The American Institute of Certified Public Accountants (AICPA) is urging the Internal Revenue Service (IRS) to provide relief for U.S. citizens living abroad who file taxes.
Specifically, AICPA is seeking penalty relief to any first-time filer of Form 5471, which is Information Return of U.S. Persons with Respect to Certain Foreign Corporations.
The filing obligation results from the imposition of “downward attribution” created by the Tax Cuts and Jobs Act. Congress passed this Tax Cut and Jobs Act in December.
“Downward attribution” permits stock owned by a foreign person to be attributed to a United States person for purposes of creating a Controlled Foreign Corporation (CFC), AICPA explained.
“Many other taxpayers will face a new requirement to file Form 5471 without realizing it,” AICPA wrote to the IRS. These taxpayers need immediate prospective penalty relief because the requirement to file Form 5471 applies to tax year 2017, as well as all future years, AICPA wrote.
“Failure to timely file Form 5471 results in immediate imposition of a $10,000 penalty by the IRS,” the AICPA stated in the letter to the IRS. “Taxpayers have historically faced difficulties in having this penalty abated, even when taxpayers believed they had reasonable cause.”