Form 8858: Foreign Disregarded Entities
Form 8858 Filing Requirements
A United States person who directly or indirectly owns a Foreign Disregarded Entity (FDE) must file Form 8858. Here are the Instructions for Form 8858. But good luck, they’re a snooze fest. An FDE is an entity that was not created or organized in the United States and that US tax law disregards as separate from its owner under Regulation sections 301.7701-2 and 301.7701-3.
You use this form to satisfy the reporting requirements of IRC sections 6011, 6012, 6031, and 6038, along with related regulations. If you must file Form 5471 as a Category 4 or Category 5 filer for a controlled foreign corporation, and that corporation owns an FDE, you must also file Form 8858. Likewise, if you belong to a controlled foreign partnership that owns an FDE, you must file Form 8858.
What Happens If You Don't File Form 8858?
Presently, a $10,000 penalty applies for each tax year the required information is not filed with the IRS. However, the penalty is increased to a maximum of $50,000 if information is not submitted after the IRS has mailed notices of the failure. Additionally, for continued failures, the foreign tax credit could be reduced. For more, see Code Section 6038(b).