Farhy v. Commissioner Case Paves the Way for Taxpayers to Reclaim Penalties Fees
Under new regulations, the IRS can no longer administratively assess penalties for not filing or being late with foreign information forms, such as Forms 5471, 5472, 8865, 8858, and similar form, which can result in penalties as high as $10,000 and $25,000 per form. Court order needed for imposing civil penalties based on relevant facts and circumstances. If the IRS has imposed a penalty on you, you can contact them to claim back the money. The recent Farhy v. Commissioner case shows that taxpayers may be able to challenge and reverse penalties for wilful failure to file Forms 5471 for several years.
Note: It is important to diligently file these forms, even if they are minor to the calculation of the tax liability, for several reasons. It is possible for someone to challenge this favourable result on appeal in the future, and the IRS may choose not to agree with the decision and continue to assess penalties. Additionally, the IRS may still file for civil fines if the failure to comply is intentional. However, if a taxpayer is just one day late with a return and receives $100,000 in various fines for foreign forms, there is now an authority to contest such an assessment.
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