Understanding the IRS Form 8621 Penalty
Form 8621 Penalty: PFIC (Passive Foreign Investment Reporting) to the IRS is handled by filing an annual Form 8621.The failure to file the form does not directly result in a monetary penalty. Rather, the tax return may stay open indefinitely.
Therefore, this may lead to significant fines and offshore penalties to the Taxpayer.
Unfiled Form 8621 Means an Incomplete Tax Return
Unless a person committed fraud and/or has more than $5000 of unreported foreign income or omitted more than 25% of gross income in the return, the statute of limitations the IRS to audit your tax return is three (3)years.
But, if you are required to report a form 8621 but failed to do so, that means your tax return is incomplete and the IRS can go back and audit you forever on that return (aka the Statute of Limitations does not expire).
8938 Penalties can stem from 8621 Penalties
The failure to file form 8621 can lead to penalties. The very technical reading of the form will reveal that the penalties can be issued through the FATCA form 8938. In other words, by failing to file form 8621 a person may still be penalized under the rules of form 8938, which is the FATCA Form.
Failure-to-File May Lead to a Criminal Investigation
The excess distribution calculation under form 8621 is comprehensive, and generally leads two tax/penalties which are significantly higher than the individual would paid under other investment schemes. Instead of performing the proper analysis, there are many unscrupulous CPAs and Attorneys who are offering to simply “book the income as capital gains or dividends.”
By agreeing to this intentional underreporting, you are knowingly underreporting your tax liability, which is a crime called tax fraud and/or tax evasion.
Golding & Golding: About our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.
Each case is led by a Board-Certified Tax Law Specialist with 20-years experience, and the entire matter (tax and legal) is handled by our team, in-house.
*Please beware of copycat tax and law firms misleading the public about their credentials and experience.
Less than 1% of Tax Attorneys Nationwide Are Certified Specialists
Sean M. Golding is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
Golding & Golding Recent Streamlined Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
How to Hire Experienced Offshore Counsel
Generally, experienced attorneys in this field will have the following credentials/experience:
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
Interested in Learning More?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
Golding & Golding specializes in Streamlined Domestic Offshore Procedures. Contact our firm today for assistance with getting compliant.