U.S. TAX GUIDE IN CHILE

Why do US expats need to know about Form 8858?

If you have rental income from a property located outside the United States, you need to report the income on your 1040 and also Form 8858.

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The same goes for self-employment earned outside the US, include that income on your 1040 and also Form 8858.

Form 8858 is required when you’re managing a foreign disregarded entity (FDE) or a foreign branch. These sound like complicated terms, but they just mean you have a business or property abroad that isn’t treated as a separate entity for tax purposes. 

In simple terms, the income from that business or rental property is taxed as part of your own income in the US, rather than as a separate entity.

When do I need to file Form 8858?

You need to file Form 8858 if you have:

  • A foreign disregarded entity—which is a business that doesn’t exist separately from its owner for tax purposes. If you run a business in Chile as a sole proprietor or single-member LLC, this likely applies to you.
  • A foreign branch, such as a rental property in Chile. If you’re earning income from property, even if you don’t consider it a formal “business,” the IRS still requires you to report this using Form 8858.

The form is filed alongside your regular US tax return, usually through Form 1040 and Schedule C. It provides detailed information about your foreign entity or branch, including financial statements, income, and expenses.

Why should I file Form 8858?

Not filing Form 8858—or filing it late—can lead to significant penalties. The IRS imposes a US$10,000 fine for failing to submit this form on time. 

If you continue to delay, additional penalties can be added. 

You might think that just reporting your income on Schedule C is enough, but if you have a disregarded entity or foreign branch in Chile, the IRS expects this form as well.

What happens if I missed filing Form 8858?

If you realize you’ve missed filing Form 8858 in previous years, don’t panic just yet. There’s a way to correct the situation: the Streamlined Foreign Offshore Procedure. 

This program allows expats who have missed forms like 8858 to get back into compliance without facing penalties.

How does the Streamlined Foreign Offshore Procedure help?

The Streamlined Foreign Offshore Procedure is an amnesty program offered by the IRS to help expats get back on track with their US tax filings. If you’ve filed your regular US tax returns but missed forms like 8858, this program allows you to amend those returns and include the missing forms.

Here’s how it works:

  1. File three years of amended returns—including Form 8858 if necessary.
  2. File six years of FBARs—the Foreign Bank Account Report, which is required if you have foreign bank accounts exceeding US$10,000 in total.
  3. Submit an offshore certification explaining why you missed the filings and affirming that you’ll comply going forward.


By doing this, the IRS forgives any late filing penalties, giving you a clean slate moving forward.

What does Form 8858 require?

Form 8858 asks for detailed information about your foreign disregarded entity or branch, including:

  • Basic entity information, like the name, country, and identification number.
  • Financial details, such as income statements and balance sheets.
  • Income and expenses for the entity or branch.


Even though it adds extra paperwork, filing Form 8858 ensures that you’re fully compliant with US tax laws. And given the steep penalties for not filing, it’s worth the effort to include this form if required.

Is this only for business owners?

Not at all. Even if you don’t consider yourself a traditional business owner, owning foreign rental property in Chile can trigger the requirement to file Form 8858. 

The IRS views rental income from property as business income, meaning the property is considered a foreign branch. So, if you’re earning rental income in Chile, make sure to file this form to avoid any surprises from the IRS.

If you’ve already missed a filing, don’t worry—the Streamlined Procedure can help you get back on track without facing major penalties.