On Aug. 25, 2022, the Internal Revenue Service (IRS) issued Notice 2022-36 which provides certain taxpayers penalty relief with respect to years 2019 and 2020. The notice focuses on certain failures to file and international information return penalties.
It indicates if covered forms are filed on or before Sept. 30, 2022, the penalties will be automatically abated, refunded or credited by the IRS without any action on the part of the taxpayer to request relief.
The series of forms to which this section may apply includes the below:
- Forms 1040
- Forms 1041
- Forms 1120
- Form 1066
- Forms 990
- Form 3520
- Form 3520-A
- Form 1065
It may also apply to disclosures on Form 5471 and 5472 when attached to Form 1120 or Form 1065. There is also penalty relief for S corporation filings if they were filed by specified dates indicated in the notice for 2019 and 2020, respectively.
This widespread penalty relief gives taxpayers a short window of opportunity to file delinquent income tax returns and international information forms they may have unknowingly failed to file.
Notably, taxpayers who received gifts or bequests from non-US persons during the 2019 or 2020 tax period can file a delinquent Form 3520 to report the receipt of such gifts/bequests without having to meet the “reasonable cause” exception for penalty abatement. Similarly, US corporations and partnerships who may have been required to file Forms 5471 to report certain interests held in non-US corporations may also do so without fear of penalties being assessed. Non-compliance in this area is typically more widespread than most realize due to changes made in the ownership attribution rules enacted as part of the US tax reform in 2017.
If you are a US person who has unreported gifts or bequests you received during 2019 or 2020, have responsibility for the US tax compliance of a US corporation or partnership with ownership interest in a non-US corporation, you should contact a Moore Doeren Mayhew international tax advisor today to discuss how this might apply to you.