IRS Form 5471 (Schedule H) – Current Earnings and Profits

IRS Form 5471 (Schedule H) – U.S. taxpayers owning or controlling foreign corporations face strict IRS reporting requirements under sections 6038 and 6046. IRS Form 5471 Schedule H specifically reports the current earnings and profits (E&P) of a foreign corporation for U.S. tax purposes. This schedule plays a critical role in calculating subpart F income, GILTI inclusions, foreign tax credits, and distributions from CFCs.

This SEO-optimized guide draws directly from the official IRS Instructions for Form 5471 (Rev. December 2025) and Schedule H (Form 5471) (Rev. December 2021) — the current versions as of the 2026 filing season for 2025 tax years. It covers who must file, line-by-line instructions, key concepts, special rules, and compliance tips to help you avoid penalties up to $10,000+ per form.

Download the official Schedule H PDF here: https://www.irs.gov/pub/irs-pdf/f5471sh.pdf

What Is IRS Form 5471 Schedule H?

Schedule H (Current Earnings and Profits) computes and reports a foreign corporation’s (typically a CFC’s) current-year E&P under U.S. tax principles. E&P measures the corporation’s economic ability to pay dividends without returning capital — it differs from book income or taxable income under foreign rules.

The IRS requires this schedule because:

  • Current E&P determines the character of distributions (taxable dividend vs. return of capital or capital gain).
  • It supports GILTI, subpart F, and section 956 calculations.
  • It feeds into Schedule J (Accumulated E&P) and affects foreign tax credit limitations.

Important: Enter amounts on lines 1 through 5c in the foreign corporation’s functional currency. Translate only the final amount to U.S. dollars on line 5d using the average exchange rate (divide-by convention).

Who Must File Schedule H of Form 5471?

You must attach a separate Schedule H for each applicable foreign corporation if you file Form 5471 as a:

  • Category 4 filer — U.S. person with control (more than 50% vote or value) of a foreign corporation.
  • Category 5a filer — U.S. shareholder (10% or more) of a CFC (including unrelated section 958(a) shareholders).
  • Category 5b filer — Related constructive U.S. shareholder of certain foreign-controlled CFCs (but not required for foreign-controlled CFCs).
  • Category 5c filer — In specific cases involving Form 8858 for foreign disregarded entities (FDEs) or foreign branches (FBs).

Exceptions and notes:

  • Category 5b filers skip Schedule H for foreign-controlled CFCs.
  • If the foreign corporation owns an FDE or FB, include converted amounts from Form 8858 Schedule H.
  • Applicable corporations under section 59(k) may also need Schedule H-1.

Filers using alternative information under Rev. Proc. 2019-40 can simplify certain computations (mark Item F on Form 5471).

Purpose of Current Earnings and Profits (E&P) Reporting

The IRS defines current E&P per Regulations section 1.964-1. It starts with book income and applies U.S. GAAP and tax adjustments. E&P cannot be reduced for “blocked income” due to foreign currency or legal restrictions — it remains includible until actually distributable.

Schedule H breaks out E&P into:

  • General category
  • Passive category
  • Section 901(j) category (sanctioned countries)

This breakdown supports accurate income inclusions and foreign tax credits.

Step-by-Step: How to Complete Schedule H (Line-by-Line)?

Header Information:

  • Name and identifying number of the person filing Form 5471.
  • Name of foreign corporation, EIN (if any), and Reference ID number (from Form 5471 page 1).

Line 1: Current year net income or (loss) per foreign books of account
Enter in functional currency. If books follow U.S. GAAP in functional currency, use Schedule C, line 22. For DASTM users, use dollar GAAP income from Schedule C, line 22.

