Table of Contents
- Purpose of Form
- Who Must File
- When and Where to File
- Other Reporting Requirements
Form 8858 is used by certain U.S. persons that own a foreign disregarded entity (FDE) directly or, in certain circumstances, indirectly or constructively. See U.S. Person Filing Form 8858 below. The form and schedules are used to satisfy the reporting requirements of sections 6011, 6012, 6031, and 6038, and related regulations.
The following U.S. persons that are tax owners of FDEs (see definitions below), or that own certain interests in foreign tax owners of FDEs, must file Form 8858.
Complete the entire Form 8858 and the separate Schedule M (Form 8858).
Complete the entire Form 8858 and the separate Schedule M (Form 8858).
Complete only the identifying information on page 1 of Form 8858 (i.e., everything above Schedule C) and Schedules G and H on page 2 of Form 8858. Do not complete the separate Schedule M (Form 8858). You are not required to complete Form 8858 if there is a Category 1 filer of Form 8865 that completes the entire Form 8858 and separate Schedule M (Form 8858) with respect to the FDE.
Form 8858 is due when your income tax return or information return is due, including extensions. If you are the tax owner of the FDE, attach Form 8858 and the separate Schedule M (Form 8858), if required, to your income tax return or information return. If you are not the tax owner of the FDE, attach Form 8858 to any Form 5471 or Form 8865 you are filing with respect to the CFC or the CFP that is the tax owner of the FDE.
A U.S. person is:
A citizen or resident alien of the United States (see Pub. 519, U.S. Tax Guide for Aliens, for guidance on determining resident alien status),
A domestic partnership,
A domestic corporation,
Any estate (other than a foreign estate, within the meaning of section 7701(a)(31)(A)), and
Any domestic trust.
A domestic trust is any trust if:
A court within the United States is able to exercise primary supervision over the administration of the trust and
One or more U.S. persons have the authority to control all substantial decisions of the trust.
The U.S. person filing Form 8858 is any U.S. person that:
Is the tax owner of an FDE.
Owns a specified interest in an FDE indirectly or constructively through a CFC or a CFP. See items 2 and 3 of Who Must File above for more detailed information.
Throughout these instructions, when the pronouns “you” and “your” are used, they are used in reference to the U.S. person filing Form 8858.
An FDE is an entity that is not created or organized in the United States and that is disregarded as an entity separate from its owner for U.S. income tax purposes under Regulations sections 301.7701-2 and 301.7701-3. See the instructions for Form 8832, Entity Classification Election, for more information.
An eligible entity uses Form 8832 to elect how it will be classified for federal tax purposes. A copy of Form 8832 is attached to entity's federal tax return for the tax year of the election; however, special rules apply if the entity is not required to file a tax return. For more information, see Where To File in the instructions for Form 8832.
New rules, effective September 28, 2009, allow an eligible entity to request a late entity classification election. See Rev. Proc. 2009-41, 2009-39 I.R.B. 439 for more information.
The tax owner of the FDE is the person that is treated as owning the assets and liabilities of the FDE for purposes of U.S. income tax law.
The direct owner of an FDE is the legal owner of the disregarded entity.
For example, assume A, a U.S. individual, is a 60% partner of CFP, a controlled foreign partnership. FDE 1 is a foreign disregarded entity owned by CFP, and FDE 2 is a foreign disregarded entity owned by FDE 1. In this example, FDE 1 is the direct owner of FDE 2, and CFP is the direct owner of FDE 1. CFP is the tax owner with respect to both FDE 1 and FDE 2. A would be required to file the Forms 8858 relating to FDE 1 and FDE 2 with the Form 8865 it files with respect to CFP.
A $10,000 penalty is imposed for each annual accounting period of each CFC or CFP for failure to furnish the required information within the time prescribed. If the information is not filed within 90 days after the IRS has mailed a notice of the failure to the U.S. person, an additional $10,000 penalty (per CFC or CFP) is charged for each 30-day period, or fraction thereof, during which the failure continues after the 90-day period has expired. The additional penalty is limited to a maximum of $50,000 for each failure.
