Delinquent International Information Return Submission Procedures

Resolve Your Failure to File Form 926, Form 3520, Form 3520-A, Form 5471, Form 8621, Form 8865 or Form 8938 For Zero Penalty

The IRS’ Delinquent International Information Return Submission Procedures allows certain US taxpayers who have failed to file Forms 926, 3520, 3520-A, 5471, 8621, 8865 and/or 8938 and/or failed to pay income tax on earnings from unreported foreign assets, to resolve that noncompliance for no penalty at all.  

Taxpayers who failed to file such Forms have also typically failed to file a FinCEN Form 114 (Report of Foreign Bank and Financial Accounts, or ‘FBAR’).  Such taxpayers may disclose that noncompliance through the Delinquent FBAR Submission Procedures, again, for no penalty at all.  

Not surprisingly, the highly-desirable zero penalty outcome offered via the IRS Delinquent Procedures has strict eligibility requirements.  Specifically, the taxpayer’s actions, thoughts and experiences with regards to the taxpayer’s failure to file required foreign asset reporting Forms must meet the high legal standard of reasonable cause.  A taxpayer disclosing under the IRS Delinquent Procedures documents that the facts of his/her case meet that legal standard by preparing and attaching a reasonable cause statement to his/her delinquent or amended Forms.

In practical or conversational terms that a non-expert can understand, noncompliance with US tax or informational reporting obligations occurs for reasonable cause where there was no possible reasonable means or pathways by which a taxpayer would discover his tax or informational reporting obligation.  The two most common forms of reasonable cause in this area are:

• Reasonable ignorance (26 CFR 1.6664-4(b)(1))
• Reliance upon the advice of a paid professional whom the taxpayer believed in good faith to be competent to advise the taxpayer in meeting his/her tax and reporting obligations, but whom in fact, was not competent to do so (26 CFR 1.6664-4(b)(2), Example 1)

Call (415) 745-1924 to receive a free, thorough and completely confidential consultation.  You will talk directly with FBAR disclosure tax attorney Andrew L. Jones to determine if you are eligible to resolve your noncompliance through the Streamlined Domestic Offshore Procedures, the Delinquent FBAR Submission Procedures and/or the Delinquent International Information Return Submission Procedures.  Experience matters, and working with our firm, which limits its practice exclusively to IRS foreign asset voluntary disclosure cases, means no surprises and no learning on the job. 

We are available by phone nationwide or by appointment at your choice of 7 different offices in California and Washington.  We answer your calls from 8 am-9 pm Pacific, 7 days a week. After hours, please leave a message or visit our contact form and we will reply the next morning.

Experienced IRS Delinquent Procedures attorney Andrew L. Jones can guide you through all phases of disclosure via the Delinquent International Information Return Submission Procedures, including:

• Guiding and carrying out the collection of evidence relevant to your argument of reasonable cause.  Since an argument of reasonable cause almost always involves circumstantial evidence, an IRS Delinquent Procedures tax attorney will know the statutory law, the case law, and the current thinking at the IRS regarding what evidence indicates – or does not indicate – that the taxpayer had a reasonable pathway to knowledge.
• Determining whether your errors and omissions occurred for reasonable cause. Reasonable cause is a legal standard set forth in the US statutory law and Treasury Regulations, and articulated in case law (court decisions).  Non-attorneys (CPAs, enrolled agents or other ‘consultants’) are not qualified to make this determination.
• Writing a winning reasonable cause statement which establishes that each element of this strict standard was satisfied by the taxpayer’s specific behavioral and state-of-mind facts.

The goal is to show the reviewing IRS Revenue Agent that your failures to file International Information Returns (e.g. Forms 926, 3520, 3520-A, 5471, 8621, 8865 or 8938) and/or report and pay US tax on income from foreign financial assets, occurred without willful neglect and despite your exercising reasonable business prudence.

