IRS No Longer Able to Impose Penalties for Late Foreign Information Forms

penalties (1)

IRS No Longer Able to Impose Penalties for Late Foreign Information Forms

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.

The tax laws are very complex. Our short blog articles cannot cover in full all the nuances of the rules. Only qualified tax specialists can identify the opportunities and risks in your specific facts due to their expertise. We encourage you to find such help, rather than trying to figure it all out on your own. Consider giving this marketplace a try by posting your project and signing up here.

If you are a licensed tax professional interested in helping others either part or full-time, or ad hoc, come on in! Happy to have you. Our marketplace offers various tools for client communication, including billing, task management, and compliance calendars. You can also quickly connect to knowledgeable colleagues who can complement your services with the ones you do not provide. Register here.

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1 Comment

[…] Farhy v. Commissioner Case Paves the Way for Taxpayers to Reclaim Penalty FeesThe 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 forms (which can result in penalties as high as $10,000 and $25,000 per form). The government needs a court order to impose civil penalties, which are assessed based on all relevant facts and circumstances. If the IRS has assessed such a penalty on you, you can contact them to claim back the money. In Farhy v. Commissioner, the court reversed penalties imposed on a taxpayer who wilfully failed 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.The tax laws are very complex. Our short blog articles cannot cover in full all the nuances of the rules. Only qualified tax specialists can identify the opportunities and risks in your specific facts due to their expertise. We encourage you to find such help, rather than trying to figure it all out on your own. Consider giving this marketplace a try by posting your project and signing up here.If you are a licensed tax professional interested in helping others either part or full-time, or ad hoc, come on in! Happy to have you. Our marketplace offers various tools for client communication, including billing, task management, and compliance calendars. You can also quickly connect to knowledgeable colleagues who can complement your services with the ones you do not provide. Register here.  […]

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