How to Complete Form 5471 Schedule P: Previously Taxed Earnings and Profits

To complete Schedule P of Form 5471, you carry forward your prior-year closing PTEP balances into each of ten columns, add the year’s new subpart F and GILTI inclusions, subtract actual distributions, record any reclassifications between the two statutory layers, and then repeat the entire ledger in U.S. dollars in Part II.¹ Part I stays in the CFC’s functional currency; Part II converts everything to dollars using the exchange rate you enter at the top of the schedule.

What Schedule P Tracks

Schedule P is a running ledger of a U.S. shareholder’s Previously Taxed Earnings and Profits (PTEP) in a Controlled Foreign Corporation. The point of the ledger is to prevent a second layer of U.S. tax when the CFC eventually distributes earnings that were already picked up in a shareholder’s income under subpart F, GILTI, or the Section 965 transition tax. The schedule uses ten columns for ten distinct PTEP groups and a set of rows that track opening balance, current-year additions, distributions, reclassifications, and closing balance for each group.

Schedule P is required from Category 4 and Category 5 filers, and from Category 1 filers with respect to a Section 965 specified foreign corporation.² If you wholly own the CFC, your Schedule P should mirror column (e) of Schedule J, Part I. If you own less, the entries reflect only your proportionate share of the CFC’s PTEP.

Records to Gather Before You Start

Before filling in a single cell, pull these together:

Your prior-year Schedule P. The closing balances on that return become line 1a on this year’s schedule. If they don’t match, you’ll need to enter the difference on line 1b and attach a written explanation.
The CFC’s financial statements in its functional currency. The functional currency is the one identified on Form 5471, page 1, item 1h. Part I is entirely in that currency.
Current-year subpart F and GILTI computations. New Section 951(a)(1)(A) and Section 951A inclusions become additions in specific columns.
Distribution records showing what the CFC actually paid to you during the year.
Section 956 investment data. If the CFC held or acquired U.S. property, some earnings must be reclassified from the 959(c)(2) columns to the 959(c)(1) columns.
Foreign tax records tied to each PTEP group, since those feed your Form 1118 or Form 1116 calculations.

When the CFC’s fiscal year doesn’t match yours, use the CFC’s tax year that ends with or within your own tax year.

The Ten PTEP Columns

Columns (a) through (j) correspond directly to columns (e)(i) through (e)(x) on Schedule J. The first five columns hold earnings reclassified as investments in U.S. property — the Section 959(c)(1) layer. The last five hold original income inclusions — the Section 959(c)(2) layer. Placing a dollar in the wrong column is the most common error on this schedule, so work through the classification carefully before you enter anything.

Section 959(c)(1) Columns (Reclassified Amounts)

Column (a): Section 965(a) transition tax PTEP reclassified as investments in U.S. property.
Column (b): PTEP treated as such under Section 965(b)(4)(A), reclassified as investments in U.S. property.
Column (c): An aggregated group covering PTEP directly attributable to investments in U.S. property, subpart F inclusions reclassified as U.S. property investments, and inclusions under former Section 951(a)(1)(C) reclassified as investments in excess passive assets.
Column (d): Section 951A (GILTI) PTEP reclassified as investments in U.S. property.
Column (e): An aggregated group for hybrid dividend amounts under Section 245A(e)(2), Section 1248 amounts under Section 959(e), and Section 1248 amounts from a CFC’s sale of another foreign corporation’s stock, all reclassified as investments in U.S. property.¹

Section 959(c)(2) Columns (Original Inclusions)

Column (f): Section 965(a) transition tax inclusions.
Column (g): Amounts treated as PTEP under Section 965(b)(4)(A).
Column (h): Section 951A (GILTI) inclusions.
Column (i): Aggregated group for hybrid dividends under Section 245A(e)(2), Section 1248 amounts under Section 959(e), and Section 1248 amounts from a CFC’s sale of foreign corporation stock.
Column (j): Section 951(a)(1)(A) general subpart F inclusions not captured in columns (f) through (i).

The column order is not cosmetic. Under Section 959(c), distributions are sourced first from the 959(c)(1) layer (columns (a) through (e)), then the 959(c)(2) layer (columns (f) through (j)), and only then from earnings that have never been previously taxed.³

Filling In Part I Row by Row

Part I reports every amount in the CFC’s functional currency. Work each column top to bottom.

Line 1a — opening balance. Enter the prior-year closing balance for each column. This must agree with what you reported on last year’s Schedule P.

