Foreign company tax reporting for US expats: the 2025 complete guide

Owning a foreign company means your US tax responsibilities don’t end at the border. Even if you live overseas, the IRS still requires you to report foreign business interests and financial accounts, often through complex information returns and the FBAR. Below, we break down what you need to file, when it’s due, what penalties to avoid, and whether recent legislation like the One Big Beautiful Bill Act of 2025 affects your obligations.

This article is brought to you by Taxes for Expats – a top-rated team helping Americans abroad stay compliant with US rules on foreign companies, business income, and global asset reporting. Whether you’re starting a foreign business or managing an existing one, we’ll guide you through every step of the US tax process – learn more about our services or contact us.

Key takeaways

Use this section to skim what matters most. It’s designed for fast decisions and next steps.

• Penalties are steep – missing Form 5471 can cost up to $50,000, and Form 5472 starts at $25,000 per year.

• Foreign-owned US LLCs must file Form 5472 with a basic Form 1120 if they have transactions with related parties.

• Owning 10% or more of a controlled foreign corporation (CFC) may trigger extra income reporting under GILTI, even if you don’t get paid.

• FATCA and FBAR rules still apply – report if your accounts or assets abroad hit $10,000 or more anytime during the year.

Foreign company defined for US tax rules

Clear definitions anchor every filing decision. These definitions below set up how you handle forms, deadlines, and penalties, but first, what precisely constitutes a foreign company under US tax law?

A foreign corporation is any corporation that is not domestic under the code. Domestic means created or organized in the United States or under US law. A foreign-owned US LLC is a domestic disregarded entity, yet when wholly owned by a foreign person, it must file a pro forma Form 1120 with Form 5472.

A foreign partnership, on the other hand, is any partnership not organized under US or state law – often an eligible entity taxed as a partnership under the check-the-box rules. For ownership, the IRS code uses a US person, which includes a citizen or resident, a domestic corporation, a domestic partnership, certain trusts, and estates.

It's important to note that what matters is not that "a US citizen can be a person or a corporation" in common speech, but that the tax code defines a US person broadly to include both individuals and entities. Therefore, a foreign company may be owned by a US person, and equally, a US company may be foreign-owned.

Your business structure – and what you need to report

Every reporting obligation starts with how your business is classified – whether it’s a foreign corporation, partnership, trust, or a US entity with foreign ties. If you’re unsure where your company fits, refer back to the section on foreign companies before proceeding.

Foreign corporations

Many expats operate through local corporations, which often triggers multiple information returns. The following forms cover ownership, transfers, and downstream shareholder reporting.

Form 5471

Form 5471 reports US persons who are officers, directors, or 10%+ owners of a foreign corporation, including Category 1–5 filers; it captures control changes, related-party transactions, and CFC items, and is filed with the individual’s return by the standard due date with expat extensions. Penalties are covered under section 6038(b), and recent litigation (Farhy) confirms in the D.C. Circuit that the IRS may assess these penalties, though other venues have diverged.

A concise way to approach 5471 requirements is to trace ownership during the year, test for CFC status, then map your facts to the filer category and schedules. A typical scenario is where a US engineer owns 60% of a UK Ltd; because US shareholders collectively own >50%, it’s a CFC, making the engineer a Category 5 filer and requiring Form 5471 with GILTI/Subpart F schedules as applicable.

Form 926

Form 926 reports certain transfers of property or cash to a foreign corporation when either the transferor holds 10% immediately after, or when aggregate cash transfers exceed $100,000 in the 12-month period ending on the transfer date.

If you wire $150,000 over several months, for instance, to capitalize a new Canadian corporation and end up with 20%, you must file Form 926 with your income tax return for the year of the final transfer. The filing duty derives from IRC Section 6038B and Reg. Section1.6038B-1.

Foreign partnerships

Partnership interests held abroad bring look-through ownership and contribution reporting. The forms below align with control thresholds and cross-border partner disclosures.

Form 8865

Form 8865 applies to US persons who control a foreign partnership, own 10% when US persons collectively control it, make reportable contributions, or have events under Section 6046A (acquisitions, dispositions, proportional-interest changes). It rides with your return and mirrors corporate reporting in many respects, including continuation penalties after notice for late or incomplete filings.

