IRS Abandons Automatic Assessment of Foreign Gift Penalties
By Anthony P. Daddino on October 25, 2024
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Anthony P. Daddino
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The IRS has renounced its membership to the Green Day band fan club and finally restored due process in its procedures for assessing foreign gift tax return penalties.
IRS Commissioner Danny Werfel publicly announced yesterday that the IRS will no longer automatically impose penalties for late-filed forms related to foreign gifts. The IRS will now review reasonable cause statements that are attached to late-filed forms before penalties are assessed. For those of you who missed it, in late 2020, the IRS updated its website to put taxpayers on notice that penalties for late-filed international returns may be assessed without any consideration of an attached reasonable cause statement – aka the “Fire, Ready, Aim” approach (Green Day fans, click HERE).
Questions remain, however, on how the IRS will respond to late filings that do not include a reasonable cause statement. Long ago, the IRS initially issued a soft contact letter, alerting the taxpayer to the possibility of penalties and inviting a reasonable cause statement. The IRS’ resurrection of this soft-contact approach would be most welcomed.
Still, the new penalty procedures only apply to late-filed Forms 3520 Part IV. Automatic assessment procedures for other late-filed international information returns, such as Form 5471, remain in place. Of course, this author lauds any move by the IRS toward sensibility.
If you or your client have any questions about this Blog post or other tax-related topic, feel free to contact me at (214) 749-2464 or adaddino@meadowscollier.com.
IRS Commissioner Danny Werfel publicly announced yesterday that the IRS will no longer automatically impose penalties for late-filed forms related to foreign gifts. The IRS will now review reasonable cause statements that are attached to late-filed forms before penalties are assessed. For those of you who missed it, in late 2020, the IRS updated its website to put taxpayers on notice that penalties for late-filed international returns may be assessed without any consideration of an attached reasonable cause statement – aka the “Fire, Ready, Aim” approach (Green Day fans, click HERE).
Questions remain, however, on how the IRS will respond to late filings that do not include a reasonable cause statement. Long ago, the IRS initially issued a soft contact letter, alerting the taxpayer to the possibility of penalties and inviting a reasonable cause statement. The IRS’ resurrection of this soft-contact approach would be most welcomed.
Still, the new penalty procedures only apply to late-filed Forms 3520 Part IV. Automatic assessment procedures for other late-filed international information returns, such as Form 5471, remain in place. Of course, this author lauds any move by the IRS toward sensibility.
If you or your client have any questions about this Blog post or other tax-related topic, feel free to contact me at (214) 749-2464 or adaddino@meadowscollier.com.
