Statute of Limitations for Foreign Reporting Forms
Missing foreign filings may subject to entire tax return to extend statue of limitations. These exceptions essentially give the IRS the ability to audit a tax return outside of the normal statute of limitations if the return is missing any of the specified foreign reporting forms.
Extended Period for Assessment
Taxes are generally required to be assessed by the IRS within three years after a taxpayer’s return is filed – Code §6501(a). In the case of a false or fraudulent return filed with the intent to evade tax, or if the taxpayer fails to file a required return, the tax may be assessed at any time – Code §6501(c)(1), (2), and (3).
Code §6501(c)(8) provides an exception to the three-year period of limitations due to failures to provide information about cross-border transactions or foreign assets. Under this exception, the statute of limitations period for possible assessment of additional taxes and penalties related to the taxpayer’s income taxes remains open indefinitely and it is applicable to the entire income tax return – not just the tax consequences related to the information required under the relevant foreign information reporting provision. If the failure to file the information return is due to reasonable cause, the extended limitations period applies only to items on or items related to the late filed information return.
The disclosure forms relevant to Code §6501(c)(8) include:
| Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund | |
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| Form 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations | |
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| Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships | |
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| Form 8858, Information Return of U.S. Persons With Respect to Foreign Disregarded Entities | |
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| Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business | |
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| Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation. | |
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| Form 8938, Statement of Foreign Financial Assets | |
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| Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner | |
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If the taxpayer can establish reasonable cause, the limitations period is suspended only for the item or items related to the failure to disclose. Not only can the failure to file the necessary forms result in an exception to the three-year period of limitations, but omission of income from the tax return can extend the statute of limitations after the tax return was filed.
Author: Chandrakant Patel, CPA | [email protected]
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