In the past year, we have seen a significant increase in late filing penalties being assessed by the IRS. Both the number and size of the penalties are of concern.
In fact, these late filing penalties are now being assessed even for failure to file information forms on a timely basis. In other words, no taxes are owing, but you are informing the IRS of specific information. In the past, these potential penalties were routinely ignored for late filing of information forms.
We have seen one taxpayer whose US tax advisor did not file a form to report the foreign ownership of the US Corporation. Again, no taxes were owing. However, the IRS assessed a $10,000 penalty for each of the three forms that were not filed for a total of $30,000! The worst part, of course, was that the taxpayer’s accountant had filed the forms, and had a receipt to prove they were mailed, but the IRS had lost them. This was understandably hugely stressful for all involved.
So, please be wary of US filing deadlines, make sure you track your paperwork to the IRS, and be cautious that they do lose things, so have your backup information available.
If you have any questions about US taxes, please contact Peter Cuttini (pcuttini@bdo.ca).
Tags: IRS, penalities
