U.S. persons that own foreign disregarded entities (FDEs) and/or operate foreign branches (FBs) must file Form 8858 to satisfy the reporting requirements of various U.S. tax laws. This article overviews the filing requirements for Form 8858, including who must file, when and where to file, multiple filers of same information, exceptions to filing, definitions, accounting books and records, and associated penalties.
What is Form 8858?
Form 8858 is used by certain U.S. persons that operate an FB (foreign branch) or own an FDE (foreign disregarded entity) directly or indirectly, or constructively. This form and its accompanying schedules, such as Schedule M (Form 8858) are used to satisfy the reporting requirements of the U.S. Internal Revenue Service (IRS) for sections 6011, 6012, 6031, and 6038, and its related regulations. Generally, entities required to file Form 8858 are U.S. persons that are tax owners of FDEs, operate an FB, or own certain interests in tax owners of FDEs or FBs. FDEs and FBs are defined by the IRS and separate sets of books and records can be used to determine if a business activity is an FB. Forms 8858 must be filed along with a tax return or information return, by the due date, including extensions. Penalties can be incurred through failure to file the form or for providing incorrect or incomplete information.
IRS Form 8858 – Who Needs to Fill It Out?
Form 8858 must be filled out by certain U.S. persons that own FDEs, operate FBs, or own interests in FDEs or FBs indirectly or constructively. This includes U.S. persons that are tax owners of FDEs or FBs at any time during the year, certain persons that must file Form 5471 or Form 8865 with respect to CFCs or CFPs, and U.S. corporations that are partners in U.S. partnerships that own FDEs or FBs. Form 8858 and Schedule M (Form 8858) must be filed with the appropriate tax return or information return. Exceptions to filing Form 8858 may apply. Fines may be imposed for failure to file Form 8858 or provide the correct information.
Step-by-Step: Form 8858 Instructions For Filling Out the Document
The Form 8858 and Schedules M (Form 8858) are due when the tax return or information return in which the Form 8858 is attached is due, including extensions. All U.S. persons that are the tax owners of FDEs, operate an FB, or own certain interests in those entities must complete the Form 8858 and separate Schedule M (Form 8858). Additionally, Category 4 and Category 5 filersof Form 5471 or Category 1 filers of Form 8865 must complete the entire Form 8858 and separate Schedule M (Form 8858). When multiple people are required to furnish information, it may be filed in the same manner as the multiple filer information. 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. Penalties may be imposed for failure to fulfill the reporting requirements.
Below, we present a table that will help you understand how to fill out Form 8858.
|Information Required for Form 8858||Details|
|Due Date||When the Form 8858 is due|
|Applicability||Who must complete Form 8858|
|Exchange Rates||Reporting exchange rates|
|Penalties||Penalties for non-compliance|
Do You Need to File Form 8858 Each Year?
You must file Form 8858 if you are a U.S. person that is the tax owner of an FDE, a direct or indirect owner of a certain interest in an FDE, or a U.S. person that directly or indirectly operates an FB. If multiple U.S. persons are required to file the same information, one person may file Form 8858 for all other persons with same filing requirements. It must be filed when your income tax return or information return is due, and will need to be attached to either the income return or the information return depending on the requirements of the form. Penalties may apply if you fail to file the correct information. Make sure to use the right exchange rates when translating functional currency to U.S. dollars.
Download the official IRS Form 8858 PDF
On the official IRS website, you will find a link to download Form 8858. However, to make it easier for you, we are providing the link in our article, which comes directly from the official irs.gov website! Click to download: Form 8858