Form 8858 Reporting of U.S. Owned Foreign Disregarded Entities: Ownership and Correct Filing Status

Information Return Requirements for Check-the-Box Structures Including Indirect and Constructive Ownership

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A


Conducted on Tuesday, January 12, 2021

Recorded event now available

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Program Materials

This webinar will provide tax advisers with guidance to the U.S. reporting requirements for ownership of foreign disregarded entities (FDEs) on IRS Form 8858. The panel will offer section-by-section detail on completing Form 8858, discuss the interrelation between Form 8858 and other required international information reporting, and review IRS enforcement practices and actions through their filing checks/matching examination process.

Description

IRS Form 8858, Information Return of U.S. Persons Concerning Foreign Disregarded Entities, is among the most complex tax reporting forms for U.S. persons engaged in offshore business activities. Due in part to the challenge of determining whether a U.S. person meets ownership requirements, many taxpayers overlook or incorrectly complete this filing, leading to steep taxes and other penalties.

Like other foreign information filings, Form 8858 is required for any taxpayer owning 100 percent interest in any foreign business entity created outside the U.S. which is not treated as a separate entity for U.S. tax purposes. Ownership may be direct, indirect, or constructive based on IRS guidelines.

The treatment of the entity in its home country has no bearing on U.S. reporting obligations; any entity structured similarly to a U.S. single-member LLC will likely require a Form 8858. This includes an entity that is considered a corporation under local law but has elected under the "check-the-box" rules not to be treated separately from its owner.

Additionally, U.S.-held foreign corporations or partnerships subject to Form 5471 or Form 8865 reporting requirements that own 100 percent of an FDE must also file a Form 8858 for each FDE it holds. Failure to report these FDEs can lead to the Service considering those Forms 5471 or 8865 incomplete, with additional penalties imposed. Tax advisers of U.S. taxpayers owning FDEs must identify the type of ownership and sections of Form 8858 to be reported.

Listen as our experienced panel provides a practical guide to reporting ownership of FDEs on Form 8858.

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Outline

  1. Classification of FDEs
    1. Definition for U.S. tax purposes
    2. Examples of foreign structures
    3. Check-the-box elections and impact on Form 8858 filing requirements
  2. Types of ownership
    1. Direct
    2. Indirect
    3. Constructive
  3. Critical sections of Form 8858 which lead to IRS scrutiny
  4. Intersection with Forms 5471 and Form 8865
  5. Penalties for noncompliance

Benefits

The panel will discuss these and other important questions:

  • Identifying Form 8858 reporting obligations from Form 5471 and Form 8865 filings
  • Recognizing the types of ownership of FDEs and how indirect or constructive ownership impacts which sections of Form 8858 must be completed
  • Penalties involved in Form 8858 noncompliance
  • Completing the individual sections of Form 8858

Faculty

Dougherty, Alison
Alison N. Dougherty, J.D., LL.M., CPA

Partner
Aronson

Ms. Dougherty specializes in U.S. international tax reporting, compliance, consulting, planning, and structuring as a...  |  Read More

Kennedy-C. Edward
C. Edward Kennedy, Jr., CPA, JD

Managing Director
C Edward Kennedy Jr

Mr. Kennedy has more than 36 years of experience dealing with a variety of international tax matters, specializing in...  |  Read More

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