Partnerships and S Corporations with Foreign Assets

• FBAR (Form 114) – Report of Foreign Financial Accounts (Civil penalty starting at $10,000 or 50% of the account value, up to 10 years in prison)

• Form 8938 – Statement of Specified Foreign Financial Assets (Civil penalty up to $50,000 and 40% of unpaid tax, IRC § 6038)

• Form 8858 – Information Return of U.S. Persons with Respect to Foreign Disregarded Entities (FDEs) and Foreign Branches (FBs) (Same penalty as Form 8938)

• Form 8865 – Return of U.S. Persons with Respect to Certain Foreign Partnerships (Same penalty as Form 8938)

• Form 8621 – Information Return by a Shareholder of a Passive Foreign Investment Company (PFIC) or Qualified Electing Fund (No direct penalty)

• Form 5471 – Information Return of U.S. Persons with Respect to Certain Foreign Corporations (Same penalty as Form 8938)

What Is This About?

These forms are used by U.S. partnerships and S corporations that own foreign financial accounts, assets, or interests in foreign entities.

• FBAR (Form 114) is required if total foreign financial accounts exceed $10,000 at any time during the year. Severe penalties apply for noncompliance.

• Form 8938 is for reporting foreign financial assets if they exceed IRS thresholds.

• Forms 8858, 8865, and 5471 are for U.S. persons or entities with ownership in foreign entities (disregarded entities, partnerships, or corporations).

• Form 8621 is used for Passive Foreign Investment Companies (PFICs) but does not have a direct penalty.

Why Is This Important?

• Failure to report foreign accounts or assets can lead to severe IRS penalties, including high fines and potential criminal charges.

• Certain thresholds apply, so not all entities must file all forms.

• These forms ensure compliance with U.S. tax laws and foreign asset reporting requirements under FATCA and FBAR regulations.