To determine your filing duties with Form 8865, consider the following:

1. Ownership or Control – If you directly or indirectly own at least 10% of a foreign partnership and US persons collectively control the entity, you likely need to file.
2. Contributions – Reportable contributions of property (especially intangible assets) may require Form 8865 under Category 3.
3. Changes in Proportional Interest – Acquiring, disposing of, or changing your interest in a foreign partnership may trigger reporting under Section 6046A.
4. Timing and Attachments – File the form with your return, including all applicable schedules (capital, income, transactions), and attach supporting statements as outlined in the instructions.

The statutory hooks are Section 6038, 6038B, and 6046A; the instructions organize these as Categories 1–4.

Schedule K-2 and K-3

Schedules K-2/K-3 transmit international items – foreign source income, taxes, ECI, treaty disclosures – to partners in a standardized format. For 2024–2025, a one-month date request from any partner compels filing K-2/K-3 even if a domestic-filing exception might otherwise apply, so monitor partner notices during extension season. The below are some key things to know about Schedules K-2 and K-3:

• Apply to partnerships and S corporations with international tax relevance, regardless of whether partners are US-based.

• Filing is required if any partner requests Schedule K-3 by the one-month date before filing – usually 30 days before the extended due date.

• Penalties for noncompliance are significant and include standard partnership failure-to-file fines under IRC Section 6698.

• Best practice is to prepare K-2/K-3 preemptively unless all conditions for exception are clearly met and documented.

Foreign-owned US LLCs

A US single-member LLC owned 100% by a foreign person is disregarded for income tax – but not for information reporting. The filing below applies when there are related-party transactions.

Form 5472 and pro forma 1120

A foreign-owned US disregarded entity is a reporting corporation and must file Form 5472 for each tax year with reportable transactions with related parties; it attaches to a pro forma Form 1120.

The duty flows from Section 6038A/6038C and their regulations, which, since 2017, extend these rules to foreign-owned US SMLLCs; use the instructions for precise definitions and examples of reportable transactions. Treas. Reg. Section 1.6038A-1 et seq. and the 5472 instructions explicitly require the pro forma 1120 attachment for foreign-owned US disregarded entities.

Foreign disregarded entities

Single-owner foreign entities and branches flow through to the US owner. Choosing or confirming status is step one; annual reporting follows.

Form 8832

Form 8832 is the check-the-box election that sets a foreign eligible entity’s US classification as a corporation, partnership, or disregarded entity, with a general five-year limitation on changes. Courts have upheld the check-the-box regime – Littriello v. United States affirmed Treasury’s authority, underscoring that an un-elected single-member LLC is disregarded by default. Use the election to align local law, treaty access, and GILTI/PFIC outcomes before income begins. Statutory authority and limits are in Treas. Reg. Section 301.7701-3.

Form 8858

Form 8858 reports foreign disregarded entities and foreign branches, including Schedule M for related-party dealings; file it with your return each year that ownership or branch activity exists.

Foreign disregarded entities aren’t taxed directly, but you still must report them

Read more

Foreign trusts and hybrid entities

Trust reporting hinges on ownership under the grantor rules and on transactions. Deadlines diverge from income-tax filing – mark them early.

Form 3520 and Form 3520-A

These forms apply when a US person creates, owns, or interacts with a foreign trust, or receives large foreign gifts. The table below details both forms and their peculiarities.

FBAR

FBAR (FinCEN Form 114) is due April 15 with an automatic extension to October 15, and it applies when aggregate foreign accounts exceed $10,000 at any time – this includes signature authority over a company account. In Bittner v. United States (2023), the Supreme Court held that non-willful penalties apply per report, not per account, clarifying exposure for late forms. Align FBAR data with FATCA and entity filings to keep totals and ownership consistent.

Noncompliance penalties, costs & fines

Penalties aren’t just line items – they’re the IRS’s way of enforcing business transparency across borders. When foreign ownership meets complex filing rules, understanding how each form ties into the broader IRS business reporting requirements is essential.

