Form 926 - U.S. Persons Transferring Property to Foreign Corporations

What Is Form 926?

IRS Form 926 is a tax form required for international reporting requirements when a US person, such as a U.S. citizen, green card holder, or certain entities, transfers property to a foreign corporation. The purpose of this IRS form is to allow the IRS to track these cross-border transfers and determine whether any U.S. tax is due. The filing requirement is established under the Internal Revenue Code, which provides the legal authority for reporting such foreign property transfers.

By filing Form 926, the US person—which includes individuals and entities as defined by the IRS—reports the details of the transfer and calculates any potential tax consequences. Even if no immediate tax is owed, the filing may still be required.

Download and Print Form 926

Form 926 can be downloaded directly from the IRS website and must be completed accurately to avoid penalties or delays.

Key Takeaways

• Form 926 is required for certain transfers of cash or property from a U.S. person to a foreign corporation.

• U.S. taxpayers have tax obligations to file Form 926 with their annual tax return, typically due by April 15 each year.

• Accurate and timely filing helps you meet IRS reporting requirements and avoid penalties.

• The filing process may include exemptions for minor stakeholders with limited foreign investments, but failing to file or not filing Form 926 when required can result in significant penalties, extended audit periods, and other legal consequences.

• Transfers made during a corporate liquidation may also trigger a Form 926 filing if a U.S. person has significant ownership.

What Information Is Required on Form 926?

When completing Form 926, detailed information must be provided about both the U.S. transferor (the transferor of property) and the foreign corporation receiving the property. This includes:

• The name, address, and employer identification number (EIN), if applicable, of the U.S. transferor.

• The name, address, and country of incorporation of the foreign corporation.

• A clear description of the property transferred, specifying whether it is tangible or intangible property, including intangible property and other property, as required by IRS regulations. Part III of Form 926 requires detailed information about each item of property transferred, including the date of transfer, description, fair market value, cost basis, and any recognized gain.

• The date of the transfer and the percentage of stock or securities owned by the U.S. person in the foreign corporation after the transfer.

• Details of any consideration received, whether cash, property, or the assumption of liabilities by the foreign corporation.

If a partnership transfers property, each domestic partner must report their proportionate share of the transfer.

Providing complete and accurate information is essential to ensure proper IRS reporting.

What Are the Filing Requirements for Form 926?

Transfers of Cash

A U.S. person may be required to file Form 926 when they transfer cash to a foreign corporation. Cash transfers and transfers of appreciated property, such as cash or other assets, may trigger a filing requirement under certain circumstances, such as when specific ownership thresholds are met or large sums are involved.

Form 926 must be filed if:

• The total cash transferred during the tax year exceeds $100,000, or

• The transfer results in the U.S. person owning at least 10% of the total voting power or total value of the foreign corporation immediately after the transfer.

These rules allow the IRS to monitor significant international cash transfers, transfers of appreciated property, and changes in total voting power and total value ownership.

Transfers of Stock or Securities

The same general rules apply to transfers of stock or securities to a foreign corporation. Filing is required if, after the transfer, the U.S. person owns more than 10% of the total value or total voting power of the foreign corporation. The requirement is based on the percentage of voting power or total value held immediately after the transfer.

The form must report:

• The type and value of the stock or securities transferred

• The date of the transfer

• The U.S. person’s ownership percentage, including total voting power and total value, after the transfer

Distributions by Domestic Liquidating Corporations

Form 926 may also be required when a domestic corporation in liquidation distributes assets to a foreign corporation.

If a U.S. person has significant ownership in the distributing corporation or the value of the assets meets reporting thresholds, the transaction must be disclosed on Form 926. If a partnership is involved in the liquidation, each domestic partner must report their share of the distributed assets on Form 926.

When Is Form 926 Filed?

Form 926 is filed with the U.S. person’s federal income tax return for the year in which the transfer occurs. It is not filed separately.

The form must be attached to the applicable tax return (such as Form 1040, 1120, or 1065) and submitted by the regular filing deadline, including extensions. Filing on time is critical, as penalties may apply even if no tax is ultimately due.

Who Must File Form 926

U.S. taxpayers—including citizens, residents, and domestic entities—are required to file Form 926 when transferring property to a foreign corporation. This includes domestic partners in a partnership. When a partnership makes a transfer, each domestic partner must report their proportionate share of the transfer on Form 926, ensuring that all taxpayers fulfill their IRS reporting obligations.

Penalties for Failure to File Form 926

Failure to file Form 926 without reasonable cause can result in significant penalties and increased IRS scrutiny. If a taxpayer fails to file Form 926, penalties may apply for failing to file as required.

Key penalties and consequences include:

• Base Penalty: 10% of the fair market value of the property transferred at the time of the transfer.

• Penalty Cap: The penalty is generally capped at $100,000 unless the failure was due to intentional disregard or willful neglect, in which case the penalty may exceed $100,000.

• Intentional Disregard: If the IRS determines the failure to file was intentional or due to willful neglect, the penalty is not capped and may exceed $100,000.

• Reasonable Cause: Penalties may be reduced or excused if the failure to file was not willful neglect but was for reasonable cause.

• Increased IRS Scrutiny: Noncompliance may trigger closer examination or audits of your tax filings.

• Extended Statute of Limitations: The statute of limitations for the IRS to assess tax remains open until the taxpayer files Form 926, and if filed, for three years thereafter.

• Additional Costs: Interest and other penalties may apply if the failure to file results in an underpayment of tax.

Relationship to Other International Tax Forms

Form 926 is often filed alongside other U.S. international reporting forms, as transfers of property to foreign corporations typically trigger additional disclosure requirements. Depending on the structure and ownership involved, U.S. persons may also need to file Form 5471 (Information Return of U.S. Persons With Respect to Certain Foreign Corporations), Form 8865 (for interests in foreign partnerships), or Form 8938 (Statement of Specified Foreign Financial Assets). In addition, U.S. individuals with foreign financial accounts may be required to file an FBAR (FinCEN Form 114). While Form 926 reports the transfer itself, these other forms focus on ongoing ownership, financial activity, and asset reporting. Filing Form 926 does not replace these requirements, and failure to coordinate all applicable filings can result in significant penalties and increased IRS scrutiny.

How We Can Help

Our international tax experts are here to guide you through every step of the process. We provide personalized support to help individuals and businesses comply with U.S. and international tax laws while staying informed about regulatory changes. Our firm assists clients in fulfilling their US tax obligations, including the preparation and filing of IRS Form 926, and helps calculate any tax owed resulting from transfers of property to foreign corporations. If you are unsure about specific reporting obligations, we recommend consulting the official IRS instructions for Form 926 for the latest guidelines.

With offices across the United States—including Miami, Coral Gables, Aventura, Fort Lauderdale, Orlando, Melbourne, and Tampa—and a presence in more than 29 countries, our CPAs and International Tax Advisors are well-positioned to assist with:

• International and U.S. tax planning

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Contact us today to learn how we can support your global tax and accounting needs.