Delinquent or unfiled IRS Form 5471

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 enforcement of the reporting of foreign (non-U.S.) financial accounts and their related incomes. Beware: As of January 1, 2009, the IRS began to automatically assert the $10,000 penalty on late filed Forms 5471.   Due to the risk of audit and high penalties, we strongly recommend that individuals considering becoming Form 5471 complaint and contact our law office prior to curing the noncompliance. What you should do if you have unfiled or incorrect Forms 5471?  Here are a few resources to help you begin to understand this issue:    
  1. IRS' new Streamlined Filing Compliance Procedures:  The Internal Revenue Service has recently updated the certification forms required to be filed by taxpayers seeking to avail themselves of the Streamlined Filing Compliance Procedures with with 0% or 5% penalty.  The streamlined program was significantly expanded by the IRS in June 2014 in order to provide a meaningful way for non-willful taxpayers to remedy past non-compliance with respect to Form 5471. Read this article.
  2. Delinquent Information Return Submission ProceduresThe IRS will allow U.S. taxpayers to file delinquent information returns without imposing the $10,000 late filing penalty for Forms 5471 if reasonable cause is persuasively demonstrated with 0% penalty. To qualify, the U.S. taxpayer cannot be under a current civil or criminal examination by the IRS. This option is not available if the IRS has contacted the U.S. taxpayer regarding the delinquent information returns prior to being submitted. The delinquent information returns should be filed with an amended U.S. federal tax return including a persuasive compelling reasonable cause statement.  Contact our office to discuss this good option.
  3. Offshore Voluntary Disclosure Program (OVDP)The IRS OVDP is designed for U.S. individual taxpayers with foreign reporting delinquencies that involve willful or intentional conduct. The OVDP penalty is 27.5% of the highest year’s aggregate balance or value of unreported foreign financial assets. If the U.S. government has identified the foreign financial institution where the unreported foreign accounts are maintained on a publicized list then the OVDP penalty is increased substantially. A significant advantage of the OVDP is that it protects U.S. individual taxpayers from criminal prosecution for willful Form 5471 delinquencies which otherwise could result in imprisonment.
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