Introduction
This three-part series will focus on IRS civil penalties, mainly as these relate to failure to file international information returns.
The framework for civil penalties is discussed first. The focus will then turn to how the framework relates to failure to file international information returns, including Form 5471 Information Return of U.S. Persons with Respect to Certain Foreign Corporations.
Part One of this series sets out the current IRS penalty framework. It looks at penalty sections of the Internal Revenue Code. It also discusses how one landmark case became authority, defining the doctrine of reasonable cause as defence.
Part Two will focus on penalty cases of U.S. persons with unfiled international information returns. We explore the evolution of case law, post-Neonatology Associates[1].
Part Three will take a deep dive into Form 5471, providing expertise and insight into the most technically difficult of the international information returns U.S. citizens and residents with foreign equity interests must file.
Part One: Civil Penalty Framework
Civil penalties, rules, and procedural requirements are found in sections 6651 through 6751, and section 6038 of the U.S. Code: Title 26 – Internal Revenue Code. Sections 6651-6750 penalties include failure to file penalties, failure to pay penalties, accuracy-related penalties, and civil fraud penalties. These are based on the amount of tax due on a filed U.S. tax return.
