August 30th, 2022 – New York, United States
IRS Waives Penalties for Some International and Late Returns
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The IRS is offering new relief for certain penalties, including international information return penalties for tax returns for 2019 and 2020. But the deadline to take advantage is just days.
The IRS is offering pandemic-related relief for certain penalties, including those for international information returns (IIRs), with respect to tax returns for 2019 and 2020. The catch: The returns must be filed no later than this Sept. 30.
The IRS Notice, “Penalty Relief for Certain Taxpayers Filing Returns for Taxable Years 2019 and 2020,” also provides relief from certain information return penalties regarding taxable year 2019 returns that were filed on or before Aug. 1, 2020, and taxable year 2020 returns that were filed on or before Aug. 1, 2021.
Plus penalties for certain late-filed returns for S corporations and partnerships that failed to report required information on 2019 and 2020 returns can be abated. Eligible penalties will be automatically waived or abated if they were previously assessed.
Aside from laying out the short window to take advantage of this relief, the IRS Notice does not specify when refunds will be issued.
The relief seems an unprecedented switch for the IRS, which has pursued late-filing penalties aggressively for required IIRs related to foreign corporations and foreign trusts and foreign-owned U.S. corporations. The agency often, for example, automatically issued penalties for late filings regardless of the taxpayer’s explanation or whether the taxpayer used one of the IRS’ programs to resolve the issue.
“The [following] penalties do not apply if the taxpayer can show that the failure to timely file the return or to furnish the required information or to provide the required notice, as applicable, is due to reasonable cause,” the new notice reads.
The abated penalties cover failure to file and inadequate information; “systematically assessed” penalties when a certain IIRs is attached to a late-filed U.S corporate return or U.S. partnership return; and penalties assessed by the IRS “campus assessment program” for the late filing of Forms 3520 and 3520-A.
The penalties specifically apply to:
· IRC Sec 6651(a)(1), failure to file;
· Sec. 6038, failure to furnish certain information with respect to a controlled foreign corporation or a controlled foreign partnership;
· Sec. 6038A(d), on a “25-percent foreign-owned” domestic corporation or wholly foreign-owned domestic disregarded entity for failure to furnish certain information or failure to maintain certain records;
· Sec. 6038C(c), on a foreign corporation engaged in a U.S. trade or business for failure to furnish certain information or failure to maintain certain records;
· Sec. 6039F(c), for failure to furnish certain information with respect to the receipt of large gifts or bequests from foreign persons;
· Sec. 6677, for failure to file a notice or return required by Sec. 6048 with respect to transactions with, or ownership of, a foreign trust;
· Sec. 6698(a)(1), for failure of any partnership to file the return required under Sec. 6031, and Sec. 6698(a)(2), for filing a return that fails to show the information required under Sec. 6031;
· Sec. 6699(a)(1), for failure of any S corporation to file a return required under Sec. 6037, and Sec. 6699(a)(2), for filing a return that fails to show information required under Sec. 6037.
· Sec. 6721(a)(2)(A), for failure to file an information return (as defined in section 6724(d)(1)) on or before the required filing date.
Penalty relief is unavailable in the case of a fraudulent return or when penalties are part of an accepted offer in compromise or a closing agreement, or where the penalties were determined by a court. Penalties not in the relief notice are ineligible. Also, not all international information forms seem to fall within this penalty abatement.
You may need to do nothing to qualify – or you may have to take specific affirmative steps between now and Sept. 30.
If you need our help before the deadline, contact us ASAP – the window of opportunity now closes in less than a month.
About the Author
Alicea Castellanos is the CEO and Founder of Global Taxes LLC. Alicea provides personalized U.S. tax advisory and compliance services to high net worth families and their advisors. Alicea has more than 17 years of experience. Prior to forming Global Taxes, Alicea founded and oversaw operations at a boutique tax firm, worked at a prestigious global law firm and CPA firm. Alicea specializes in U.S. tax planning and compliance for non-U.S. families with global wealth and asset protection structures which include non-U.S. trusts, estates and foundations that have a U.S. connection.
Alicea also specializes in foreign investment in U.S. real estate property, and other U.S. assets, pre-immigration tax planning, U.S. expatriation matters, U.S. persons in receipt of foreign gifts and inheritances, foreign accounts and assets compliance, offshore voluntary disclosures/tax amnesties, FATCA registration, and foreign companies wanting to do business in the U.S. Alicea is fluent in Spanish and has a working knowledge of Portuguese.
Alicea is an active member of the Society of Trusts & Estates Practitioners (STEP), the New York State Society of Certified Public Accountants (NYSSCPAs), the American Institute of Certified Public Accountants (AICPA), the International Fiscal Association (IFA), a member of Clarkson Hyde Global, a world-wide association of accountants, auditors, tax specialists and business advisors and the International Advisory Experts (IAE).
Distinctly, in 2020, Alicea was awarded with a prestigious NYSSCPA Forty Under 40 Award. She was selected as someone that has notable skills and is visibly making a difference in the accounting profession. Alicea has also been recognized as a leading expert for Tax advice and she has been invited to join Advisory Excellence, as their exclusively recommended tax expert in the USA.
In 2021 and 2022, Alicea was the Gold and Silver Winner, respectively, of Citywealth’s Powerwomen Awards in the category USA – Woman of the Year – Business Growth (Boutique). Furthermore, Alicea is currently listed in the Global Elite Directory 2022, which is an annual exclusive directory of the world’s elite lawyers and outstanding wealth advisors advising ultra-high net-worth clients.
Please note: This content is intended for informational purposes only and is not a replacement for professional accounting or tax preparatory services. Consult your own accounting, tax, and legal professionals for advice related to your individual situation. Any copy or reproduction of our presentation is expressly prohibited. Any names or situations have been made up for illustrative purposes — any similarities found in real life are purely coincidental.
