Canada collects $120,000 in Form 5471 penalties for the IRS

Canada collects $120,000 in Form 5471 penalties for the IRS

Mr. Dewees, was a U.S. citizen living in Canada, where he operated a consulting business. In 2009, Dewees learned that he had failed to comply with the FBAR requirements, and, thereafter, successfully applied to participate in the OVDP. IRS assessed a penalty of over $185,000 for not filing the FBARs. Dewees refused to pay the assessed penalty and withdrew from the OVDP. Because the business was incorporated abroad, Dewees was required to file a form 5471. Not filling the form carries a $10,000 penalty. And the statute of assessment is not 6 years. In September 2011, IRS notified Dewees that it had assessed a different penalty of $120,000 against him for failing to file Form 5471 from ’97 to 2008. Dewees requested an abatement of this penalty for reasonable cause, which was denied. Mr. Dewees was in Canada. Then pursuant to the U.S.-Canada tax treaty (the Treaty), the Canadian tax authority held Dewees’ Canadian tax refund in abeyance until the IRS penalty was paid in full. How did Canada do this? IRM 5.21.7.4 (11-13-2015) Mutual Collection Assistance Requests (MCAR) The United States has five bilateral tax treaties that contain broad provisions for mutual assistance in collection, also known as "MCAR" . Canada – All taxes including both individual and business Denmark – Income taxes France – Income taxes & estate taxes The Netherlands – Income taxes Sweden – Income taxes Note: On January 24, 2013, the United States and Japan signed a new Protocol to tad japan to the list. Once the new Protocol to the income tax treaty between the United States and Japan has been ratified, this section will be updated. Note FBAR penalties aren’t tax penalties so MCAR non-issue. Offshore penalty can be collected by MCAR. Takeaways: IRS only knew to assess 5471 penalties because taxpayer came clean. Pretty nasty. Expecting justice from Federal court is like corn expecting justice from chickens. If you made a disclosure look to make sue you have all your 5471s done, and properly done. Missing Form 5471s we see: 1. 5471s dormant corps 2. holding companies for asset protection 3. self-employment Other Delinquent Information Reporting Forms 8865, 5472, 3520, 3520A, 8938, 920 also carry $10,00 per year penalty. Think about these before opting out. You can win on FBARs but lose on 5471s. http://ift.tt/2wgDlHq https://youtu.be/S8ZeyIiZLnI IRS Medic