{"id":3769,"date":"2020-11-12T19:50:10","date_gmt":"2020-11-12T19:50:10","guid":{"rendered":"https:\/\/patellawoffices.com\/blog\/?p=3769"},"modified":"2020-11-12T20:04:11","modified_gmt":"2020-11-12T20:04:11","slug":"irs-revises-delinquent-international-information-return-submission-procedure-diirsp","status":"publish","type":"post","link":"https:\/\/patellawoffices.com\/blog\/planning-for-tax-minimization\/irs-revises-delinquent-international-information-return-submission-procedure-diirsp\/","title":{"rendered":"IRS Revises Delinquent International Information Return Submission Procedure (DIIRSP)"},"content":{"rendered":"\n

The IRS revised its Delinquent International Information Return Submission Procedure (DIIRSP)<\/a> last week. The DIIRSP provided an alternative 0% penalty voluntary disclosure process to taxpayers other than the Offshore Voluntary Disclosure Program or the Streamlined Filing Compliance Procedures to file delinquent international information returns. We have successfully filed hundreds of DIIRSP filings for clients since the DIIRSP program was started in 2014. The IRS revision is the first major revision since 2014.<\/p>\n\n\n\n

The DIIRSP has been used to file the below delinquent international-related information returns: <\/p>\n\n\n\n

\u2022 Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation<\/p>

\u2022 Form 3520, Annual Return to Report Transactions with Foreign Trusts & Receipt of Foreign Gifts<\/p>

\u2022 Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner<\/p>

\u2022 Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations<\/p>

\u2022 Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business<\/p>

\u2022 Form 8858, Information Return of U.S. Persons With Respect to Foreign Disregarded Entities<\/p>

\u2022 Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships<\/p>

\u2022 Form 8938, Statement of Specified Foreign Financial Assets<\/p><\/blockquote>\n\n\n\n

<\/p>\n\n\n\n

The revisions to the DIIRSP program are as follows\n(compared to the old guidelines):<\/p>\n\n\n\n

Taxpayers who <\/del>What <\/ins>do not need to use the IRS Criminal Investigation Voluntary Disclosure Practice or the Streamlined Filing Compliance Procedures to file delinquent or amended tax returns to report and pay additional tax, but who:<\/del>I do if I<\/ins> have not filed one or more required <\/del>a delinquent <\/ins>international information returns, <\/del>return? Taxpayers who <\/ins>have reasonable cause for not timely filing the<\/del>identified the need to file delinquent international<\/ins> information returns,<\/del> who<\/ins> are not under a civil examination or a criminal investigation by the IRS,<\/del> and have not already been contacted by the IRS about the delinquent information returns should file the delinquent information returns with a statement of all facts establishing reasonable cause for the failure to file. Describe your situation in the reasonable cause statement As part of the reasonable cause statement, taxpayers must also certify that any entity for which the information returns are being filed was not engaged in tax evasion. If a reasonable cause statement is not attached to each delinquent information return filed, penalties<\/del>through normal filing procedures. Penalties<\/ins> may be assessed in accordance with existing procedures. All delinquent international information returns other than Forms 3520 and 3520-A should be attached to an amended return and filed according to the applicable instructions for the amended return. All delinquent Forms 3520 and 3520-A should be filed according to the applicable instructions for those forms. A<\/del>Taxpayers may attach a<\/ins> reasonable cause statement must be attached <\/del>to each delinquent information return filed for which reasonable cause is being requested<\/del>asserted. During processing of the delinquent information return, penalties may be assessed without considering the attached reasonable cause statement. It may be necessary for taxpayers to respond to specific correspondence and submit or resubmit reasonable cause information<\/ins>. Information returns filed with amended returns will not be automatically subject to audit but may be selected for audit through the existing audit selection processes that are in place for any tax or information returns.<\/p>

<\/p>

The below DIIRSP FAQ linked information was also deleted (but the information is still present on the IRS website<\/a>):<\/p>

