Complicated Form 5471 filing requirements simplified for dormant foreign corporations

- By : P. Patel

  The reporting requirements for IRS Form 5471 are complex, including ‘category of filer’ and required schedules.  However, very few taxpayers know that there are special simplified filing rules for a foreign dormant corporation. IRS Revenue Procedure 92-70, specifies specific, conditions that must all be met in order for a foreign corporation to be considered

Delinquent or unfiled IRS Form 5471

- By : P. Patel

IRS Form 5471 is a form required to be filed by US owners of foreign corporations. The form and filing requirements are complicated, and the penalties and consequences for non-filing are extreme. A taxpayer who has not been already contacted by the government should immediately take steps to cure the noncompliance because the IRS has increased

Substantially Completed Form 5471 is Required to be Filed

- By : P. Patel

IRS has recently released a new International Practice Unit (IPU) providing guidance to its examiners on the monetary penalties applicable if certain categories of U.S. shareholders fail to comply with the reporting requirements on Form 5471 (Information Return of U.S. Persons With Respect To Certain Foreign Corporations). Referencing prior rulings and other guidance, the IPU

Large Penalties: Form 5471 Information Return of U.S. Persons With Respect to Certain Foreign Corporations

- By : P. Patel

Internal Revenue Code (I.R.C.) Section (§) 6038(a) and Treasury Regulation § 1.6038-2(a) require a U.S. citizen or resident alien to furnish information with respect to certain foreign business entities. This information includes any foreign partnership/corporation entity data, stock ownership data, financial statements, and intercompany transactions with related persons. The Form 5471, Information Return of U.S.

New Post-OVDP IRS Voluntary Disclosure Procedures Announced

- By : P. Patel

The Internal Revenue Service released new updated procedures for voluntary disclosures since the old Offshore Voluntary Disclosure Program (OVDP) closed on September 28, 2018. Last week, IRS deputy commissioner Kirsten Wielobob issued Interim Guidance Memo LB&I-09-1118-014, Updated Voluntary Disclosure Practice (PDF) on November 20, 2018 to supplement procedures regarding the voluntary disclosure practice. The updated procedures apply

2018 ABA COMMENTS ON THE OFFSHORE VOLUNTARY DISCLOSURE PROGRAM AND THE STREAMLINED PROGRAMS

- By : P. Patel

We are members of the American Bar Association Section of Taxation, which on May 2, 2018 submitted comments to the IRS on the IRS Offshore Voluntary Disclosure Program (“OVDP”), the Streamlined Domestic Offshore Program (“SDOP”), and the Streamlined Foreign Offshore Program (“SFOP”). We co-authored the ABA comments. The comments are very constructive. It is hoped that the

New IRS practice unit: “Substantial compliance” doctrine, international information return penalties

- By : P. Patel

The IRS Large Business and International (LB&I) division last week publicly released a “practice unit” that addresses what the term “substantially complete” means with reference to international information return penalties, particularly Form 5471. The IRS recently released a new International Practice Unit (“IPU”) on failures to file form 5471.  IPUs are meant to act as a

The Misunderstood Extension of time to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR)

- By : P. Patel

The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) announced an automatic six-month extension for taxpayers required to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR). Taxpayers now have until October 16 to submit their FBARs for 2016 without being subject to penalties. There is no specific FBAR extension document or form

New IRS IRM with Updated Streamlined Filing Compliance procedures

- By : P. Patel

The Internal Revenue Manual (IRM) is essentially the IRS employee handbook on how to carry out all administrative and procedural matters, such as how to audit specific tax returns, collect taxes, process returns, or assess penalties. The IRM may be the most important tool provided to IRS employees as it contains vital information to help

Protective Filing of Information Returns

- By : P. Patel

There is an increased focus by the Internal Revenue Service (IRS) on offshore activities.  There are tax return and information return filing obligations that may be associated with foreign income, assets and transactions. Many taxpayers (including non-U.S. persons who might not otherwise consider themselves U.S. taxpayers) should resolve any reasonable doubt they might have in

Beware of Overlooked Common Overseas Tax Forms

- By : P. Patel

Practically all Americans with any income anywhere in the universe are required to file a U.S. return. Below are some of the most common tax forms that are generally part of an expat-American tax return. Common Overseas Tax Forms Form 2555 & 2555- EZ: These forms are for calculating your Foreign Earned Income Exclusion (FEIE) and to calculate

Caution: Foreign Businesses Require Additional Reporting

- By : P. Patel

If you are an American entrepreneur with a foreign business interest or operating abroad then you should be aware of U.S. tax reporting obligations on non-U.S. businesses. If a U.S. taxable person (U.S. citizens or U.S. green card holders) owns a controlling stake in a foreign business, that business is likely a Controlled Foreign Corporation

Below is a List of Common Forms Applicable in Compliance Requirements for U.S. Citizens and Residents with Foreign Assets, Trusts, and Entities

- By : P. Patel

Foreign Financial Assets FinCEN Form 105 Report of International Transportation of Currency or Monetary Instruments FinCEN Form 114 Report of Foreign Bank and Financial Accounts (FBAR) Form 8938 Statement of Specified Foreign Financial Assets Foreign Trusts Reporting Forms Form 3520-A Annual Information Return of Foreign Trust With a U.S. Owner Form 3520 Annual Return to

Taxpayers’ Evidence of Non-Willfulness or Willfulness Factors

- By : P. Patel

We have come across the below 3 questions numerous times with our clients. What kind of evidence is relevant to demonstrate “non-willfulness” for purposes of the SDOP and the SFOP when the definition of non-willful conduct ranges from negligent conduct to conduct resulting from a good faith misunderstanding of the law? How does a taxpayer

