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Gary Bode, CPA is a Master's Degreed, nation wide accountant offering tax and business services. Member of AICPA and NCACPA. Our virtual office provides excellent service to long distance and international clients. Call (910) 399-2705 for a free phone consult.

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Amended Tax Return and IRS Resolution

I was initially worried about picking someone off the internet but your testimonials sold me so I would more than happy to assist and hopefully the next person will be at ease choosing to utilize your services. I am pleased to write you to let you know I received a response from the IRS in response to the schedule C you assisted with filing. They responded saying the information supplied was sufficient and they have closed discrepancy. I spoke with the IRS and they said no tax is due. I asked even though I did make a $400 profit and they said again no tax liability is showing that the case was closed. I just wanted to thank you again for your assistance with this issue.

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Form 5471 CPA explains the currency conversion process | Expat Taxes | Form 5471 instructions

Form 5471 CPA explains expat tax issues

Gary Bode, CPA: the IRS now enforces late penalties for Form 5471. Need a free consult from a Form 5471 CPA? (910) 399-2705.

Form 5471 CPAs handle lots of different concerns from their Expat clients. Like filing Form 2555. Foreign Earned Income, and Form 1116, Foreign Tax Credit. But IRS Form 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations, is the most problematic expat topic. I’ll try to prep you for the Form 5471 instructions. Many foreign accountants don’t handle IRS Form 5471 tax preparation, even though they prepared the foreign taxes and Financial Statements. Many American Form 5471 CPAs won’t handle all countries. Unlike some tax accounting, Form 5471 seldom adds any managerial value; it’s strictly a compliance cost. Sad, but true.

Sources of help for IRS Form 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations

The IRS Form 5471 instructions state that Form 5471 preparation takes over 24 hours, yes hours, to prepare. I’m not aware of any Form 5471 tax software which could help. While the Form 2555 instructions and Form 1116 instructions actually do help, the Form 5471 instructions don’t, in my opinion. Most IRS Form 5471 CPAs use a third party tax database. The database explains things better and brings in other pertinent information, like the currency conversion rate.

“Surprisingly many areas of IRS Form 5471 explain themselves, which helps you filter the Form 5471 instructions for the topics you need.”
– Gary Bode, Form 5471 CPA.

So what’s the Basic Conversion Process on Form 5471?

  • Basically Form 5471 reports the foreign corporation’s Financial Statements to the IRS, albeit in odd ways.
  • There are currency conversion or translation issues.
    • Use the tax year’s average conversion rate as published by the IRS.
    • Form 5471 goes back and forth on what currency to use on the various sections.
  • There are adjustments to convert the Financial Statements to US Generally Accepted Accounting Principles.
    • Here’s why IRS Form 5471 CPAs specialize in various countries.
    • One example? Depreciation is sometimes different in other countries.
  • Finally, Form 5471 calculates the US person’s gross income from the foreign corporation.

Can you File Form 5471 yourself?

Maybe. Of course Form 5471 CPAs only deal with folks who don’t self prepare. Lots of help exists; tax research databases, Internet, AICPA guides, continuing professional education course or seminars, etc. Form 5471 has an alphabet of schedules to complete. The 5471 instructions are convoluted, even if English is your primary language. There’s a $10,000 penalty for filing late, so start early. I’ve heard the IRS frequently audits Form 5471 but I haven’t seen any actual IRS stats on that. The decision to hire a 5471 CPA hinges on your ability, available time and complexity of the foreign corporation.

How does a Form 5471 CPA handle preparation?

Usually from a spreadsheet, setup to reflect Form 5471’s flow. Excel handles the currency translation nicely (be careful you don’t reverse the calculation). We build controls into spreadsheets. I use lots of notes so I can back track (of course that never happens –  lol). Then some of it is cut and paste from the spreadsheet into the IRS Form 5471 PDF. Like most tax preparation, the first year of preparation is the hardest. Beware; the IRS blank 5471 Form on their website doesn’t add up any numbers even though it allows completion by computer. So, your spreadsheet can be perfect while some error occurs on Form 5471.

I’m an expat CPA that handles Form 5471. We have a virtual office, so international clients don’t have logistic problems. We offer a free phone consult. (910) 399-2705.

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