With all of the focus on FBARs and Form 8938 these days, it’s sometimes easy to forget about the other IRS international reporting forms. Below is a discussion of all of the other IRS international reporting forms and their corresponding penalties.
(1) Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts: Under IRC § 6048, taxpayers must report various transactions involving foreign trusts, including creation of a foreign trust by a United States person, transfers of property from a United States person to a foreign trust, and receipt of distributions from foreign trusts. This return also reports the receipt of gifts from foreign entities under IRC § 6039F. The penalty for failing to file each one of these information returns, or for filing an incomplete return, is the greater of $10,000 or 35 percent of the gross reportable amount. However, for returns reporting gifts, the penalty is five percent of the gift per month, up to a maximum penalty of 25 percent of the gift. President Obama recently signed a bill that changed the deadline for Form 3520 to April 15 for calendar-year filers, with a maximum six-month extension. This change went into effect for due dates after December 31, 2015.
(2) Form 3520-A, Information Return of Foreign Trust With a U.S. Owner: Under IRC § 6048(b), taxpayers must report their interests in foreign trusts, by United States persons with various interests in and powers over those trusts. The penalty for failing to file each one of these information returns or for filing an incomplete return is the greater of $10,000 or 5 percent of the gross value of trust assets determined to be owned by the United States person.
(3) Information Return of U.S. Persons with Respect to Certain Foreign Corporations: Under IRC §§ 6035, 6038, and 6046, certain United States persons who are officers, directors or shareholders in certain foreign corporations (including International Business Corporations) must report information. The penalty for failing to file each one of these information returns is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.
(4) Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business: Under IRC §§ 6038A and 6038C, taxpayers may be required to report transactions between a 25 percent foreign-owned domestic corporation or a foreign corporation engaged in a trade or business in the United States and a related party. The penalty for failing to file each one of these information returns, or to keep certain records regarding reportable transactions is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency.
(5) Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation: Under IRC § 6038B, taxpayers must report transfers of property to foreign corporations and other information. The penalty for failing to file each one of these information returns is ten percent of the value of the property transferred, up to a maximum of $100,000 per return, with no limit if the failure to report the transfer was intentional.
(6) Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships: Under IRC §§ 6038, 6038B, and 6046A, United States persons with certain interests in foreign partnerships must report interests in and transactions of these foreign partnerships, transfers of property to these foreign partnerships, and acquisitions, dispositions and changes in foreign partnership interests. Penalties include $10,000 for failure to file each return, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency. The penalty is capped at $50,000 per return and ten percent of the value of any transferred property that is not reported, subject to a $100,000 limit.