I.R.C. § 6038 requires U.S. taxpayers to file Form 5471 (Information Return of U.S. Persons With Respect to Certain Foreign Corporations) with their tax returns. The reporting requirements of § 6038, as well as § 6046, require Form 5471 to be filed by certain U.S. persons who are officers, directors, or shareholders in certain foreign corporations.
A person required to file Form 5471 who fails to file the form, or files a late or incomplete form, subjects himself to steep monetary penalties. Also, the statute of limitations on assessment for the taxpayer’s entire return remains open until three years after the required information is submitted to the IRS.
The IRS imposes a $10,000 penalty for each annual accounting period of each foreign corporation for failure to furnish the required information within the prescribed time period. If a taxpayer does not file the information within 90 days after the IRS has mailed a notice of the failure to the U.S. person, an additional $10,000 penalty per foreign corporation is charged for each 30-day period, during which the failure continues after the 90-day period has expired. This additional penalty is limited to a maximum of $50,000 for each failure to file.
Any taxpayer who fails to file or report all of the information requested by I.R.C. § 6046 is subject to a $10,000 penalty for each failure for each reportable transaction. If the failure continues for more than 90 days after the date the IRS mails its notice of the failure, an additional $10,000 penalty applies for each 30-day period during which the failure continues after the expiration of the 90-day period. This additional penalty is also limited to a maximum of $50,000.
I.R.C. § 6038(a) requires the reporting of information regarding certain foreign corporations (Form 5471) and describes the information that must be reported on this form. I.R.C. § 6038(b) (1) provides for a monetary penalty of $10,000 for each Form 5471 that is filed after the due date of the income tax return (including extensions) or which does not include the complete and accurate information described in § 6038(a).
Neither the Code nor the regulations provide rules to determine when a taxpayer has substantially complied with the Form 5471 filing requirements. Any taxpayer required to file Form 5471 should enlist the assistance and guidance of an experienced and knowledgeable tax professional. THE PENALTIES FOR FAILING TO FILE FORM 5471 ARE STEEP! If you have questions about the timely or delinquent filing of a Form 5471, contact THE TAX EXPERTS at the Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation, call 212-490-0704.
