IRS Updates Guidance for Filing Delinquent International Information Return

Recently, The IRS updated the instructions for the “Delinquent International Information Return Submission Procedure” (DIIRSP).

The DIIRSP was announced in 2014 and designed to provide taxpayers with delinquent international information returns, such as Forms 5471, 5472, 3520 and 3520A, an alternative zero-penalty voluntary disclosure process available to qualifying taxpayers. Prior to the revisions, taxpayers who were submitting delinquent international information returns under DIIRSP were required to attach a statement of all facts establishing reasonable cause for failing to file and to certify that foreign entities were not engaged in tax evasion. Generally, the IRS did not impose penalties in these situations.

Under the updated procedure, taxpayers now must present delinquent international information returns through normal filing procedures, and a reasonable cause statement may be attached (in the past, the statement was required). According to the IRS, during processing of the delinquent information return, penalties may be assessed without considering the reasonable cause statement, and it may be necessary for taxpayers to respond to specific correspondence and submit or resubmit reasonable cause information.

Until more guidance is provided by the IRS, it is unclear if penalties will be automatically assessed under DIIRSP and if reasonable cause statements will face more scrutiny.

The procedure for filling delinquent reports of Foreign Bank and Financial Accounts (FBAR) remains unchanged.

For more information about this topic, please contact your Schneider Downs international tax advisor.