If you are a US taxpayer, and you own any interest in a foreign corporation you need to understand your IRS audit risks. The most important takeaway of this post is the importance of filing IRS Form 5471 as part of your federal tax return. Failure to do so means several harsh and even potentially criminal ramifications. If you own any part of a foreign corporation, file Form 5471. Failure to do so will result in a penalty of $10,000 per form. Yes, a $10,000 penalty for failing to file one form.
Worse, the failure to file Form 5471 means your entire tax return remains open to an IRS audit indefinitely. Without a statute of limitations the look back period can result in a substantial fortune of penalties and interest owed to the IRS.
If You Own 10% of Any Foreign Company You Must File IRS Form 5471
If you own 10% of any foreign company you must file the IRS Form 5471, even if the foreign company you own a part of isn’t a corporation. These changes were enacted as part of the FATCA legislation that was signed into law in 2010. The results of FATCA for those with foreign assets and interests has been chilling. The US Justice Department has pursued foreign investment houses and financial institutions in international courts, and won huge judgments. As a result, banks, investment houses, and foreign tax authorities in almost 100 nations including the Swiss are providing detailed account and investment information to the IRS, with your taxpayer ID associated with them.
If you own an interest in a foreign corporation, or more than 10% of any foreign company we invite you to call us today for a free and substantive consultation at 866-631-3470. Protect your interests, and prevent the IRS from having the open ability to audit your entire tax return for the rest of your life, with no statute of limitations.