Q1.\u00a0\u00a0\u00a0\u00a0\u00a0 Are the Delinquent International Information Return Submission Procedures announced on June 18, 2014 different from the procedures described in 2012 OVDP FAQ 18 (in effect prior to July 1, 2014)?\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Yes. The IRS eliminated 2012 OVDP FAQ 18, which gave automatic penalty relief, but was only available to taxpayers who were fully tax compliant. The Delinquent International Information Return Submission Procedures clarify how taxpayers may file delinquent international information returns in cases where there was reasonable cause for the delinquency. Taxpayers who have unreported income or unpaid tax are not precluded from filing delinquent international information returns. Unlike the procedures described in OVDP FAQ 18, penalties may be imposed under the Delinquent International Information Return Submission Procedures if the Service does not accept the explanation of reasonable cause. The longstanding authorities regarding what constitutes reasonable cause continue to apply, and existing procedures concerning establishing reasonable cause, including requirements to provide a statement of facts made under the penalties of perjury, continue to apply. See, for example, Treas. Reg. \u00a7 1.6038-2(k)(3), Treas. Reg. \u00a7 1.6038A-4(b), and Treas. Reg. \u00a7 301.6679-1(a)(3).<\/p><\/blockquote>\n\n\n\n

<\/p>\n\n\n\n

I\nbelieve the significant revisions are:<\/p>\n\n\n\n

1.         Taxpayers who <\/del>do not need to use the IRS Criminal Investigation Voluntary Disclosure Practice or the Streamlined Filing Compliance Procedures to file delinquent or amended tax returns to report and pay additional tax,<\/del>  The nexus or connection between the DIIRSP and the IRS Voluntary Disclosure Practice or the Streamlined Filing Compliance Procedures has been severed. This is probably helpful because the prior connection was ambiguous and open to interpretation. Unfortunately, the new revised DIIRSP guidelines fail to provide comfort or needed certainty to taxpayers (see below).<\/p>\n\n\n\n

2.         \u201cDuring processing of the delinquent\ninformation return, penalties may be assessed without considering the attached\nreasonable cause statement.\u201d  Normal\nprocessing of some delinquent international\ninformation returns sometimes result in automatic penalty assessments.  This could mean that penalties could be\nassessed without consideration of reasonable cause.  <\/p>\n\n\n\n

3.         \u201cIt may be necessary for taxpayers to\nrespond to specific correspondence and submit or resubmit reasonable cause\ninformation.\u201d  We have successfully filed hundreds of DIIRSP filings for\nclients without any responsive correspondence from the IRS.   This\ncould mean that reasonable cause statements could be face more scrutiny.<\/p>\n\n\n\n

4.         \u201cTaxpayers may attach a reasonable cause statement\u201d.  Under the prior procedures, taxpayers were required (note the deletion of the \u201cmust be attached\u201d text above) to have a reasonable cause statement and taxpayers were required to certify that foreign entities were not engaged in tax evasion. Under the new procedures, taxpayers file through \u201cnormal filing procedures\u201d and taxpayers \u201cmay\u201d attach a reasonable cause statement. This could mean that penalties could be assessed without consideration of reasonable cause.  This could also mean (doubtfully) that penalties may not be assessed at all.  Again, unfortunately, the new revised DIIRSP guidelines fail to provide needed certainty to taxpayers.<\/p>\n\n\n\n

The new revisions are not helpful to taxpayers\nwho wish to come forward in good faith and comply and file delinquent international\ninformation returns.  Until more\nguidance is released by the IRS, in my opinion, the DIIRSP still exists and\nwill be used to help taxpayers (cautiously) file delinquent international information returns.  <\/p>\n","protected":false},"excerpt":{"rendered":"

The IRS revised its Delinquent International Information Return Submission Procedure (DIIRSP) last week. The DIIRSP provided an alternative 0% penalty voluntary disclosure process to taxpayers other than the Offshore Voluntary Disclosure Program or the Streamlined Filing Compliance Procedures to file delinquent international information returns. We have successfully filed hundreds of DIIRSP filings for clients since […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_daextam_enable_autolinks":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-3769","post","type-post","status-publish","format-standard","hentry","category-planning-for-tax-minimization"],"_links":{"self":[{"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/posts\/3769","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/comments?post=3769"}],"version-history":[{"count":4,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/posts\/3769\/revisions"}],"predecessor-version":[{"id":4002,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/posts\/3769\/revisions\/4002"}],"wp:attachment":[{"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/media?parent=3769"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/categories?post=3769"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/tags?post=3769"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}