News: 25% Foreign-owned corps in U.S. who missed filling form 5472
This post originally appeared on GBS’s tax blog.
Did you miss filing form 5472 at some point? Normally this means big penalties that are nearly impossible to waive, but finally there is some relief. The IRS sent out a news blast today with some great news for corporations that file form 5472 – they are waiving penalties on late filed international information returns for 2019 and 2020. This is huge for corporations with foreign owners, as many have avoided filing for fear of the $25,000 per form penalty being assessed.
The IRS has announced that they will waive international information return late filing penalties, specifically including penalties related to Form 5471 and Form 5472, for 2019 and 2020 tax years. They have rolled this out to meet Covid-19 pandemic penalty relief mandates that had largely been ignored until now by the understaffed IRS. However, the IRS is only offering this grace period for a short window of time- only on returns filed by September 30th, 2022, so if you have past-due returns for those years it is critical to file right away.
Prior Years Missing Form 5472
If you have prior years that you missed filing returns for, this is a huge opportunity to get caught up without the $25,000 per form 5472 penalties being applied. This also is a good reminder to get everything finished up for the 2021 filing year now, as it is unlikely the IRS will be so gracious again in the future. The IRS normally fights these penalties tooth and nail, and has been emboldened lately by many wins in tax court. For help with late or current tax returns, you can sign up for tax returns here. Keep in mind Gust Launch offers a $250 discount on GBS tax filing packages.
If you have already filed your corporate tax returns, no need to worry, penalty relief is automatic. This means you do not need to apply for it, and if there is an ongoing resolution case for 2019 or 2020, the penalties will be automatically abated. If the penalties were already paid, you will receive a credit or refund. If you have any questions, reach out as we are always here to help.
The Bad News
The bad news about this form 5472 penalty relief is it means the IRS is clearing off their slate to pursue other forms of revenue raisers. This is a signal that there is greater enforcement coming, especially as the recent Inflation Reduction Act included $80 billion dollars of new IRS funding over the next 10 years, of which $45.6 billion is earmarked to go towards increased audits.
We have recently seen a couple clients receive notices for missing 5472s already for 2021 tax year when an extension was not received by the IRS but a prior year tax return with Form 5472 was filed. Thus the IRS is probably planning to send out a massive amount of penalty letters to non-filers after this very short grace period expires. Remember that in order to get this relief, the returns for those years must be filed by September 30th, 2022, which is a very short timeline to get compliant! So sign up for tax preparation right away to not miss this rare IRS penalty abatement opportunity.
Here is the link to the IRS news for reference.
Crystal Stranger
Crystal Stranger, EA, NTPI Fellow, International Tax Director • Multi-Industry Entrepreneurial Innovation • Speaker • Writer • Blockchain Technology • Business Development. Crystal Stranger started out as a software developer in the tech world of San Francisco, then ended up homeless in the dot com crash, turned her life around as an investor, gaining millions in real estate, then worked in finance and became an enrolled agent, federally licensed for tax planning and representation. She has done much project management and product development across different industries, but continually comes back around to software. She has been writing about cryptocurrency tax and regulatory issues since 2014 and has built several companies from the ground up.
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This article is intended for informational purposes only, and doesn't constitute tax, accounting, or legal advice. Everyone's situation is different! For advice in light of your unique circumstances, consult a tax advisor, accountant, or lawyer.