A Simple Guide to Schedule M (Form 5471): Transactions Between Controlled Foreign Corporation and Shareholders or Other Related Persons 

controlled foreign corporation

Introduction to Form 5471 for Controlled Foreign Corporations

Individuals who must file Form 5471 may also need to submit Schedule M. The IRS requires anyone who had a controlled foreign corporation during the tax year to report their transactions with the foreign entity. 

Key Takeaways

  • A Category 4 filer,  a U.S. resident who controlled a foreign corporation during its annual accounting period, must file Schedule M (form 5471).
  • A balance sheet with data expressed in US dollars is needed to complete Schedule M.
  • On the same date you submit your annual tax return, you must submit Schedule M, a component of Form 5471. 

Who Has to File Schedule M?

Form 5471 filers fall into five categories based on the taxpayer’s relationship with the controlled foreign corporation. Each category has specific filing requirements. A Category 4 filer, which includes a U.S. person who controlled a foreign corporation during the foreign corporation’s annual accounting period, must file Schedule M.

A person has control of a foreign corporation if they own more than 50% of the total value or voting power of all classes of stock. 

What is Schedule M (Distributions From a Controlled Foreign Corporation) Used For?

Schedule M is used to report transactions that took place during the controlled foreign corporation’s annual accounting period, which ended with or within the tax year of the US person. 

If a U.S. corporation owns stock in a foreign corporation and is part of a consolidated group, you must list the common parent as the US person filing. 

What is the Deadline for Schedule M?

Schedule M shares the same deadline as your income tax return. For example, S-corps and partnerships must file by the 15th day of the third month following the end of the tax year (filing an extension will add six months to the deadline). For C-corps, the deadline is the fourth month after the end of the tax year (with the option to extend this due date up to six months). 

Where Do I File Schedule M?

Submit Schedule M and Form 5471 as part of your federal income tax return via the IRS website or mail

Where Do I Find the Newest Version of Schedule M?

Visit the IRS website to download Schedule M for the current tax year. 

How Do I Find the Instructions for Schedule M?

Find instructions and filing information on Form 5471 and Schedule M on the IRS website. 

What Documents are Required to File Schedule M?

To complete Schedule M for transactions between a controlled foreign corporation and shareholders, you must provide a balance sheet that reports all figures in U.S. dollars and complies with U.S. Generally Accepted Accounting Principles (GAAP). Use the average exchange rate for the foreign corporation’s tax year when converting to U.S. dollars.

Can I Apply Deductions Using Schedule M?

Schedule M is for informational purposes only and cannot be used to claim tax deductions. 

Do You Have Any Tips for Correctly Filing Schedule M?

When filing Schedule M, make sure that your balance sheet is correct. It is easy to make mistakes, particularly when converting from foreign to US currency. Ensure you use the correct exchange rates and that all amounts and transactions are properly converted. 

Can I Get a Refund for Filing Schedule M?

Because Schedule M is for reporting information on a controlled foreign corporation, it cannot be used to calculate or claim a tax refund.

Can Cleer Tax Help Me File Schedule M?

Cleer Tax specializes in helping business owners in the U.S. and abroad navigate the complexities of the IRS tax code with a foreign controlled corporation. If you’re required to file Form 5471, we can help you prepare all the related tax documents, including Schedule M. Learn more about our services to see how we can help set you and your business up for success.

Author Bio
Henry Shin
Henry loves to roll his sleeves up and dive into complex tax matters. As an IRS Enrolled Agent, Henry represents clients in front of the IRS, but what he really prefers is solving client issues BEFORE they become issues with the IRS! Henry tackles a lot of complex tax forms like Forms 5472 and 5471 for clients worldwide. Henry is also working towards his CPA certification in Texas where he lives.
Sign up for special offers, tax reminders and the latest news!
Table of Contents

Business Tax Calendar

We’ve created this handy widget to keep track of important business tax deadlines for your startup that you can automatically add to your calendar. Get your…

hand pointing to date on calendar with pen

Start your financial journey on the right foot

Get $50 discount off your tax package.