Key Takeaways
Form 8858 Filing Requirements:
- U.S. persons who are “tax owners” of foreign disregarded entities must file
- Form 5471/8865 filers must attach Form 8858 for FDEs owned by reported entities
- Foreign branch operators must file Form 8858
- No minimum dollar threshold for filing
- Both direct and indirect owners may have filing requirements
Table of Contents
Introduction
Form 8858 catches many U.S. taxpayers off guard. Unlike some international forms that have dollar thresholds or ownership percentage requirements, Form 8858 applies whenever you’re the “tax owner” of a foreign disregarded entity (FDE) or operate a foreign branch, regardless of size or activity level.
The filing requirement extends beyond direct ownership. If you file Form 5471 for a controlled foreign corporation that owns an FDE, or Form 8865 for a foreign partnership that owns an FDE, you must also file Form 8858.
This guide explains who qualifies as a tax owner, the different categories of Form 8858 filers, and how to determine your specific filing obligations.
The “Tax Owner” Concept
Understanding the “tax owner” concept is essential because it determines Form 8858 filing requirements. The tax owner isn’t always the legal owner of the entity.
Definition of Tax Owner
A tax owner is the person who’s treated as owning the assets and liabilities of the disregarded entity for U.S. federal income tax purposes. Because a disregarded entity is ignored for tax purposes, its assets and liabilities are attributed to its owner.
For Single-Owner Entities: If you’re the sole owner of a foreign entity treated as disregarded, you’re the tax owner. The entity’s income, deductions, assets, and liabilities are treated as yours.
For Multi-Owner Entities: If a foreign entity has multiple owners, it’s not disregarded. It’s either a partnership (requiring Form 8865) or a corporation (requiring Form 5471), depending on classification.
Tax Owner vs. Legal Owner
The tax owner and legal owner are usually the same person, but they can differ:
Example: Nominee Ownership
A U.S. citizen (John) is the beneficial owner of a foreign entity, but shares are held in a nominee’s name for local legal reasons. John is still the tax owner and must file Form 8858.
Example: Trust Ownership
A foreign disregarded entity is owned by a U.S. grantor trust. The grantor (not the trust) is the tax owner for Form 8858 purposes.
Determining Tax Ownership
To identify the tax owner:
- Start with the legal owner of the foreign entity
- If the legal owner is itself disregarded, look through to its owner
- Continue until you reach a person that’s recognized for U.S. tax purposes
- That person is the tax owner
Category 1: Direct Tax Owners
The most straightforward Form 8858 filers are U.S. persons who directly own foreign disregarded entities.
Types of U.S. Persons Who File
U.S. Citizens All U.S. citizens who are tax owners of FDEs must file Form 8858, regardless of where they live. This includes citizens living abroad (expats) and dual citizens.
Resident Aliens Green card holders and individuals meeting the substantial presence test are treated as U.S. persons for Form 8858 purposes.
Domestic Corporations U.S. corporations that own FDEs file Form 8858 with their Form 1120.
Domestic Partnerships U.S. partnerships that own FDEs file Form 8858 with their Form 1065. Individual partners don’t separately file Form 8858 for the same FDE.
Domestic Trusts and Estates U.S. trusts and estates that are tax owners of FDEs file Form 8858 with their Form 1041. For grantor trusts, the grantor may be the filer.
How Direct Tax Owners File
Direct tax owners attach Form 8858 to their annual income tax return:
- Individuals: Attach to Form 1040
- Corporations: Attach to Form 1120
- Partnerships: Attach to Form 1065
- Trusts/Estates: Attach to Form 1041
The form is due when your income tax return is due (including extensions).
Example:
Sarah (U.S. citizen) owns 100% of a UK Ltd that elected disregarded status. She’s the direct tax owner and files Form 8858 with her Form 1040.
Category 2: Form 5471 Filers with FDEs
If you file Form 5471 for a controlled foreign corporation (CFC), and that CFC owns a foreign disregarded entity, you must attach Form 8858 to your Form 5471.
When This Applies
Form 8858 attachment is required when:
- You’re a Category 4 or 5 filer of Form 5471
- The CFC owns one or more foreign disregarded entities
- The CFC is treated as the “tax owner” of the FDE
Filing Mechanics
Form 8858 attaches to Form 5471, not to your individual return. The CFC is treated as the tax owner of the FDE for this purpose.
Example Structure:
U.S. Parent (you) ↓ owns 100% Irish Ltd (CFC) → Form 5471 ↓ owns 100% German GmbH (FDE) → Form 8858 attached to Form 5471
Multiple FDEs Under a CFC
If a CFC owns multiple FDEs, you file a separate Form 8858 for each FDE, all attached to the Form 5471 for that CFC.
