International Tax Controversy Success Story
U.S. international reporting compliance requirements are extremely complex and can be very costly if overlooked. The McGuire Sponsel Global Business Service (“GBS”) team can assist in those instances a required compliance reporting was missed. Our Controversy team has years of experience with handling these types of situations.
Our Controversy team assisted numerous clients during 2022. It seems the number of cases has been increasing over the past few years. I attribute this to more sophisticated Internal Revenue Service tracking systems and increased awareness of international reporting requirements on behalf of CPAs and taxpayers. The general rule with controversy cases is it is better to approach the IRS when non-compliance situations are identified as opposed to waiting for the IRS to send a notice.
One case we assisted with last year was both interesting and frustrating. The CPAs client, a U.S. citizen, received an inheritance from a family member that resided outside of the United States. The client informed the CPA about this transaction and the CPA properly prepared the required international reporting forms and delivered the forms to the client along with their individual income tax return well before the original filing due date. The client has electronically filed their individual income tax returns for several years and was very comfortable with this process. However, the international reporting forms were required to be mailed to the IRS. The client was familiar with the approach of electronically filing but simply overlooked the forms required to be mailed. The oversight was discovered by the client a couple months later and she called the CPA who advised her to immediately file the forms.
A year later the IRS sent the client a notice assessing significant penalties for filing the forms late. The CPA corresponded with the IRS requesting abatement of the late filing penalty but was unsuccessful. The CPA requested our assistance with the appeals process which was ultimately successful. The entire process from the receipt of the notice to the resolution in appeals took about two years.
This is just one example of a successful controversy outcome as a result of our GBS team partnering with a CPA firm to achieve a positive outcome for their client.
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Jerry Hammel, CPA, is a business and specialty tax executive with more than 30 years of experience. Jerry works with the firm’s alliance network across four practice lines and top firms, specializing in international tax and strategic tax planning.