Some taxpaying individuals and businesses are required to submit offshore information returns to the government when dealing in matters that concern foreign entities and offshore financial accounts. Information returns do not require payment but should still be taken seriously because of the civil penalties involved for failing to file them.
Late filing or filings with mistakes can cause fines that compound the longer they go unaddressed. Fortunately, there are options for you to file delinquent or amended offshore information returns and avoid painful civil penalties.
The Dual Licensed International Tax Attorneys and CPAs at the Tax Law Offices of David W. Klasing are here to help. Call our offices today at (800) 681-1295 or click here to schedule a reduced-rate case evaluation.
What is IRS Form 5472?
More and more businesses are operating on a global level, even small businesses and startups. In recognition of that fact, the IRS requires U.S. businesses that have foreign ownership, or foreign businesses that do a significant amount of business in the U.S. to file Form 5472. The form discloses information about reportable transactions, and is submitted along with IRS Form 1120, your annual tax return. Form 5472 differs from Form 5471, which is used for U.S. citizens that have ownership in foreign corporations.
The IRS wants you to include all reportable transactions on Form 5472. The phrase “reportable transactions” is defined very broadly as basically any activity carried out between a U.S. corporation and a foreign owner. Some examples include any money or property exchanged, loans or interest payments, and any use of U.S. property by foreign owners.
Who Must File IRS Form 5472?
If 25 percent or more of your U.S.-based corporation is owned by a foreign individual (which can include both businesses and individuals), you will need to file Form 5472. In addition, any company that’s foreign and is engaged in a U.S. trade or business must file. Some U.S. LLCs that are owned by foreign entities may need to file. If your company has multiple foreign shareholders, a separate Form 5472 must be filed for each.
If a business that does not fit these categories does certain types of reportable transactions with a company that is subject to Form 5472 disclosure requirements. These are referred to as transactions with a “related party.” Examples of the types of reportable transactions that may require a Form 5472 filing include the following:
- Sale of stock
- Purchase of stock
- Sale of tangible property
- Purchase of tangible property
- Sales leases
- Consideration for services
- Loans
- Loan guarantees
- Interest paid
- Premiums paid for insurance or reinsurance
The rules for which entities qualify as a “related party” can be tough to interpret. The same is true for determining whether a corporation is 25% foreign-owned. To learn the details of your own situation, consult a Dual Licensed International Tax Attorney and CPA.
When is IRS Form 5472 Due?
Form 5472 is due at the same time as your company’s income tax return (Form 1120). For tax year 2022, that would mean the due date for your filing of Form 5472 would be April 18. However, if you file a six-month extension for your Form 1120, Form 5472 will also be postponed to the same date (or October 17 for tax year 2022). You must file a new Form 5472 every year your company meets the filing requirements.
What are the Penalties for Filing Form 5472 Too Late?
The standard penalty for failing to file a Form 5472 on time is a $25,000 fine. There is an additional fine of $25,000 if you fail to file a Form 5472 within 90 days of being notified by the IRS. This fine continues to apply for each month that passes after those 90 days.
For instance, let’s say that you are a year late on filing Form 5472. You would have the $25,000 initial fine for missing the deadline, plus $25,000 for the first three months that you didn’t file, plus nine more fines worth $25,000 each for the months after the 90-day fee. This would amount to a total balance of $275,000.
You should bear in mind that a filing with a mistake on it will be considered a late fine for purposes of the IRS’ assessment of fines. IRS Form 5472 is a highly complicated filing, so to ensure that a serious mistake does not result in immense penalties, we urge you to utilize the experience of a Dual Licensed International Tax Attorney and CPA.
What Should You Do if You Have a Delinquent International Information Return?
Taxpayers who have identified the need to file delinquent international information returns who are not under a civil examination or a criminal investigation by the IRS and have not already been contacted by the IRS about the delinquent information returns should contact our offices to explore all of the available options to return to compliance.
The Tax Law Offices of David W. Klasing Can Help You File Your Delinquent Foreign Information Returns in the Most Advantageous Way Possible.
To learn more about the available options in your situation and our services, contact the Tax Law Offices of David W. Klasing at (800) 681-1295 or click here to schedule your first case evaluation for a reduced rate.
Concerned About Criminal Tax Charges? Call the Tax Law Offices of David W. Klasing
If you are dealing with serious tax matters, you deserve tax assistance that you can rely on. Schedule your first reduced-rate case evaluation with our Criminal Tax Defense Lawyers by calling (800) 681-1295 today or schedule online here.