Line 1b — adjustment to opening balance. If a restatement, amended return, or correction produces a difference between last year’s closing balance and this year’s opening balance, enter the difference here and attach a written explanation. The IRS flags unexplained mismatches, so do not leave 1b blank when the numbers move.

Current-year addition rows. Post each new inclusion to the column that matches its statutory source. A GILTI inclusion under Section 951A goes on line 7 in column (h). A general subpart F inclusion under Section 951(a)(1)(A) goes in column (j). A Section 965(a) amount goes in column (f). Match the character of the inclusion to the column before you enter the number.

Line 8 — actual distributions. Subtract what the CFC actually distributed to you during the year. Allocate distributions first against the 959(c)(1) columns and then against the 959(c)(2) columns, following the statutory ordering.

Reclassification rows. Record any movement between columns (see below). Reclassifications net to zero across the schedule but change the column composition of your PTEP going forward.

Closing balance. The figure at the bottom of each column carries forward and becomes next year’s line 1a. Save this. If the CFC is later sold or liquidated, cumulative PTEP directly affects the taxable gain calculation, and reconstructing balances from scratch is painful.

When Earnings Move Between Columns

The most common reclassification happens when the CFC invests in U.S. property that triggers Section 956. Loans to a U.S. related party or the acquisition of certain U.S. assets are treated as deemed distributions. Earnings that had been sitting in a 959(c)(2) column move to the corresponding 959(c)(1) column.⁴

Which earnings move first is dictated by an ordering rule: Section 965(a) PTEP is sourced first, then Section 965(b) PTEP, and then the remaining 959(c)(2) groups on a last-in, first-out basis within each annual PTEP account, starting from the most recent account. The ordering matters because different PTEP groups carry different foreign tax credit characteristics. Reclassifying the wrong group first distorts credit calculations downstream.

Filling In Part II in U.S. Dollars

Part II mirrors Part I row for row and column for column, but every figure is stated in U.S. dollars. Section 989(b) generally points to the average exchange rate for the CFC’s tax year for translating earnings, while Section 986(a) governs the rate used for foreign taxes deemed paid.

Enter the exchange rate at the top of the schedule using the divide-by convention described in the Form 5471 general instructions: state how many units of functional currency equal one U.S. dollar. Reversing this convention is a frequent mistake and will throw off every figure in Part II. Check it before you translate.

Common Errors to Check Before Filing

Line 1a doesn’t tie to last year’s closing balance and line 1b is blank.
A GILTI inclusion posted to column (j) instead of column (h), or a general subpart F inclusion posted to column (h) instead of column (j).
Distributions allocated to 959(c)(2) columns while 959(c)(1) balances still exist.
Section 956 investments not reflected as reclassifications.
Exchange rate entered in the wrong direction, so Part II figures are off by orders of magnitude.
Ownership less than 100 percent but figures reported at the CFC level rather than proportionate to the shareholder.

Filing and Penalties

Schedule P is attached to Form 5471, which is attached to your primary federal income tax return. The whole package is due with your return, including extensions. Individuals filing Form 1040 use the April 15 due date; C corporations filing Form 1120 use the 15th day of the fourth month after the end of the corporation’s fiscal year.⁵ E-filing through IRS-approved software is standard, and computer-generated Form 5471 schedules that conform to the official layout can be filed without prior IRS approval.⁶

Failing to file Form 5471 with its required schedules carries a $10,000 penalty for each annual accounting period covered by the missed filing.⁷ If the failure continues more than 90 days after the IRS mails a notice, an additional $10,000 accrues for each 30-day period, capped at $50,000 per failure. Section 6038(c) also reduces the shareholder’s foreign tax credit by 10 percent, with further reductions if the failure continues past the 90-day notice period. Keep filed copies of every Schedule P, digital and physical; PTEP balances carry forward indefinitely, and the IRS can question them years later.

1
Internal Revenue Service. Instructions for Form 5471 (Rev. December 2025)
2
Internal Revenue Service. Instructions for Form 5471 (12/2025) – Section: Category 1 Filers
3
Office of the Law Revision Counsel. 26 U.S. Code 959 – Exclusion From Gross Income of Previously Taxed Earnings and Profits
4
Internal Revenue Service. Previously Taxed Earnings and Profits Accounts (Notice 2019-01)
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Internal Revenue Service. Publication 509, Tax Calendars
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Internal Revenue Service. Instructions for Form 5471 (12/2025) – Section: Computer-Generated Form 5471 and Schedules
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Office of the Law Revision Counsel. 26 U.S. Code 6038 – Information Reporting With Respect to Certain Foreign Corporations and Partnerships