, not to profitability, and a foreign-owned US disregarded entity with no other filing requirement still files a pro forma Form 1120 with the Form 5472 attached. The penalty is $25,000 whether or not any tax was due.

What is the penalty for filing Form 5471 late?

$10,000 per foreign corporation per annual accounting period under IRC §6038(b)(1). If it remains unfiled more than 90 days after IRS notice, a further $10,000 for each 30-day period, capped at $50,000 per form. Foreign taxes creditable under §§901 and 960 are also reduced by 10%, increasing by 5% for each three-month period the failure continues. Reasonable cause can defeat the penalty, but it has to be established on the facts — it is not automatic.

Is GILTI still called GILTI?

Not for tax years beginning after 31 December 2025. The 2025 act renamed the §951A inclusion “net CFC tested income” and the §250(b) benefit “foreign-derived deduction eligible income”, eliminated the 10% QBAI routine return from both, and set the §250 deduction at 40% and 33.34% respectively. For tax years beginning before 2026 the old names and the 50%/37.5% rates still govern. The IRS form titles still use the older terminology.

Form 1116 or Form 1118?

Form 1116 for individuals, estates and trusts. Form 1118 for corporations, and for individuals who make a §962 election. Individuals can skip Form 1116 altogether if all foreign-source gross income is passive category, is reported on qualified payee statements, and total creditable foreign taxes are $300 or less, or $600 on a joint return.

When is the FBAR due, and is it filed with our tax return?

Due 15 April with an automatic extension to 15 October, and it is not filed with the tax return. It goes to FinCEN through the BSA E-Filing System as a separate filing. The threshold is an aggregate of more than $10,000 across all foreign financial accounts at any point in the year — not per account, and not measured at year end.

We have unfiled international information returns from prior years. What are the options?

Do not simply attach them to the next return. Where income was correctly reported and only the information returns are missing, the IRS Delinquent International Information Return Submission Procedures allow late filing with a reasonable-cause statement. Where income was also unreported and the conduct was non-willful, the Streamlined Filing Compliance Procedures may apply. Which path fits depends on whether income was omitted, whether the conduct was non-willful, and whether the IRS has already made contact — and the choice is difficult to reverse, so it is worth taking advice before filing anything.

Talk to us about your filing obligations

If you are not certain which of these returns your group must file, or you have discovered a year that was missed, we can map your entities to their filing obligations and tell you where the exposure is.

Contact our international tax team

International Tax Compliance