Example:
Irish CFC owns three FDEs (German, French, Spanish entities) You file one Form 5471 with three Form 8858s attached
Form 5471 Category Requirements
Not all Form 5471 filers attach Form 8858. Generally, Category 4 and Category 5 filers (those with the most extensive reporting requirements) must attach Form 8858 for FDEs owned by the reported CFC.
See our Form 5471 Categories Guide for more on which category applies to you.
Category 3: Form 8865 Filers with FDEs
If you file Form 8865 for a foreign partnership, and that partnership owns a foreign disregarded entity, you must attach Form 8858 to your Form 8865.
When This Applies
Form 8858 attachment is required when:
- You’re a Category 1 filer of Form 8865 (or certain other categories)
- The foreign partnership owns one or more FDEs
- The partnership is treated as the “tax owner” of the FDE
Filing Mechanics
Form 8858 attaches to Form 8865, not to your individual return. The foreign partnership is treated as the tax owner of the FDE.
Example Structure:
U.S. Partner (you, 60% ownership) ↓ UK LLP (foreign partnership) → Form 8865 ↓ owns 100% Swiss GmbH (FDE) → Form 8858 attached to Form 8865
Form 8865 Category Requirements
Form 8858 attachment is generally required for Category 1 filers of Form 8865 (controlling U.S. persons with 50%+ ownership). Other categories may also trigger Form 8858 attachment depending on the circumstances.
Category 4: Foreign Branch Operators
U.S. persons who operate foreign branches must file Form 8858 for each branch. A foreign branch is different from an FDE, but both require Form 8858.
What Constitutes a Foreign Branch
A foreign branch is a trade or business carried on outside the United States by a U.S. person. Unlike an FDE, a branch isn’t a separate legal entity. It’s simply a division or office of the U.S. business operating in another country.
Characteristics of a foreign branch:
- Business operations outside the U.S.
- Not conducted through a separate legal entity
- Books and records maintained for the branch
- Income/expenses attributable to the branch
Examples of Foreign Branches
U.S. Consulting Firm with UK Office
A U.S. consulting company opens an office in London. The London office operates under the U.S. company’s name, not as a separate entity. This is a foreign branch requiring Form 8858.
U.S. Manufacturer with Foreign Production Facility
A U.S. manufacturer operates a production facility in Mexico under its own name, not through a Mexican subsidiary. The Mexican operation is a foreign branch.
Branch vs. FDE
| Characteristic | Foreign Branch | Foreign Disregarded Entity |
|---|---|---|
| Separate legal entity | No | Yes |
| Formed under foreign law | No | Yes |
| Liability protection | No | Typically yes |
| Local registration | May not be required | Required |
| Form 8858 required | Yes | Yes |
Who Does NOT File Form 8858
Understanding who doesn’t file is as important as knowing who does.
Indirect Owners Not Filing Form 5471/8865
If you’re an indirect owner of an FDE but don’t file Form 5471 or Form 8865 for the entity that owns the FDE, you don’t file Form 8858.
Example:
You own 5% of a foreign partnership. The partnership owns an FDE. You don’t file Form 8865 (below threshold). You don’t file Form 8858 either.
Foreign Persons (Non-U.S.)
Non-resident aliens and foreign entities don’t file Form 8858. The form applies only to U.S. persons.
Example:
A Canadian citizen (non-U.S. person) owns a UK disregarded entity. No Form 8858 required.
U.S. Persons Owning Foreign Corporations
If you own a foreign corporation (not disregarded), you may need Form 5471, but not Form 8858 for that corporation.
Example:
You own 100% of a Japanese K.K. (per se corporation). You file Form 5471, not Form 8858, for the Japanese company.
U.S. Persons Owning Foreign Partnerships
If you own a foreign partnership (multiple owners), you may need Form 8865, but not Form 8858 for that partnership.
Example:
You and your sibling own a German GbR 50/50. The entity is a partnership. You file Form 8865 (if you meet categories), not Form 8858.
Domestic Disregarded Entities Holding Foreign Assets
If you use a domestic (U.S.) disregarded entity to hold foreign assets, Form 8858 doesn’t apply. The entity isn’t foreign.
Example:
Your Delaware single-member LLC owns stock in a foreign corporation. No Form 8858 for the Delaware LLC (it’s domestic).
U.S. Person Definition
The Form 8858 requirement applies to “U.S. persons.” Here’s who qualifies:
Citizens
All U.S. citizens are U.S. persons for Form 8858 purposes, including:
- Citizens living in the U.S.
