D.C. Circuit: IRS has statutory authority to assess penalties for willful failure to file form 5471; Earlier Tax Court decision reversed

On May 3, 2024, the IRS appeared successful in getting an earlier ruling in Tax Court reversed. The DC Circuit ruled that the IRS does have jurisdiction to assess penalties to companies who are willfully not filing form 5471. That is important for U.S. Corporate Income Tax filings for U.S. subsidiaries of European entities.

What is Form 5471?
Form 5471 is an “Information Return of U.S. Persons With Respect to Certain Foreign Corporations,” and it is used by U.S. persons who are officers, directors, or shareholders in certain foreign corporations to report their interest in these foreign corporations.

Who Must File Form 5471?

  1. U.S. Citizens and Residents: Individuals who are U.S. citizens or residents and are officers, directors, or shareholders in a foreign corporation.
  2. U.S. Entities: Partnerships, corporations, estates, and trusts that are U.S. persons and have direct or indirect ownership in foreign corporations.

Several U.S. Subsidiaries have been penalized $10K per filing for supposedly not or late filing these forms in the FY2022 filings. Even when the taxpayer appealed the penalties because the form had actually been filed timely, the IRS was holding off responding to the abatement request. While the IRS acknowledged receipt of the abatement request, it appears that the IRS has been waiting to respond to the request while waiting for this ruling.

Now that the DC Circuit sided with the IRS, it is even more important that the U.S. subsidiaries of European headquarters file their Corporate Income Tax in time, including this informational 5471 form.

More info here.


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