Big fines for foreign entity missteps (5471, 5472, 8865, 8858)

Form 5471 and Form 8858 each start at $10,000 per entity per year if late or incomplete. After IRS notice, add $10,000 per 30 days (capped at $50,000) and possible foreign tax credit reductions. Form 8865 mirrors those amounts, while Form 5472 begins at $25,000 and adds $25,000 per 30 days after 90 days.

Transferring assets abroad? Here's the Form 926 penalties

Unreported transfers to a foreign corporation trigger steep consequences:

• 10% of the property’s fair market value at transfer; $100,000 cap unless intentional disregard.

• Reasonable cause can abate; the assessment statute may extend until the required information is filed.

Foreign trusts and gifts: Form 3520's harsh penalties

Failing to report foreign trust transactions on Form 3520 can cost the greater of $10,000 or 35% of the gross value of transfers or distributions; failure to report ownership can be the greater of $10,000 or 5% of trust assets.

For large foreign gifts or bequests, penalties run 5% per month up to 25% of the gift’s value. Continuation penalties of $10,000 per 30 days can apply after notice, though reasonable-cause relief exists.

Trust ownership slip-ups? Form 3520-A penalties bite hard

Annual reporting for foreign trusts with US owners on Form 3520-A comes with sharp teeth and stronger penalties, just as much as the Form 3520:

• Greater of $10,000 or 5% of the US-owned portion of trust assets for late, incomplete, or incorrect filings.

• Continuation penalty of $10,000 per 30 days after 90 days from notice, capped by the gross reportable amount.

Hidden foreign accounts? FBAR penalties stack fast

Non-willful violations can bring civil penalties up to $10,000 (inflation-adjusted) per report, depending on facts. Willful violations can reach the greater of $100,000 (inflation-adjusted) or 50% of the account balance at the time of violation. Criminal exposure exists; delinquent FBAR procedures may help when reasonable cause applies.

Ultimately, when you own or control a specified foreign corporation, proactive compliance is the surest way to avoid turning technical foot faults into costly tax setbacks.

Facing penalties on 5471/5472/8865 – what abatement options do you have?

Find out

Report foreign business income correctly

Choose the right return, then apply anti-deferral rules where required – the bullets below map the default filings and when extra inclusions may apply. Keep it simple, file what fits your entity, and add the cross-border layers only when triggered.

• Use Form 1040 with Schedule C if you operate as a sole proprietor or a single-owner entity taxed as disregarded for US purposes. Schedule C reports your business income or loss and attaches to your Form 1040.
• Use Form 1120 or Form 1120-S if you operate through a corporation: C corporations file Form 1120; S corporations with a valid Form 2553 election file Form 1120-S.
• GILTI/Subpart F – brief: US shareholders holding 10% of a controlled foreign corporation (>50% US-owned) may need current-year inclusions even without dividends – GILTI under 951A via Form 8992, and Subpart F under 951952.

Filed this way, you align personal and corporate reporting while watching for anti-deferral pickups – a clean path whether you operate a branch or a foreign profit corporation.

NOTE! A foreign-owned LLC that remains disregarded generally reports its trade or business results at the owner level – most often on Form 1040 with Schedule C.

OBBBA 2025 – impact on expat foreign company reporting

Signed on July 4, 2025, OBBBA resets several international tax levers – most notably GILTI/FDII rates, foreign tax credit mechanics, and related rules – with changes generally effective for tax years beginning after December 31, 2025.

It does not alter the core information-return framework for owners of a foreign company: Forms 5471, 8858, 8865, 5472, plus FATCA Form 8938 and FBAR remain required as before.

For 2025, file under existing rules and watch for IRS implementation updates, then adjust 2026 planning for the new GILTI/FDII and credit calculations as guidance rolls out.

Why should you partner with Taxes for Expats?

Reporting foreign company income means three big responsibilities – timely filing, choosing the right IRS form, and staying alert to anti-deferral rules like GILTI or Subpart F. Miss any one of these, and penalties or double taxation can follow quickly.

This is where Taxes of Expats comes in – we handle the heavy lifting so you can focus on running your business abroad. From mapping your structure to the right forms to reviewing thresholds and elections, we ensure every detail is documented correctly.

FREE

Unsure which foreign company tax forms apply? Get general guidance

It all begins with a free consultation

Schedule my free call