I never filed Form 8992 for my foreign company — what happens?
The filing is the visible part; the inclusion behind it is the expensive part. Because the charge does not wait for a distribution, every year the company earned active profits above a routine return on its tangible assets is a year with an inclusion to compute, whether or not anything was filed. So a late position is rarely one form. It is a series of computations, each feeding the return for its own year, with tax and interest running from the original due dates. The first task is to establish which years the company was within the rules and what its accounts show for each, because until that is done the size of the problem is unknown.
Does filing Form 8992 late create tax on profits I never took?
Yes, and that is usually the hardest part of the conversation. The inclusion is blind to whether cash was distributed, so profits reinvested in the business years ago can produce tax now, payable personally, on money that is still working inside the company. Nothing about filing late creates that charge. It was there from the start, and the filing reveals it. What changes with delay is the accumulation: several years of inclusions arrive together, with interest from each year's due date, at a moment the company's cash position may not suit. Work out the whole figure before deciding how to fund it.
How many years back do I have to compute GILTI?
That depends on when the company came within the rules and on which years remain open, so it is a question of fact rather than a fixed answer. The practical approach is to work forwards from the company's formation, or from the point at which the ownership reached the level that matters, and identify each year in which there were profits above a routine return on tangible assets. Some years produce nothing and still need establishing. We generally build the whole history and then decide with the client which years are filed and in what order. Doing it the other way round, year by year as questions arrive, costs more and reads worse.
Can I still make the elections if Form 8992 is late?
Some choices remain open and some do not, which is why nobody should file the first year in isolation. The elections and relief mechanisms in this area carry their own conditions and their own timing, and a choice made for one year has consequences for the years around it, including the treatment of foreign tax the company has already paid and of distributions still to come. The sensible order is to compute the inclusions for every affected year, then model the routes across the whole period, then file. A choice made in order to get one year off the desk is the one most likely to be regretted.
Will I owe interest on a late GILTI inclusion?
Interest runs on tax that was due and unpaid, so where a late inclusion produces a liability for an earlier year, expect interest from that year's due date rather than from the date you discovered the problem. It is worth keeping interest and penalty separate in your head: interest is a charge on the balance and it accrues for as long as the balance is outstanding, whatever the reason for the delay. That makes the funding question more urgent than the filing question. Where several years are involved, ask for the computation to show the liability year by year, so you can see which years drive the balance.
Do I amend my past returns to add a late Form 8992?
Usually yes, and the amendment is the vehicle rather than the point. The computation belongs to a particular year and feeds that year's return, so bringing it current normally means amending the returns for the years affected and attaching the reporting to each. The work is therefore return work as much as form work, because the inclusion changes the income on the return and that can change other figures on it. Prepare the years as one set, in order, and check that each amended return agrees with the schedule behind it. The fee for that scope is agreed in writing before the work starts.
What is a PFIC, and why do Canadian mutual funds cause trouble for US persons?
A passive foreign investment company is a non-US company that is mostly passive by income or by assets — which describes almost every Canadian mutual fund and ETF. For a US owner the default regime taxes distributions and gains punitively with an interest charge for the years the value built up. Two elections fix it, and both need annual information the fund may not produce for you. Holding the same exposure through US-domiciled funds usually avoids the problem entirely. See PFICs and Canadian mutual funds.
What is Form 5471 and who has to file it?
The information return a US person files about a foreign corporation they own or control, in one of several filer categories that determine which schedules apply. It is not a tax computation, which is exactly why it gets missed — and why the penalty regime is severe. The consequence people underestimate is that a missing 5471 can keep the limitation period open on the whole return, not merely on the foreign company's figures. See Form 5471.
