Form 5471 Substantial Compliance Rules: IRS International Practice Unit Guidance

Recognizing When the IRS Will Deem an International Tax Information Filing as Not "Substantially Complete"

Recording of a 90-minute premium CLE/CPE video webinar with Q&A

Conducted on Tuesday, June 8, 2021

Recorded event now available

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Course Materials

This CLE/CPE course will provide tax counsel and advisers with a practical discussion of IRS International Practice Unit (IPU) guidance on what constitutes "substantial compliance" in filing Form 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations. The panel will detail the IRS guidance on applying the substantial compliance doctrine and the meaning of "substantially complete" for purposes of the Service's imposition of penalties related to international information return requirements.

Description

Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, is one of the most complex reporting obligations in the U.S. offshore information tax reporting regime. A taxpayer who fails to file a "substantially complete" Form 5471, absent reasonable cause, is subject to severe monetary and other penalties per year per missed filing the form.

Additionally, the statute of limitations remains open for failure to file a Form 5471 on the taxpayer's entire return until the IRS receives a substantially complete filing. This subjects the tax return to a longer period of audit scrutiny.

Further complicating matters is that neither IRC 6038 nor its regulations provide any definition of "substantially complete" to determine whether penalties apply. The Service issued an IPU guidance to tax examiners on failure to file penalties and what constitutes "substantial compliance" for a Form 5471 filing.

The IPU guidance provides fact pattern examples for IRS audit examiners showing where a Form 5471 may be considered not substantially complete and can be used by practitioners as a tool to evaluate the compliance of client filings.

Listen as our experienced panel provides a thorough and practical review of the IPU guidance on substantial compliance for Form 5471 information return filings.

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Outline

  1. IPU guidance on the meaning of "substantially complete"
  2. Substantial compliance vs. strict compliance
    1. Examples of application of substantial compliance by the tax court
    2. Difference between an income tax return and an informational tax return in terms of substantial compliance
    3. Other previous IRS guidance and memoranda
  3. Examples of when an informational filing is not substantially complete
  4. Errors apparent on the face of the Form 5471 return
  5. Errors beyond the face of the return
  6. Examples from the IPU

Benefits

The panel will review these and other highly relevant concepts:

  • IRC 6038 information reporting requirements and penalties
  • Guidance on Category 4 vs. Category 5 filers
  • How the IPU advises examiners to view substantial compliance in light of tax court holdings and prior IRS advice
  • Errors "beyond the face" of Form 5471 that will cause an examiner to treat the filing as not substantially complete
  • Common errors on Form 5471 that render the filing to be not substantially complete

Faculty

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

Samtoy, John
John Samtoy
Tax Partner
Holthouse Carlin & Van Trigt

Mr. Samtoy’s practice specializes in international tax compliance and consulting services, with a focus on...  |  Read More

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