The LTR 5471 relates to penalties for failing to file international information returns, particularly Form 5471 (Information Return of U.S. Persons with Respect to Certain Foreign Corporations) and Form 5472 (Information Return of a 25% Foreign-Owned U.S. Corporation). These penalties are among the most severe in the tax code.
The Penalties
Form 5471 carries a $10,000 penalty per form per year for failure to file. After IRS notification, an additional $10,000 per month accrues for continued failure, up to $60,000 maximum per form. Form 5472 carries $25,000 per form with $25,000 per month continuation penalties. These penalties apply regardless of whether any tax is owed.
Who Must File
U.S. persons who are officers, directors, or shareholders owning 10% or more of a foreign corporation may be required to file Form 5471. U.S. corporations that are 25% or more foreign-owned must file Form 5472. The filing requirements are complex and depend on the specific category of filer and the type of transactions involved.
Reasonable Cause Abatement
International information return penalties can be abated for reasonable cause. Common arguments include lack of awareness of the filing requirement despite good-faith compliance efforts, inability to obtain information from the foreign entity, reliance on a tax professional who failed to identify the requirement, and the fact that the failure caused no tax harm (no tax was due regardless of the filing).
Submit a detailed reasonable cause statement with each delinquent form. The statement should document your specific circumstances, not generic excuses. The IRS applies the reasonable cause standard strictly for international penalties.
If you've received international information return penalties, call us at (813) 229-7100. These penalties require specialized knowledge to contest.