Forms 5471 and 5472: Meeting the Substantially Complete Standards

Forms 5471 and 5472 are two of the most complex foreign information reporting forms completed by tax practitioners. Whether by oversight or newly acquired information, these forms are often incomplete or incorrect when submitted. Errors may include the omission of a country or transaction on Form 5472, the category may be omitted on page one, or a taxpayer may use an accounting method other than GAAP used on Form 5471.

Since the criteria for substantial compliance is a facts and circumstances determination, any number of problems could deem a foreign information return not substantially complete and not meeting the information reporting requirements of Sections 6038 or 6038A. The penalties for not meeting these reporting requirements are steep--$10,000 per month to a maximum of $50,000 if not timely resolved.

The penalty abatement process for these filings is challenging. Tax practitioners working with international clients need to understand the threshold for substantial compliance for these cumbersome international reporting forms.

Listen as our panel of foreign tax experts explains current information on meeting the substantial compliance requirements for foreign international reporting.

1. Statutory provisions of IRC 6038A and 6038C
2. Key definitions under statutory provisions and regulations
   1. Reporting corporations
   2. Reportable transactions
   3. Related parties
3. Regulations (TD 9796) requiring foreign-owned DREs to file Form 5472
4. Completing the form
5. Penalties and penalty abatement provisions
   1. Impact of Farhy v. Commissioner on foreign reporting penalties
   2. Potential claims for refund
6. Recent developments
   1. Form 3520
   2. Other developments

The panel will review these and other critical issues:

• What foreign reporting deficiencies are considered substantially incomplete?
• What forms, in addition to Forms 5471 and 5472, are subject to substantial compliance requirements?
• What are the best steps to take toward penalty abatement for incomplete submissions?
• How are omission oversights best handled or corrected?

Learning Objectives

After completing this course, you will be able to:

• Determine what constitutes substantial compliance based on recent rulings
• Decide steps a taxpayer can take to aid penalty abatement for incomplete foreign information returns
• Identify specific examples of Forms 5472 that are in substantial compliance with Section 6038 requirements
• Ascertain what specific omissions cause Form 5471 to fail to meet the substantially complete standard

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of international taxation including residency determination, foreign entity classifications, application of treaty benefits, as well as GILTI, Subpart F, and the related Section 250 deductions.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).