IRS Penalty Relief

As a result of the COVID-19 Pandemic the IRS has announced a waiver program:

Temporary IRS Penalty Waiver for tax years 2019 and 2020
Ends 30 September 2022
This waiver benefits:
- - Americans living in Ireland
  - Irish owners / investors in U.S. businesses
  - Irish owners U.S. real estate
  - Irish beneficiaries of U.S. estates / inheritances / gits
  - Irish Green Card holders
  - Irish trusts and estates with U.S. beneficiaries / settlors
  - U.S. estates / trusts with Irish beneficiaries / settlors
  - Irish nationals filing U.S. Tax Returns
  - Irish owners U.S. LLCs
You do not need to show the COVID-19 Pandemic prevented you filing on time.

Contact us with any tax questions about the IRS Penalty Waiver :

USTAX
8A Appian Way, Ranelagh, Dublin 6, Ireland D06C9N3

Fax: + 353 ( 01) 9011795 www.ustax.cpa

Due to the COVID-19 Pandemic the IRS has announced (IRS Notice 2022-36, dated 24 August 2022) it will waive the Failure-to-File Penalty for:

(a) Unfiled 2019 and 2020 Tax Returns that are filed by 30 September 2022, and

(b) Tax Returns for 2019 and 2020 that have already been filed late.

The Failure-to-File Penalty is 5% of unpaid tax per month up to a maximum of 25%. Also waived are some fixed notice penalties on Tax Forms including Forms 5471 and 5472 which begin at $10,000 and $25,000 respectively. The waiver applies to most, but not all, 2019 and 2020 Tax Returns. See What is included (below).

The waiver is available for qualifying unfiled Tax Returns for 2019 and 2020 that are filed by 30 September 2022 and is automatically applied to Tax Returns already filed.

Americans, U.S. citizens / taxpayers, and green card holders living in Ireland who have not filed for 2019 or 2020 are urged to act now to take advantage of this waiver before 30 September 2022. Taxpayers who want to amend their Tax Returns should also act, as well as owners or investors of U.S. businesses or real estate. This waiver may not be suitable for U.S. taxpayers with undeclared FBAR or FACTA accounts, or who have not filed for years prior to 2019 – please see our IRS Amnesty Programs section below for other options.

Taxpayers do not need to show the COVID-19 Pandemic prevented them filing on time. The wavier will be given without question for Tax Returns filed or amended by 30 September 2022.

1 Who does this help

The waiver will help U.S. taxpayers who have fallen behind (since 2019) due to the COVID-19 Pandemic or who were not aware that they had to file with the IRS. Any unclaimed Stimulus payments due can also be collected on U.S. Tax Returns filed for 2019 and 2020. However please see our IRS Amnesty Programs section below for other options as this waiver may not be suitable for U.S. taxpayers who have not filed for years prior to 2019 or those with undeclared bank accounts (‘FBAR’) or financial assets (‘FACTA’).

This waiver will also benefit:

- - Irish owners of U.S. corporations
  - Irish corporations doing business in the United States
  - U.S. owners of foreign corporations
  - Irish beneficiaries of U.S. estates / inheritances / gifts
  - U.S. estates with Irish beneficiaries
  - U.S. trusts with Irish beneficiaries / settlors
  - Irish nationals filing U.S. Tax Returns
  - Irish estates or trusts with U.S. beneficiaries or settlors
  - US. beneficiaries of Irish gifts
  - Irish Green Card holders
  - Taxpayers who want to amend Tax Returns
  - Foreign owners of LLCs

Since 1 January 2017, foreign owned single member LLCs (and foreign corporations) doing business in the United States should file forms 1120 (or 1120-F) and Form 5472. This is an often-missed requirement that can lead to initial penalties of $25,000 per year. These penalties can be waived if the missing or erroneous Tax Returns are filed or amended by 30 September 2022.

2 What is included

Some of the main reliefs included for each Tax Return:

IRS Tax Return Penalty Waived

1040 / 1040NR Total failure to file penalty – 25% of tax due
(Individuals)

1041 Total failure to file penalty – 25% of tax due
(Trusts and Estates)

1120 / 1120-S / 1120-F Total failure to file penalty – 25% of tax due
(Corporations)

1065 Total failure to file penalty – 25% of tax due
(Partnerships)

3520 / 3520-A For Trusts up to 35% of the value of property settled
(Foreign Trusts / Gifts) For Gifts up to 25% of the value of the gift

5471 $10,000 (for 1120, 1120-S, 1120-F, 1065 not 1040, 1041)
(Foreign Corporations)

5472 $25,000 (for 1120, 1120-S, 1120-F, 1065 not 1040, 1041)
(Foreign Businesses)

3 What is not included

However the following forms are not included:

Form Penalty

FinCen114 (‘FBAR’) $10,000 per year per account for last 6 years

Form 8938 (‘FATCA’) $10,000 per year

5471 / 5472 due with 1040 or 1041 $10,000 / $25,000 per year per company

There are other options to reduce or eliminate those penalties not included in this waiver, such as reasonable cause defense, abatement relief, or other IRS Amnesty Programs (see below).

Also not included in this waiver are:

- - Interest on unpaid tax
  - Failure-to-Pay Penalty of 0.5% of unpaid tax per month to 25% of tax
  - Penalties assessed by the courts
  - Penalties arising from settlement agreements with the IRS
  - Penalties arising from fraud

The options to reduce or eliminate some of these penalties include reasonable cause defense, and abatement relief.

4 General

For tax year 2021 American citizens and green card holders earning more than $12,550 per year (if Single, less in earlier years, or $5 per year if Married Filing Separately!), are required to file U.S. tax returns, even if they have never lived in the United States.

If you have not filed with the IRS, you may face heavy fines – and even criminal liability – when caught. IRS compliance can be slow and expensive when administering the estates of non-filers. Many non-filers living outside the United States do not receive U.S. Social Security benefits that they are entitled to and come into compliance to claim social security.

Since 2016 the IRS has received extensive information on bank and financial accounts held by American citizens and green card holders in Ireland under the FACTA agreement.

5 IRS Amnesty Programs

There are several IRS Amnesty Programs available – normally resulting with little or no taxes / fines / penalties due to the IRS. In some cases, collecting unclaimed stimulus payments results in an overall gain for filers. For those who have not filed for tax years prior to 2019, have undeclared foreign bank accounts (‘FBAR’) or foreign financial assets (‘FACTA’), these IRS Amnesty Programs may be a better option rather than the temporary waiver in this IRS Notice 2022-36 – particularly the reliefs that the IRS Amnesty Programs offer for FBAR and FATCA violations.

Contact us with any tax questions:

USTAX

8A Appian Way, Ranelagh, Dublin 6, Ireland D06C9N3

Tel: + 353 ( 01) 6834066 info@ustax.cpa

Fax: + 353 ( 01) 9011795 www.ustax.cpa

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