If you are a US citizen who owns or invests in foreign corporations, you may need to file Form 5471 with the IRS to report your investments. As part of Form 5471, you may also need to submit Schedule H to provide information on the earnings and profits from your overseas business. This guide will help you understand the requirements for filing Form 5471 Schedule H.
Form 5471 Schedule H: Key Takeaways
- A foreign corporation’s current earnings and profits (E&P) are reported on Schedule H for US tax purposes.
- US persons who qualify as Categories 4 and 5a filers must submit Schedule R with Form 5471.
- An income statement in the foreign corporation’s functional currency is required to file Schedule H.
- The deadline for submitting Schedule H, which is a component of Form 5471, is the same date as the deadline for filing your annual tax return.
Who has to file Schedule H?
Form 5471 filers fall into five categories, depending on their involvement with the foreign entity. Two of the five categories of filers will need to submit Schedule H with Form 5471:
- Category 4 Filer: This category includes a US person who controlled a foreign corporation during the foreign corporation’s annual accounting period. Control is defined as an individual owning more than 50% of the total value of shares or 50% of the total voting power of all classes of stock.
- Category 5a Filer: A Category 5a filer is a Category 5 filer who does not fall into the categories 5b or 5c.
- In general, a Category 5 filer is a person who owned stock in a controlled foreign corporation (CFC) at any time during the U.S. tax year and on the last day of the year in which the foreign entity was a CFC.
- A person is a Category 5b filer if they are an unrelated section 958(a) U.S. shareholder of a foreign-controlled CFC. This type of Category 5 filer implements the relief for certain Category 5 filers announced in Section 8.02 of Rev. Proc. 2019-40, 2019-43 IRB 982.
- A person is a Category 5c filer if they are a related constructive U.S. shareholder of a foreign-controlled CFC. This type of Category 5 filer implements the relief for certain Category 5 filers announced in Section 8.03 of Rev. Proc. 2019-40, 2019-43 IRB 982.
Filers in Categories 5b and 5c are not required to submit Schedule H for foreign-controlled CFCs.
What is Schedule H (Current Earnings and Profits) used for?
For the purposes of US taxation, the current earnings and profits (E&P) of a foreign corporation are reported using Schedule H. Enter the amounts on lines 1-5c in the functional currency of the CFC. On line 5d, enter the corporation’s earnings and profits in U.S. dollars. On line 5e, enter the exchange rate used to convert the CFC’s functional currency to USD.
When is the due date for Schedule H?
Schedule H of Form 5471 will be due on the same date as your U.S. income tax return. This deadline varies based on your business structure. For instance, partnerships and S-corps must file by the 15th day of the third month following the end of the tax year. On the other hand, the deadline for C-corps is the 15th day of the fourth month following the end of the tax year. In either case, you can postpone the deadline by up to six months by filing an extension.
Where is Form Schedule H filed?
Form 5471, including Schedule H, should be mailed or electronically submitted to the IRS with your tax return.
Where do I find the newest version of Schedule H?
Visit the IRS website to download the latest version of Schedule H of Form 5471.
How do I find the instructions for Schedule H?
Get instructions and additional information on Form 5471 and Schedule H on the IRS website.
What documents are required to file Schedule H?
To file Schedule H, you must provide an income statement in the foreign company’s functional currency. U.S. Generally Accepted Accounting Principles (GAAP) must be followed in the preparation of all financial statements.
Are there secret deductions that can be claimed on Schedule H?
Schedule H does not allow tax deductions because it is only for informational purposes.
Do you have any tips for correctly filing Schedule H?
Accurate bookkeeping makes it easier to prepare the financial statements required to complete Schedule H of Form 5471. To make filing taxes easier, keep track of your income and expenses throughout the year.
Can I get a refund by filing Schedule H of Form 5471?
Unfortunately, completing Schedule H of Form 5471 will not help you claim a tax refund. This tax schedule is used only to report information to the IRS.
Can Cleer Tax help me file Schedule H?
Cleer specializes in assisting startups and growing businesses with tax and bookkeeping needs, including Form 5471, Schedule H, financial statement preparation, and more. Explore our service packages to learn more.
If you have further questions or need assistance, feel free to contact us.
