The IRS recently released guidelines for its revenue officers regarding the pursuit of investigations relating to IRS Audits of US taxpayers with foreign interests. The guidelines are designed to help IRS auditors to find more evidence and information abroad, and to authorize them to use significant means to track down information and taxpayers themselves.
The guidelines enourage revenue officers to use all available electronic means available including the internet, electronic databases, industry datatbases, Section 982 document requests even foreign travel to obtain the information, records and interviews they need.
The IRS provided specific guidance regarding fines and penalties surrounding the Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations. Penalties under IRS section 6038 (providing information in response to IRS requests regarding entities and partnerships that include foreign ownership) may be limited to 3 years from the submission of a “substantially complete” form 5471.
Also, any entity that has 25% foreign ownership will be scrutinized more carefully. When under examination, the revenue officer is directed to investigate and request specific information whenever a transaction occurs between the company and the 25% foreign partner, or the domestic corporation and any relative of either the company’s owners or the 25% foreign partner.
The IRS has greatly expanded its ability to track the money and to monitor international transactions. The IRS, the US Treasury and Congress believe there are vast sums of unreported and uncollected taxes associated with offshore activities. The passing and implementation of FATCA, the intense focus upon FBARs and now increased focus upon corporations with any foreign ownership and Form 5471 filers signals a new era for US taxpayers.
If you have any offshore or foreign business or financial dealings, it is important to seek expert tax, legal and accounting advice. We invite you to contact Allen Barron for a free and substantive consultation at 866-631-3470. Our clients value the quality and candor of our insight, and the ability to access multi-discplinary expertise in a single vendor.