If you have failed to file a tax return for one or more years or have taken a position on a tax return that could not be supported upon an IRS or state tax authority audit, eggshell audit, reverse eggshell audit, or criminal tax investigation, it is in your best interest to contact an experienced tax defense attorney to determine your best route back into federal or state tax compliance without facing criminal prosecution.
As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosure before the IRS has started an audit or criminal tax investigation / prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply.
It is imperative that you hire an experienced and reputable criminal tax defense attorney to take you through the voluntary disclosure process. Only an Attorney has the Attorney Client Privilege and Work Product Privileges that will prevent the very professional that you hire from being potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended, in a subsequent criminal tax audit, investigation or prosecution.
Moreover, only an Attorney can enter you into a voluntary disclosure without engaging in the unauthorized practice of law (a crime in itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect you if you do not qualify for a voluntary disclosure.
As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, Kovel CPAs and EAs, our firm provides a one stop shop to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and your net worth. See our Testimonials to see what our clients have to say about us!
More Commonly Asked Tax Audit Questions
- How should Tax Audits be Handled by Criminal Tax Counsel?
- How to survive audit when I cheated on return being audited
- What is an eggshell audit?
- What is a reverse egg shell audit?
- Why is a reverse egg shell audit dangerous for a taxpayer?
- Warning signs of a criminal referral from an IRS audit
- Effective tax defense counsels goals in an egg shell audit?
- How are the 4 goals and outcomes 1 and 2 best obtained?
- What are the possible outcomes of an egg shell audit?
- Is it my right to know why I was selected for examination?
- What can I do to prepare for an audit?
- What is an IRS civil examination?
- How IRS decides which tax returns are audited
- What are my appeal options if I disagree with IRS?
- What are my basic taxpayer rights if the IRS audits me?
- Options if I am unable to pay at the conclusion of audit
- What a 30 or 90-Day Letter from the IRS means
- What is involved with appealing disagreements?
- Rights to disagree with IRS tax auditor’s findings
- Can I stop the IRS from repeatedly auditing me?
- Can I have the examination transferred to another area?
- Can I record my IRS interview and is it a good idea?
- How many years of returns are at risk during an audit?
- Common reasons for the IRS to conduct a tax audit
- How to avoid negative consequences from an IRS interview
- Have to agree to interview by taxing authority directly?
- Are all audits the same?
- What should I do if the IRS is investigating me?
- What if I don’t respond to a taxing authority audit notice
- Your rights during an IRS tax audit
- Risks of attending an IRS audit without a tax lawyer
- Most common audit technique used by taxing authorities
- Don’t go into an IRS audit without representation
- Why hire an attorney to represent me in an audit?
- Why hire David W. Klasing to represent me in an audit
Questions and Answers for Criminal Tax Representation
- When tax defense counsel parallels tax crime investigation
- Guilty of tax obstruction by backdating documents?
- To be found guilty of tax obstruction must a person actually be successful in impeding the IRS’s functions?
- Help! The Document I Gave the IRS Had False Information
- Tax crime aiding or assisting false return IRC §7206(2)
- What is the crime known as tax obstruction § 7212?
- What is the difference between tax perjury and tax evasion?
- What is the tax crime commonly known as tax perjury?
- What is a Klein Conspiracy?
- Increased possibility of civil action in IRS investigation
- Am I Guilty of Tax Evasion if the Law is Vague?
- What happens if the IRS thinks I committed tax crimes?
- What are ways to defend against a tax evasion charge?
- Difference between criminal tax evasion and civil tax fraud
- What accounting method does the IRS use for tax fraud
- Can I Change Accounting Method to the Accrual Method
- What is the willfulness requirement for tax evasion?
- I didn’t know I committed tax fraud. Can I get off?
- Concealed assets from IRS. Can I avoid tax evasion charges
- How government proves I willfully engaged in tax evasion
- What is the venue or court where a tax crime case is heard?
- Must the IRS prove tax crimes beyond a reasonable doubt?
- Is it a crime to make false statements to the IRS?
- Will the IRS overlook my tax evasion if it’s minor?
- Failed to tell IRS about my nominee account
- Audit risk with cash based business transactions
- How to defend a client charged with tax evasion
- Is it tax evasion if I didn’t file income tax return?
