The Unknown Quantity

Informational IRS Reports on Foreign Corporations, Partnerships and Trusts

The article below makes a great point in regards to the trigger events that begin the clock for the Assessment Statute Expiration Date (ASED), normally three years. In regards to informational reports on foreign corporations (IRS Form 5471, 5472), partnerships (IRS Form 8865), and trusts (3520, 3520-A), these informational reports or returns must be filed to start the ASED clock. Additionally, as the article points out, failure to file can invoke extreme, draconian penalties.

  • 3520 Penalty for Failure to File – The greater of $10,000 or 35 percent of the gross reportable amount, except for returns reporting gifts, where the penalty is five percent of the gift per month, up to a maximum penalty of 25 percent of the gift.
  • 3520-A Penalty for Failure to File – The greater of $10,000 or 5 percent of the gross value of trust assets determined to be owned by the United States person.
  • 5471 Penalty for Failure to File – $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.
  • 5472 Penalty for Failure to File – $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency.
  • 926 (Return by a U.S. Transferor of Property to a Foreign Corporation) Penalty for Failure to File – ten percent of the value of the property transferred, up to a maximum of $100,000 per return, with no limit if the failure to report the transfer was intentional.
  • 8865 Penalty for Failure to File – $10,000 for failure to file each return, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return, and ten percent of the value of any transferred property that is not reported, subject to a $100,000 limit.

For taxpayers that find themselves in delinquency with any of these items, you should consult a federally authorized tax practitioner on options for compliance. These options are as follows: (1) Offshore Voluntary Disclosure (2) Streamline Filing or (3) Delinquent Informational Report Procedure. The path to compliance is based on facts and circumstances that should be determined under the attorney-client privilege legal analysis. This is not a do it yourself situation.

About Five Stone Tax Advisers

Five Stone Tax Advisers has years of experience negotiating directly with the IRS to get the best possible outcome for you. Our International Tax Advisory and Compliance unit has a team of tax attorneys, certified public accountants and enrolled agents that form a single sourced point of contact that will provide services for all the legal, compliance and financial reconstruction aspects of offshore account cases.

FOUND THIS USEFUL ? SHARE WITH
Five Stone Tax
by Five Stone Tax

Five Stone Tax is America’s trusted tax adviser, offering full-service tax solutions with the goal of making sure all of our clients pay the lowest amount of taxes legally possible. As the most effective tax representation company in America, our team consists of the best Tax Attorneys, Enrolled Agents, case managers, and administrators in the industry.

Subscribe to Our Blog!

Don’t miss out our filing tips & deadlines, global tax news and customer case studies

Give it a try—it only takes a click to unsubscribe.