Skip to content

On April 3, 2023, the U.S. Tax Court ruled in Farhy v. Commissioner[1] that the IRS lacks statutory authority to assess Form 5471 penalties under I.R.C. § 6038(b)(1) or (2). As a result, the IRS cannot proceed with the collection of the penalties against the taxpayer. In recent years, the IRS has aggressively enforced foreign information return penalties, including the penalty for failing to file timely and complete Forms 5471. Farhy may have significant implications for taxpayers who have paid or are contesting Form 5471 penalties.

Click here to continue reading the full GT Alert.