A solution in a tough tax season: the IRS Streamlined Offshore Procedures

- By : P. Patel

In the midst of tough tax season, many U.S taxpayers are unfortunately surprised to discover that they have a U.S. tax reporting obligation on financial accounts or assets held overseas. Once they discover their tax and reporting obligation, there are a number of programs through which they can become compliant. One option, if the taxpayers

IRS Releases FAQs for the Delinquent International Information Return Submission Procedures

- By : P. Patel

The IRS recently released frequently asked questions for the Delinquent International Information Return Submission Procedures (available here). The IRS now states that these procedures are available to taxpayers even if they have unreported income. See below quote: The Delinquent International Information Return Submission Procedures clarify how taxpayers may file delinquent international information returns in cases where

New IRS internal procedure guidance for Streamline Filing Compliance Procedures

- By : P. Patel

The IRS has published new IRS internal procedure guidance with IRM changes dated 8/13/14.  The guidance is numbered WI-21-0814-1244 and titled “Streamline Filing Compliance Procedures for Accounts Management International IMF”.  The guidance is here. The general legal rule is that IRM provisions are for the IRS’s internal guidance and confer no rights on the taxpayer. There

New IRS Disclosure Program Announced for Non-Resident Taxpayers: Streamlined Foreign Offshore Procedures

- By : P. Patel

The United States’ IRS is moving to entice more taxpayers to disclose their unreported assets and income just weeks before implementation of the U.S. Foreign Account Tax Compliance Act (FATCA).  The IRS has announced a Streamlined Foreign Offshore Procedures (SFOP), which will significantly alter all future voluntary disclosures. The SFOP is a game changer for

New Streamlined Domestic Offshore Procedures (SDOP) is a Game Changer

- By : P. Patel

The IRS has announced a Streamlined Domestic Offshore Procedures (SDOP), which will significantly alter all future voluntary disclosures. The SDOP is a game changer for residents and non-resident (who would use the Streamlined Foreign Offshore Procedures (SFOP)) taxpayers alike. The SDOP liberalizes the old rules and rewards non-willful taxpayers to disclose offshore assets with minimal

Method to Cure Delinquent or Incomplete Foreign Information Returns Without Penalties

- By : P. Patel

Last year, the IRS announced its third offshore voluntary disclosure initiative. Like the earlier initiatives, the 2012 OVDP is designed to encourage taxpayers with unreported offshore accounts and assets to voluntarily disclose them to the IRS. The 2012 OVDP is available to individuals and entities, including corporations, partnerships and trusts. Unlike the previous initiatives, this

Instructions for New Streamlined Filing Compliance Procedures for Non-Resident, Non-Filer U.S. Taxpayers

- By : P. Patel

The IRS has announced its new New Filing Compliance Procedures for Non-Resident U.S. Taxpayers that taxpayers presenting “low compliance risk” should file delinquent tax returns, including delinquent information returns, for the past three years; and delinquent FBARs for the past six years.  This seems to be a new EZPASS or express OVDPwithout any penalties. Is this a new

Full Analysis of Updated 2012 OVDP Program

- By : P. Patel

The Internal Revenue Service announced on June 26, 2012 (IR-2012-64) that it is tightening eligibility requirements for the open-ended offshore voluntary disclosure program (2012 OVDP) that it announced in January 2012 for taxpayers with unreported income or assets, generally in the form of off-shore bank accounts. The IRS also added details to the compliance initiative

Checklist of tax forms for taxpayers with foreign assets

- By : P. Patel

This year, there is at least one new tax form for US taxpayers to be aware of: Form 8938: Statement of Foreign Financial Accounts. Since there are a number of sometimes obscure U.S. tax forms that U.S. taxpayers are required to file, we have put together the following checklist to help you keep track of

More Tax Complexity: New Form 8938

- By : P. Patel

In recent years, the IRS and US Treasury have stepped up their efforts toward tracking down delinquent tax payers and enforcing payment of overdue taxes. One of these initiatives has been labeled the “Foreign Account Tax Compliance Act”. FATCA is part of the Hiring Incentives to Restore Employment (HIRE) Act, which was designed to enforce

The Risks of “Opting Out” of OVDI

- By : P. Patel

Under the 2011 OVDI voluntary disclosure program, the penalties for failing to timely file Foreign Bank Account Reports, (FBAR’s) and the penalties for failure to file information returns (such as Controlled Foreign Corporation tax returns) were combined into a single miscellaneous civil penalty. The penalty combined the FBAR penalty which is established under the Bank

New Extended Deadline for OVDI

- By : P. Patel

Last week, late on Friday afternoon, August 26, 2011, the IRS issued a statement indicating that the due date for filing 2011 Offshore Voluntary Disclosure Initiative (OVDI) requests has been extended until September 9, 2011, due to the potential impact of Hurricane Irene. Prior to this statement, the deadline was set to occur on August

Foreign bank account reports (FBARs) and the 2011 Offshore Voluntary Disclosure Initiative (2011 OVDI)

- By : P. Patel

Foreign bank account reports (FBARs) for 2010 are due on June 30, 2011 (and no extension is available). Recent guidance provides insight into who is required to file an FBAR and what is considered to be a “foreign financial account” that must be reported on an FBAR. In addition, the IRS recently announced a new

2011 Offshore Voluntary Disclosure Initiative (OVDI)

- By : P. Patel

On February 8, 2011, the IRS announced the 2011 Offshore Voluntary Disclosure Initiative (OVDI), designed to bring offshore money back into the U.S. tax system and help people with undisclosed income from hidden offshore accounts get current with their taxes. The OVDI covers calendar years 2003 to 2010, and is available through August 31, 2011