5471 Schedule J Form 2020-2024

5471 Schedule J Form: What You Should Know

U.S. Income of a Controlled Foreign Trust As its name suggests, Form 5471 is the IRS form used to report U.S. residents' income earned in a foreign corporation (“CFC‎). “E&P” refers to the E&P—that is, the “income earned” by the U.S. shareholder, which in most cases is the U.S. shareholder's foreign corporation (“CFC), which is usually a partnership (or other entity which is legally structured as a partnership). So for a U.S. shareholder who owns the foreign corporation in the U.S., Form 5471 is used to report the U.S. resident's income earned in the foreign corporation. In a way, Form 5471 tracks E&P as U.S. income earned in a foreign partnership. While this may seem trivial, this can actually be used to “fraud” the IRS. To understand how, check out Form 2555, “Self Employment Taxes and Partnership Income Tax Return (Form 1065” and “Partnership Income Tax Return (Form 1070): Fraud and Forgery of U.S. Partnership Return.” Form 2555 — Self Employment Taxes and Partnership Income Tax Return Because it tracks E&P, this specific form is used by IRS professionals to deal with and assist individuals who have income earned from a foreign partnership (and foreign corporation) in the U.S. or any other year. Note: While IRS forms are now required to be filed on a calendar year (rather than a fiscal year), IRS Form 2555 cannot be filed for a fiscal year since it tracks income earned from a foreign partnership in a U.S. year. Therefore, a Form 2555-B or a similar return need not be filed during a fiscal year. However, those who want to file a Form 2555-B during a fiscal year need to obtain an extension before making a payment to the IRS. (See Form 2555, Self Employment Tax Return (for general information on Form 2555, see IRS.gov/Form-2555).) Ongoing Taxation of U.S. Income Earned in Foreign Partnership or CFC in U.S. Dollars U.S. resident and foreign partnerships do not pay U.S. taxes on their U.S. business income or U.S. individual income earned from foreign sources.

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