Key Facts You Must Know About Form 5472 Penalties

Form 5472: IRS Penalty Waiver, Reasonable Cause & Abatement

IRS Form 5472 Penalties and Enforcement

There are various international reporting forms U.S. persons may be required to file. In addition, when a person is a foreign person with certain ownership of – corporation or U.S. corporations owned by foreign persons, there is also a form required.  The Form is IRS Form 5472, and the failure to file the form may result in significant fines and offshore penalties. The Internal Revenue Service has also developed various Penalty Waivers, Reasonable Cause options & Abatement Unlike the majority of forms an individual files with internal revolution’s in order to get into compliance with international and offshore related matters, form 5472 is a bit different.

How Much are Form 5472 Penalties?

Form 5472 penalties are tough.

• • • “A penalty of $25,000 will be assessed on any reporting corporation that fails to file Form 5472 when due and in the manner prescribed.

    • The penalty also applies for failure to maintain records as required by Regulations section 1.6038A-3.”

Substantially Incomplete Form

• • • “Note. Filing a substantially incomplete Form 5472 constitutes a failure to file Form 5472.”

In other words, when it is time for you file Form 5471 it is important that you perform a diligent and reasonable search for the information necessary, and that you complete the form properly. That does not mean that form has to be perfect but if it appears to the IRS that it is substantially incomplete, it may result in the IRS rejecting the form and issuing the penalties indicated above.

Consolidated Group

If a consolidated group is filing, it is important to note that each member of the group must file a separate Form 5472 (if required), and that each member of the group can get hit with a separate $25,000 penalty.

• • • “Each member of a group of corporations filing a consolidated information return is a separate reporting corporation subject to a separate $25,000 penalty and each member is jointly and severally liable.”

Moreover, there’s joint and several liability which means if the group was penalized a certain amount, that each member of the group is joint and severally liable for the total penalty of the group.

Failure More than 90 Days

If you continue non-compliance and more than 90 days passes, the IRS can turn around and issue an additional second penalty in the amount of $25,000.

• • • “If the failure continues for more than 90 days after notification by the IRS, an additional penalty of $25,000 will apply. “

Criminal Penalties

It is important to note, that it is not common for the IRS to pursue criminal penalties regarding form 5472, unless the facts are egregious and would make the IRS to believe a true crime has been committed.

Still, the IRS reserves the right to pursue criminal penalties.

• • • “Criminal penalties under sections 7203, 7206, and 7207 may also apply for failure to submit information or for filing false or fraudulent information.”

Late Filing Penalties May be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs Prior Year Non-Compliance

Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.