Why IRS Form 1083 Is Obsolete and What to File Instead

The Internal Revenue Service (IRS) has discontinued the use of Form 1083, a document previously used for specific international reporting purposes. This change reflects a broader effort by the agency to consolidate and streamline its information-gathering processes related to foreign corporations. The form’s original function was to track changes in ownership of these foreign entities.

Purpose of Obsolete Form 1083

Form 1083 was required from U.S. citizens or residents who were officers, directors, or shareholders in a foreign corporation when certain ownership thresholds were crossed. The primary trigger for filing was the acquisition or disposition of stock that resulted in a person’s ownership reaching or falling below a 5% interest in the corporation’s outstanding stock.

The form was also required when a U.S. person became an officer or director of a foreign corporation in which a U.S. person held a 5% or greater interest. This reporting was part of the framework under Internal Revenue Code (IRC) Section 6046, which mandates returns regarding the organization or reorganization of foreign corporations and acquisitions of their stock. Over time, these specific reporting duties were absorbed into a more comprehensive form.

Current Reporting on Form 5471

The reporting obligations once covered by Form 1083 have been consolidated into Form 5471, “Information Return of U.S. Persons With Respect to Certain Foreign Corporations.” This form now serves as the primary tool for the IRS to gather information on U.S. interests in overseas companies. The filing requirements are organized into several distinct categories, and a U.S. person, which includes individuals, corporations, partnerships, and trusts, may need to file if they meet the criteria for one or more of these categories.

One major group of filers includes U.S. persons who have control of a foreign corporation, defined as owning more than 50% of its voting power or value, for an uninterrupted period of at least 30 days during the year. Another category applies to U.S. citizens or residents who are officers or directors of a foreign corporation in which a U.S. person acquires a 10% or greater ownership stake. A separate requirement exists for U.S. persons who acquire or dispose of stock in a foreign corporation, which brings their ownership to at least 10% of the value or voting power.

A category pertains to U.S. shareholders of a Controlled Foreign Corporation (CFC). A foreign corporation is classified as a CFC if U.S. shareholders own more than 50% of it. A U.S. person who owns 10% or more of a CFC for an uninterrupted 30-day period during the year and held that stock on the last day of the year generally has a filing obligation under this category.

Information Needed for Form 5471

Filers must have basic identifying data ready, such as the name, address, and U.S. taxpayer identification number for themselves and the employer identification number for the foreign corporation. Details regarding the filer’s stock ownership are also necessary, including the percentage owned and a record of any transactions that changed that ownership percentage during the tax year.

The most substantial requirement is the preparation of the foreign corporation’s financial information. This includes a complete income statement and balance sheet, which must be translated into U.S. dollars and presented according to U.S. Generally Accepted Accounting Principles (GAAP). This information is reported on specific schedules within the form, such as Schedule C for the income statement and Schedule F for the balance sheet.

Filers must also compile information about any transactions that occurred between the U.S. person and the foreign corporation. These related-party transactions are scrutinized to ensure they are conducted at arm’s length and are detailed on Schedule M of the form. Additionally, information regarding the foreign corporation’s earnings and profits, both current and accumulated, is required on schedules like Schedule H and Schedule J.

Filing Procedures and Penalties

Once Form 5471 is completed, it is not submitted to the IRS as a standalone document. Instead, it must be attached to the filer’s annual income tax return and filed by that return’s due date, including extensions. For an individual, this means attaching it to their Form 1040, while a domestic corporation would attach it to its Form 1120. If a person has interests in multiple foreign corporations, a separate Form 5471 must be prepared and filed for each one.

Failure to file a complete and accurate Form 5471 on time carries penalties. Under IRC Section 6038, the IRS can impose a penalty of $10,000 for each annual accounting period for which the failure exists. If the required information is not provided within 90 days after the IRS mails a notice of the failure, an additional $10,000 penalty is charged for each 30-day period that the failure continues.

The continuation penalties can accrue up to a maximum of $50,000 for each failure. Beyond these monetary penalties, a failure to file can also result in a 10% reduction of the foreign taxes available for credit.