- Government says I attempted to evade my taxes. Now what?
- I forgot to pay my taxes or estimated tax. Is this a crime?
- Government proof I “willfully” failed to pay taxes
- 5 Ways to Respond to Tax Evasion Charges
- Being audited after using a tax professional
- Rules for what an IRS agent can do while investigating me
- How tax preparers, attorneys and accountants are punished
- How the IRS selects tax crime lead for investigation
- How does the IRS prosecute suspected tax crimes?
- Does IRS reward informant leads for suspected tax crimes?
- How the government proves deficiency in a tax evasion case
- Do prior tax crimes factor into new IRS tax convictions?
- Requesting conference before investigative report is done
- Requesting conference after IRS Special Agent Report
- What are my rights during an IRS criminal investigation?
- Avoid prosecution for tax crime with voluntary disclosure?
- Defense tactics that make it hard for to prove willfulness
- How a tax attorney can stop your criminal tax case?
- What can you generally tell me about tax crimes?
- Continuing filing requirement with investigation pending
- Federal criminal code crimes that apply to tax issues
- Penalty for making, subscribing, and filing a false return
- CID special agent’s report for criminal prosecution
- What is the discovery process in a criminal tax case?
- What the IRS includes in indictment for tax case
- What is the hardest element of a tax crime to prove?
- IRS methods of gathering evidence to prove tax crime
- What does a grand jury do in IRS tax crime prosecution?
- Failure to keep records or supply information
- Failure to make a return, supply information, or pay tax
- What is attempting to evade payment of taxes?
- What is income tax evasion and how is it punished?
- What is attempted income tax evasion?
- What is the crime of failure to pay tax? What is punishment
- Crime of making or subscribing false return or document
- Criminal Investigation Division investigation tactics
- Tax crimes related to employment tax forms and trust funds
- Tactics to defend or mitigate IRS criminal tax charges
- How the IRS generates leads about suspected tax crimes
- What is the crime ”evasion of assessment” of tax?
- Specific examples of “attempting” to evade tax assessment
- What is the so-called Spies evasion doctrine?
- Does overstating deductions constitute tax evasion?
- Is it tax evasion if my W-4 contains false statements?
- IRC §7201 attempt to evade vs. common-law crime of attempt
- What are the penalties for Spies tax evasion?
- How government proves a taxpayer attempted tax fraud
- What is a tax that was “due and owing.”
- What is evasion of assessment for tax liability?
- Is evasion of assessment different from evasion of payment
- Does the IRS have a dollar threshold for tax fraud?
- What is the IRS burden of proof for tax fraud convictions?
- Are Tax Laws Constitutional?
- What is the source of law that defines tax evasion?
- Does section 7201 create two distinct criminal offenses?
- Does tax evasion definition include partnership LLC
- What if I helped someone else evade taxes?
- Is it illegal to overstate deductions on my tax return?
- Is it illegal to conceal bank accounts from the IRS?
- Do later losses justify prior deductions?
- Common reasons the IRS and DOJ start investigations
- What is the Mens Rea component of tax crimes?
- What is a proffer agreement and what are the risks?
- Why to have an attorney to review a proffer agreement
- Why enter into a proffer agreement?
- Limited use immunity from proffer agreements
- Difference between civil and criminal fraud allegations
Questions and Answers on Unfiled Back Taxes
- What are the common issues that non-filers face?
- Risk of audit after filing delinquent prior year returns
- Can substitute return deficiency be discharge in bankruptcy
- Substitute return modified by subsequent delinquent return?
- Do I file every delinquent return for each missing year?
- How does the IRS identify non-filers?
- How important is it to the government that I didn’t file?
- Delinquent tax return criminal prosecution likelihood
- Will I get a refund on a delinquent tax year?
- What happens after enforcement action has begun?
- Should I use an attorney, EA or a CPA to represent me when I re-enter the tax system?
- Why do people drop out of the tax system?
- What happens after the IRS identifies me as a non-filer?
- IRS has not previously filed substitute returns
- Tax attorney representation when re-entering tax system
- How will the government force me to file returns?
- What penalties can IRS impose on delinquent tax filings?
- What should I do to re-enter the tax system?
- Can Law Office of David W. Klasing help me re-enter system?
- Will tax collection taken by authorities affect my credit
- I concealed bank accounts from the government
- Forgetting or failing to file tax return