- Citizens living abroad (expats)
- Dual citizens (U.S. and another country)
- Citizens who acquired citizenship at birth or through naturalization
Resident Aliens
Non-citizens who are treated as U.S. residents for tax purposes:
- Green card holders (lawful permanent residents)
- Individuals meeting the substantial presence test
- Individuals who elect to be treated as residents
Domestic Entities
Entities formed or organized in the U.S. or under U.S. law:
- Corporations formed in any U.S. state
- Partnerships formed in any U.S. state
- LLCs formed in any U.S. state
- Trusts meeting domestic trust requirements
- Estates of U.S. decedents
Filing Requirements Summary
| Situation | Form 8858 Required? | Filed With |
|---|---|---|
| U.S. person directly owns FDE | Yes | Form 1040/1120/1065/1041 |
| CFC owns FDE (you file Form 5471) | Yes | Attached to Form 5471 |
| Foreign partnership owns FDE (you file Form 8865) | Yes | Attached to Form 8865 |
| U.S. person operates foreign branch | Yes | Form 1040/1120 |
| U.S. person owns foreign corporation | No | Form 5471 instead |
| U.S. person owns foreign partnership | No | Form 8865 instead |
| Indirect FDE owner (no Form 5471/8865) | No | N/A |
| Non-U.S. person owns FDE | No | N/A |
Multiple Filing Obligations
Some taxpayers have multiple Form 8858 filing requirements in the same year.
Multiple Direct FDEs
If you directly own several FDEs, you file a separate Form 8858 for each one, all attached to your income tax return.
Direct FDE Plus CFC-Owned FDE
You might file Form 8858 both with your personal return (for a directly owned FDE) and attached to Form 5471 (for an FDE owned by a CFC).
Example:
You own a Mexican FDE directly (Form 8858 with Form 1040) You also own 100% of an Irish CFC that owns a German FDE (Form 8858 attached to Form 5471) Total: Two Form 8858s filed different ways
Coordination Challenges
When you have multiple filing obligations, ensure:
- Each FDE is reported on the correct Form 8858
- Each Form 8858 is attached to the correct underlying form
- Schedule M properly reflects transactions between all related entities
- Amounts are consistent across all forms
Frequently Asked Questions
Do I file Form 8858 if the FDE had no activity?
Yes. Form 8858 is required even for dormant FDEs with no income, expenses, or transactions. The IRS wants to know about all foreign entities you own, regardless of activity level.
What if I’m only a partial owner?
If the entity has multiple owners, it’s not a disregarded entity. It’s either a partnership or corporation depending on classification. You’d evaluate Form 8865 or Form 5471 requirements instead.
Do nonresident aliens file Form 8858?
No. Form 8858 applies only to U.S. persons. Nonresident aliens don’t file this form.
What if I inherited an FDE mid-year?
You file Form 8858 for the portion of the year you were the tax owner. If you inherited on July 1, your Form 8858 covers July 1 through December 31.
Do I file for FDEs I sold during the year?
Yes. You file Form 8858 for the period you owned the FDE. If you sold on March 31, your Form 8858 covers January 1 through March 31.
What about dormant FDEs?
Dormant FDEs (those with no business activity) still require Form 8858. The form reports the entity’s existence, not just its activity.
Do green card holders file Form 8858?
Yes. Green card holders are U.S. persons for tax purposes and have the same Form 8858 requirements as U.S. citizens.
What if I become a U.S. person mid-year?
If you become a U.S. person (through green card or substantial presence), you file Form 8858 for the period you were a U.S. person and owned the FDE.
When to Get Professional Help
Consider professional assistance when:
- Entity structure is unclear and you need classification analysis
- Multiple FDEs create complex filing coordination
- You’re a first-time filer unsure of requirements
- Catch-up filing is needed for prior years
- Ownership changed during the year (inheritance, purchase, sale)
SDO CPA specializes in Form 8858 preparation and can analyze your situation to determine your filing obligations.
Conclusion
Form 8858 filing requirements center on the “tax owner” concept. If you’re a U.S. person who is the tax owner of a foreign disregarded entity or operates a foreign branch, you must file.
The requirement extends to indirect ownership when the FDE is owned by a CFC (reported on Form 5471) or foreign partnership (reported on Form 8865). In those cases, Form 8858 attaches to the underlying Form 5471 or 8865.
There’s no dollar threshold or minimum activity level. If you own an FDE, you file Form 8858, even for dormant entities. Penalties for non-filing can reach $50,000 per form per year, making compliance essential.
Get Help Determining Your Form 8858 Requirements
Related Resources
- Form 8858 Foreign Disregarded Entity Guide
- Form 8858 vs Form 5471 Comparison
- Form 8858 vs Form 8865 Comparison
- Form 5471 Guide
- Form 8865 Guide
- Form 8858 Penalties and Relief
- Form 8858 Filing Services
- International Tax Services
This article is for informational purposes only and does not constitute tax or legal advice. Consult a qualified tax professional for advice specific to your situation.