Do You Have Ownership in a Foreign Corporation?
The owner of businesses located in Mexico and Belize owes the IRS $110,000 after failing to file necessary forms disclosing his ownership in foreign corporations for nine consecutive years (Flume T.C. Memo. 2017-21).
The U.S. Tax Court ruled that Flume, a U.S. citizen who resided in Mexico from 2001 to 2009, failed to properly disclose his ownership in 2 corporations. Flume held at least a 50% interest in both companies, and was required to file Forms 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations.
Flume filed tax returns from 2001 to 2009, but failed to file Forms 5471 disclosing his foreign corporations, resulting in a penalty of $10,000 per corporation per year.
Even worse, due to Tax Reform many shareholders now have to pay taxes on foreign corporation income even if no dividends were received.