Foreign Late Filing Notices: Effective Responses for Penalty Abatement

Reasonable Cause, First Time Abatement, Reliance on a Professional, Exercising Ordinary Care and Prudence

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Thursday, December 1, 2022

Recorded event now available

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Course Materials

This webinar will examine the current state of IRS' responses to international taxpayers' requests for penalty relief for late filing of foreign information returns. Our astute panel of international tax experts will review what constitutes reasonable cause, when first-time abatement applies, and offer tips for working with the IRS to eliminate or lessen the penalties frequently and automatically assessed to international taxpayers.

Description

International tax practitioners routinely receive late and non-filing notices for multinational clients. With the number of required forms, 5471, 8938, 3520, and 3520-A to name a few, reporting obligations and filing deadlines are easily missed. Penalties for noncompliance are steep; most familiar is the minimum penalty of $10,000 for even non-willful FBAR violations.

In 2020 Taxpayer's Advocate included the IRS' assessment of international penalties on its Most Serious Problems list, stating: "The IRS's treatment of IRC Sections 6038 and 6038A foreign information reporting penalties as systemically assessable is legally unsupportable, administratively problematic, and imposes costs, delays, and stress for taxpayers." What is the best response to these notices for the most favorable and efficient outcome?

The Internal Revenue Manual (IRM) does offer first-time penalty abatement relief for certain foreign information returns; however, the manual includes additional stipulations for foreign reporting not required for domestic relief. Reasonable cause is also noted in the IRM and contains the other requirement that the taxpayer exercised "ordinary business care and prudence." Fortunately, the courts and the IRS often disagree on penalty assessments. However, this road can be time-consuming and costly. International tax advisers need to know what defenses are readily available to decrease the penalties routinely imposed on numerous international reporting forms.

Listen as our panel of international tax experts reviews the current state of penalty relief for foreign reporting noncompliance, including how to appropriately respond to notices received to mitigate the extraordinary burden these assessments place on taxpayers and their advisers.

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Outline

  1. Late filing notices: introduction
  2. Applicable forms
  3. Penalties assessed
  4. Related regulations
  5. Defenses
    1. Reasonable cause
    2. First-time penalty abatement
    3. Other responses
    4. Appeals
    5. Court
  6. Relevant cases
  7. Delinquent International Information Return Submission Procedures
  8. Best practices

Benefits

The panel will cover these and other critical issues:

  • When reliance on a professional is a reasonable defense to foreign late filing penalties
  • When is first-time penalty abatement relief available for late-filed foreign information returns?
  • How does a taxpayer meet the ordinary business care and prudence standard?
  • How should tax practitioners respond when the IRS denies a request for penalty relief?

Faculty

Agostino, Frank
Frank Agostino
President
Agostino & Associates

Mr. Agostino is the founder and president of Agostino & Associates, P.C.  Prior to entering private practice,...  |  Read More

Kundra, Chaya
Chaya Kundra
Attorney
Kundra & Associates

Ms. Kundra is a tax law adviser, litigator, and tax controversy attorney who operate practices in Maryland and...  |  Read More

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