This item discusses the importance of timely filing federal income tax returns that include Form 5471, regardless of whether the return shows a balance due, because of the extensive penalties for failure to comply with the reporting requirements.
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TOPICS / PROCEDURE
Collections, Liens & Levies
New Procedures Permitting Prepayment Review of International Information Reporting Penalties
The authors review the recently published new Internal Revenue Manual (IRM) Section 8.11.5, which permits taxpayers that have been assessed certain international information reporting penalties to elect prepayment review of those penalties by IRS Appeals.
IRS Releases Procedures Allowing Appeals Review of International Penalties Prior to Payment
The IRS has made it a priority to improve voluntary compliance with the international tax provisions and to reduce the tax gap attributable to international transactions. This focus on international compliance has led to increased enforcement of international information-reporting requirements and the associated penalties.
Accuracy-Related Penalty Applied Despite Reliance on Adviser
The Tax Court held that a corporation was liable for an accuracy-related penalty for a substantial understatement of tax related to a joint venture transaction even though the corporation had received an opinion from a national accounting firm that the transaction was not taxable.
Sec. 6676: There’s a New Penalty in Town
The Small Business and Work Opportunity Tax Act of 2007 added a new taxpayer penalty under Sec. 6676 for erroneous refund claims, effective for claims filed or submitted after May 25, 2007.
Penalty for Failing to Meet EIC Due Diligence Requirements Can Be Assessed Against Employer or Employee
The Office of Chief Counsel (OCC) advised that after the amendments to the regulations in T.D. 9436 in December 2008, the IRS continues to have the authority to assert the penalty against either the employee-preparer of a return or his or her employer for failing to meet the earned income credit (EIC) due diligence requirements. However, the IRS cannot impose a penalty against both an employee-preparer and the employer based on the same factual situation. In addition, the OCC advised that the signing preparer of a tax return is responsible for retaining the records showing that the preparer met the EIC due diligence requirements.
The Accuracy-Related Penalty (Part II)
This article discusses the Sec. 6664 reasonable cause and good-faith defense to the Sec. 6662 penalty.
The Accuracy-Related Penalty (Part I)
This two-part article addresses the Sec. 6662 accuracy-related penalty and the defenses available to taxpayers. Part I provides an overview of the various bases upon which a Sec. 6662 penalty can be imposed.
Tax Court Does Not Have Jurisdiction to Redetermine Sec. 6707A Penalties
The Tax Court held that it did not have jurisdiction to redetermine a taxpayer’s liability for Sec. 6707A penalties for failure to report involvement in a listed transaction.
FBARs and Not-Yet-Reported Offshore Income: Penalties and Practitioners’ Issues
This item considers (1) options available for the client that did not disclose under the IRS’s voluntary disclosure program, which ended October 15, 2009; (2) practitioners’ responsibilities, including tax organizers and engagement letters; and (3) items suspended and/or extended to the June 2010 due date.
Assessing Professional Tax Advice and Taxpayer Sophistication
This article investigates the courts’ interpretation of reasonable cause and good faith in circumstances where the IRS has imposed a negligence penalty.
Tax Preparer Penalties: Who Is a Preparer?
Recent changes to the tax preparer penalty statute expose signing and nonsigning tax preparers of income, estate, gift, and certain information returns to higher monetary penalties and make it vital that they understand who is a preparer under the new rules.
IRS Announces Procedures for Tax Return Preparer Penalties
The IRS recently issued internal memoranda setting forth procedures for tax return preparer penalties in taxpayer examinations.
FBAR Penalties Reduced for Six Months
The IRS has provided a framework for voluntary disclosure requests containing offshore issues, such as previously undisclosed foreign financial accounts and entities.
Return Preparer’s Advice Does Not Prevent Accuracy-Related Penalty
In a recent decision, the Tax Court partially upheld accuracy-related penalties against a taxpayer because it failed to reasonably rely in good faith on advice from its tax return preparer.
Automatic Penalty Assertions Begin for Delinquent Forms 5471
In August 2008, the IRS began mailing “soft letters” to corporations that had, during the past two years, filed a late Form 1120 that included at least one Form 5471, to inform them of the new automatic penalty assertion procedures.
IRS Changes Policy for Asserting Penalties for Late-Filed Form 5471
The IRS recently sent letters to certain corporate taxpayers advising them that effective January 1, 2009, penalties for late-filed Forms 5471 will automatically be asserted when such forms are attached to a late-filed Form 1120.
Tread Carefully: What CPAs Should Know About Tax Fraud
This article examines Sec. 6663 and the civil tax fraud penalty it imposes.
Automatic Penalties for Late Forms 5471 and Related Forms
The IRS has begun informing taxpayers that starting January 1, 2009, it will automatically assess Sec. 6038 penalties for each late-filed Form 5471.
Disclosure Under the Preparer Penalty Prop. Regs.
Editor: Lorin D. Luchs, CPA, J.D., LL.M. On June 16, 2008, the IRS issued proposed regulations (REG-129243-07) on tax return preparer penalty standards that it hopes to have finalized by the end of the year. The proposed regulations amend existing regulations to take into account the provisions in the Small
employee benefits & pensions
Profits interests: The most tax-efficient equity grant to employees
By granting them a profits interest, entities taxed as partnerships can reward employees with equity. Mistakes, however, could cause challenges from taxing authorities.