Line 2: Net adjustments (to conform to U.S. financial and tax accounting standards — Reg. §1.964-1(b) and (c))
Separate into Net Additions and Net Subtractions:

Line Adjustment Category Key Rules
2a Capital gains or losses U.S. rules
2b Depreciation and amortization Historical cost; section 167 (straight-line if ≥20% U.S.-source income)
2c Depletion Historical cost basis
2d Investment or incentive allowance As applicable
2e Charges to statutory reserves As applicable
2f Inventory adjustments Sections 471, 472, 263A
2g Income taxes Differences from book (include Schedule E foreign taxes; PTEP taxes are positive adjustments)
2h Foreign currency gains or losses Section 988; attach statement (may trigger Form 8886)
2i Other (attach statement) Blocked income, section 367(d) reductions, PTEP adjustments, etc.

Line 3: Total net additions
Sum of positive adjustments.

Line 4: Total net subtractions
Sum of negative adjustments.

Line 5a: Current earnings and profits
Line 1 + Line 3 – Line 4.

Line 5b: DASTM gain or (loss)
Only for corporations using the U.S. Dollar Approximate Separate Transactions Method (Reg. §1.985-3). Enter unrealized exchange gain/loss.

Line 5c: Combine lines 5a and 5b
Break out the total by income categories:

  • 5c(i) — General category
  • 5c(ii) — Passive category
  • 5c(iii)(A)–(D) — Section 901(j) (include two-letter country code for sanctioned countries from IRS.gov/CountryCodes)

Line 5d: Current E&P in U.S. dollars
Translate line 5c (functional currency) at the average exchange rate for the tax year (section 989(b)). Use divide-by convention (e.g., 1.2345 foreign units per USD), rounded to at least four decimal places. For DASTM users, enter the same amount as line 5c.

Line 5e: Exchange rate
Report the rate used on line 5d (divide-by convention). Also note any blocked income here.

Special Rules and Key Concepts

  • Functional Currency: Determined under section 985. Translate QBUs to the CFC’s functional currency if needed.
  • DASTM: Special translation for hyperinflationary currencies. Adjustments stay in U.S. dollars.
  • Blocked Income: Never reduce E&P for foreign restrictions (report on line 2i and 5e).
  • PTEP Taxes (line 2g): Foreign taxes on previously taxed E&P are positive adjustments (they reduce PTEP on Schedule J, line 6, not current E&P).
  • Section 367(d): Enter E&P reduction (matching U.S. transferor inclusion) as a subtraction on line 2i.
  • Form 8858 Integration: Add FDE/FB E&P (converted as needed).

Recent Updates for 2025–2026 Filing Season

  • Main Form 5471 revised December 2025.
  • Schedule H remains Rev. December 2021 (no form changes).
  • Instructions updated December 2025 with clearer guidance on PTEP adjustments, DASTM, and Form 8858.
  • OBBBA changes (effective post-Nov. 30, 2025) repeal certain deferral rules — attach statements for allocated foreign taxes per Notice 2025-72.
  • No major Schedule H-specific revisions, but enhanced cross-references to Schedule E (taxes) and Schedule J (PTEP).

Common Mistakes to Avoid

  • Using foreign GAAP without U.S. adjustments.
  • Reducing E&P for blocked income.
  • Incorrect exchange rate convention (must be divide-by).
  • Failing to break out line 5c by category.
  • Missing attached statements for line 2i or 2h.
  • Not filing a separate Schedule H per CFC or per applicable corporation.

Penalties: Failure to file can trigger $10,000 per form (plus additional for continued failure) and reduce foreign tax credits.

Resources and Official Downloads

Conclusion: Stay Compliant with Professional Help

Schedule H is a technical but essential part of Form 5471 compliance for anyone with foreign corporate interests. Accurate current E&P reporting prevents costly audits, inaccurate GILTI/subpart F inclusions, and lost foreign tax credits.

This guide is for informational purposes only and is not tax or legal advice. Tax rules are complex and fact-specific — consult a qualified international tax professional or CPA experienced in Form 5471 before filing. Always use the latest IRS forms and instructions for your specific tax year.

Need help? Search for “Form 5471 preparer near me” or contact a specialist in CFC reporting. File accurately and on time (generally with your 2025 return due in 2026) to protect your foreign tax benefits.

Last updated: February 2026. All information sourced directly from IRS.gov publications.