Form 8858, Information Return of U.S. Persons With Respect to Foreign Disregarded Entities (FDEs) and Foreign Branches (FBs)

What is 8858?

Who needs to file 8858?

When to file 8858

Documents you need

• Organizational chart required by line 5: name, placement, percentage of ownership, tax classification and country of organization of every entity between the tax owner and the FDE or FB, and each entity in which it has a 10%-or-more interest.
• Schedule M (Form 8858), Transactions Between Foreign Disregarded Entity (FDE) or Foreign Branch (FB) and the Filer or Other Related Entities: required with each Form 8858 where the FDE or FB entered into any such transaction, for filers who complete it.
• Statement with the line 4 information for each additional direct owner, when the FDE has more than one direct owner.
• Statements for Schedule C-1: the methodology and deferral details for section 987 gain or loss reported on lines 2 and 3, and a description of the old and new method if the accounting method for section 987 changed (line 5).
• Disclosure statement under Regulations section 1.6011-4 if the tax owner of the FDE claims a section 165 loss for worthless stock or certain obligations, as described for Schedule G, line 3.
• Documents for a permitted domestic use of a dual consolidated loss (Schedule G, line 12c): an elective agreement document, a "No Possibility of Foreign Use of Dual Consolidated Loss Statement" or a "Domestic Use Election and Agreement".
• Statement describing the triggering event, its regulation citation and the prior-year DCLs recaptured, when you answer Yes on Schedule G, line 13a.
• Separate schedule of Schedule H adjustment items, showing each amount, whether it is a net addition or subtraction, and the totals entered on lines 2 and 3.
• "Schedule I—Transferred Loss Amount Additional Information" statement, when a transferred loss amount greater than zero is entered on Schedule I, line 4.
• IRS approval letter, when the Form 8858 and its schedules are computer-generated.

How to fill out 8858

1. 1

   Enter the filer and accounting period

   Enter the FDE's or FB's annual accounting period below the title, then the filer's name, identifying number, address and tax year. A U.S. corporation in a consolidated group lists the common parent as the filer.

2. 2

   Check the filer type and Initial or Final

   Check the box that describes the FDE or FB (for example FDE of a U.S. person, FB of a CFC). Check Initial Form 8858 or Final Form 8858 only if the FDE or FB was formed, acquired, terminated or disposed of this year, never both.

3. 3

   Identify the FDE or FB on line 1

   Line 1a: name and address. Line 1b(1): EIN, or line 1b(2): a reference ID number if you have no EIN (never an SSN). Complete lines 1c to 1f, then 1g with the two-letter country code, 1h with the 6-digit activity code, 1i and 1j with the three-letter functional currency code.

4. 4

   Complete lines 2, 3 and 4

   Line 2: the U.S. branch office or agent and the person with custody of the books and records. Line 3: the tax owner if different from the filer. Line 4: the direct owner if different from the tax owner, attaching a statement for each extra direct owner.

5. 5

   Attach the organizational chart

   For line 5, attach a chart of the ownership chain between the tax owner and the FDE or FB, and between the FDE or FB and each entity in which it has a 10%-or-more direct or indirect interest. One chart may cover several FDEs and FBs.

6. 6

   Complete Schedule C income statement

   Report lines 1 to 14 in functional currency under U.S. GAAP and in U.S. dollars. Check the box above line 1 if you use the section 989(b) average exchange rate. If the functional currency is the U.S. dollar, complete only the U.S. dollars column.

7. 7

   Complete Schedule C-1 if section 987 applies

   Enter remittances on line 1, section 987 gain or loss recognized on line 2 and deferred gain or loss on line 3 in columns (a) and (b), then answer lines 4 and 5. Use a separate Schedule C-1 for each QBU owner.

8. 8

   Complete Schedule F balance sheet

   Enter cash and other current assets, other assets, liabilities and owner's equity for the beginning and end of the annual accounting period, in U.S. dollars per U.S. GAAP. Lines 3 and 6 are the totals.

9. 9

   Answer Schedule G questions 1 to 9

   Check Yes or No for lines 1 to 6, complete lines 7 and 8 on base erosion payments unless you are an individual, and answer line 9 only if the tax owner is a CFC. Answer line 3 only if the FDE elected disregarded status this year.

10. 10

    Answer Schedule G lines 10 to 14

    Complete lines 10 to 13 on dual consolidated losses only if the tax owner is a U.S. corporation (not a RIC, REIT or S corporation). Line 14 asks about Top-up Tax; enter each type on lines 14b(1) to 14b(3) if you answer Yes.

11. 11

    Complete Schedule H earnings and profits

    Start with net income per books on line 1, add net additions on line 2, subtract net subtractions on line 3 and enter DASTM gain or loss on line 5 if applicable. Translate line 6 into U.S. dollars on line 7 and enter the exchange rate on line 8.

12. 12

    Complete Schedule I if assets transferred

    Answer lines 1 to 3, stopping at the first No. If you reach line 4, enter the transferred loss amount included in gross income under section 91 and attach the additional information statement.

13. 13

    Complete Schedule J foreign income taxes

    For each country, enter the two-letter code, the foreign tax year (YYYY-MM-DD), the tax in foreign currency, the conversion rate and the U.S. dollar amount. Then assign the dollars to the separate category in columns (f) to (i) and total them.

14. 14

    Prepare Schedule M and attachments

    Complete the separate Schedule M (Form 8858) if required and gather the statements and chart the form calls for. Match the column set to the tax owner: U.S. person, CFC or CFP.

15. 15

    Review and download the completed PDF

    Check that every applicable line is complete, amounts are in U.S. dollars unless noted, and exchange rates use the divide-by convention. Download or print the completed PDF from FillingPDF and attach it to the return described under How to submit.

How to submit 8858

Common mistakes to avoid

• Writing "see attached" in a section instead of completing every entry space and attaching only the remaining information on additional sheets that follow the IRS version of that section.
• Entering a Social Security number on line 1b(1) or 1b(2) for the FDE or FB; the instructions say not to, and an EIN belongs on line 1b(1).
• Reporting the exchange rate as U.S. dollars per unit of foreign currency. It must use the divide-by convention: units of foreign currency equal to 1 U.S. dollar, rounded to at least four places.
• Checking both the Initial and Final boxes, or filing one form when an FDE is formed and terminated in the same year; each event needs its own Form 8858.
• Adding lower-tier FDE or FB amounts to the form for the upper-tier FDE; each tier gets its own Form 8858, although all amounts are included for the tax owner.
• Completing Schedule G lines 7 and 8 as an individual who owns an FB or FDE directly or through tiers; the form says not to.
• Abbreviating the country name in a foreign address, or entering a country name instead of a valid country code on an e-filed form.
• Omitting Schedule M (Form 8858) when the FDE or FB had transactions with the filer or related entities.
• Reducing Schedule H earnings and profits or taxable income by blocked income that could not have been distributed because of foreign currency or other restrictions.
• Listing non-creditable taxes, such as those disallowed under section 901(j), (k), (l) or (m), on Schedule J.