Any person who fails to file or report all of the information required within the time prescribed will be subject to a reduction of 10% of the foreign taxes available for credit under sections 901, 902, and 960. If the failure continues 90 days or more after the date the IRS mails notice of the failure to the U.S. person, an additional 5% reduction is made for each 3-month period, or fraction thereof, during which the failure continues after the 90-day period has expired. See section 6038(c)(2) for limits on the amount of this penalty.
Any person required to file Form 8858 and Schedule M (Form 8858) who agrees to have another person file the form and schedules for him or her may be subject to the above penalties if the other person does not file a correct and proper form and schedule.
When translating amounts from functional currency to U.S. dollars, you must use the method specified in these instructions. But, regardless of the specific method required, all exchange rates must be reported using a “divide-by convention” rounded to at least 4 places. That is, the exchange rate must be reported in terms of the amount by which the functional currency amount must be divided in order to reflect an equivalent amount of U.S. dollars. As such, the exchange rate must be reported as the units of foreign currency that equal one U.S. dollar, rounded to at least 4 places. Do not report the exchange rate as the number of U.S. dollars that equal one unit of foreign currency.
You must round the result to more than 4 places if failure to do so would materially distort the exchange rate or the equivalent amount of U.S. dollars.
During its annual accounting period, an FDE owned by a U.S. person had current income of 30,255,400 Yen on Schedule H, line 6. The Schedule H instructions specify that the filer must translate these amounts into U.S. dollars at the average exchange rate for the tax year in accordance with the rules of section 989(b). The average exchange rate is 118.5050 Japanese Yen to 1 U.S. dollar (0.00843846 U.S. dollars to 1 Japanese Yen). Divide 30,255,400 Yen by 118.5050 to determine the U.S. dollar amount to enter on line 7 of Schedule H. Enter 118.5050 after the flush language following line 7.
If you file your income tax return electronically, see the instructions for your income tax return for general information about electronic filing.
If you are filing Form 1120 or 1065 electronically, you must attach Form 8858 electronically (as an attachment to your electronically filed Form 5471, Form 8865, Form 1120, or Form 1065). If you are filing Form 1040 or Form 1041 electronically (with or without a Form 5471 or Form 8865), attach Form 8858 to the applicable Form 8453.
A computer-generated Form 8858 and its schedules may be filed if they conform to and do not deviate from the official form and schedules. Generally, all computer-generated forms must receive prior approval from the IRS and are subject to an annual review.
Submit all requests for approval to: Internal Revenue Service, Attention: Substitute Forms Program, SE:W:CAR:MP:T:M:S, 1111 Constitution Avenue NW, IR-6526, Washington, DC 20224.
Be sure to attach the approval letter to Form 8858.
Every year, the IRS issues a revenue procedure to provide guidance for filers of computer-generated forms. In addition, every year the IRS issues Pub. 1167, General Rules and Specifications For Substitute Forms and Schedules, which reprints the most recent applicable revenue procedure. Pub. 1167 is available at www.irs.gov/pub1167, or can be ordered by calling 1-800-TAX-FORM (1-800-829-3676).
Announcement 2004-4, 2004-4 I.R.B. 357, provides for a summary filing procedure for filing Form 8858 for a dormant FDE. A dormant FDE is an FDE that would be a dormant controlled foreign corporation (CFC) if it were treated as a foreign corporation for U.S. tax purposes.
If you elect the summary procedure, complete only the identifying information above Schedule C on page 1 of Form 8858 for each dormant FDE as follows:
The top margin of the summary return must be labeled “Filed Pursuant to Announcement 2004-4 for Dormant FDE.”
Include the name, address, identifying number, and tax year of the U.S. person filing Form 8858 (see definition, earlier).
Include the annual accounting period of the dormant FDE (below the title of the form) and complete items 1a through 1e and 1g.
Complete items 3a through 3d, if applicable.
Complete items 4a through 4c, if applicable.
File this summary return in the manner described in When and Where To File, earlier.
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