• Your persuasive reasonable cause statement must address all the relevant facts of your case – both good and bad – and neutralizes any facts which might indicate that you should have known about your informational reporting obligation relating to your foreign assets.  The purpose of this statement is to convince the reviewing IRS Revenue Agent that your errors were fundamentally unavoidable because either:
  • Despite your necessary level of diligence, the obligation was simply not reasonably knowable and thus not an obligation that the law can require you to meet, or,
  • You engaged a third party to aid you in the preparation and filing of your US income tax and informational reporting obligations, and either (a) told that person directly that you possessed certain foreign assets or had experienced certain (reportable) events or conditions or (b) told that person sufficient things which would reasonably function as ‘clues’ to the possibility that you possessed certain foreign assets or had experienced certain (reportable) events or conditions. 

• An effective reasonable cause statement will convince the examining IRS Revenue Agent that the Service cannot establish (to the necessary standard of proof) that your failures to file an FBAR (FinCEN Form 114) and/or any international information return (e.g. Forms 926, 3520, 3520-A, 5471, 8865 or 8938) and/or pay US tax were even negligent.

• Knowing what foreign assets or reportable events or conditions were US-reportable, which Forms you failed to file, what penalties could be assessed for those failures to file, and the applicable statute of limitations period within which the IRS can potentially detect the noncompliance and assess penalties.  Huge sums of money are at stake in these questions and the determinations require an experienced guide.

• Producing a complete and accurate amendment (or delinquent filing) of (a) previously unfiled, incorrect, or incomplete federal tax returns, including Forms 926, 3520, 3520-A, 5471, 8621, 8865 and 8938, for all years requiring correction or late filing and (b) up to six years of FBARs.  This task, while often overlooked during discussions of foreign asset penalties and analysis of reasonable cause versus negligence, is just as critical as the reasonable cause statement.  Indeed, a disclosure consisting of amended returns and/or delinquent foreign asset filings is arguably incomplete and thus invalid if the IRS Forms are not correctly filled out.  Such tax and informational filing preparation requires high skill, particularly where the filer owns less-common types of foreign assets including foreign retirement plans, foreign life insurance policies, foreign annuities, closely-held foreign business interests, etc. 

• Preserving attorney-client privilege.  Virtually any information provided to a non-attorney can and will – if necessary – be obtained by the IRS.  Hiring and working directly with a tax attorney preserves your rights.

Unlike the Streamlined Domestic Offshore Procedures, the Delinquent Procedures do not mandate a specific number of years under which a US person must delinquently file or amend to correct international information returns.  In theory, the program’s protective provisions can be used to correct an unlimited number of delinquencies or errors, so long as each of those errors occurred for reasonable cause.  

However, persons with these issues have often been noncompliant for decades, an interval of time which is usually not a practical scope of corrective filings.  In the absence of guidance from the IRS, experienced IRS Delinquent Procedures attorneys usually advise their clients to submit corrective materials covering the last three years for which the tax return deadline has passed.   This coverage period mirrors that of the IRS’ Streamlined Domestic Offshore Procedures disclosure program.  

While no one can definitively establish the reason for the IRS’ long standing acceptance of this approach, it would follow the logic that if an individual submits (for a three-year period) a narrative statement which establishes reasonable cause as to all years of noncompliance, the IRS would see that examining years prior to the three-year period of disclosure would be essentially pointless since the defense of reasonable cause is a defense to all penalties (of this kind) for all years.  Forcing a taxpayer to correct ten or twenty years of unfiled returns, or file international information returns from 2007 forward, might be legally allowable yet be fundamentally pointless.

Call IRS Delinquent Procedures tax attorney Andrew L. Jones now at (415) 745-1924 for a free, fully confidential consultation to determine if you are eligible to disclose your tax and/or informational noncompliance to the IRS under the protective provisions of the Delinquent International Information Return Submission Procedures! 

Experience matters, and working with our firm, which limits its practice exclusively to IRS foreign asset voluntary disclosure matters, means no surprises and no learning on the job.

Interested in learning more about the Delinquent International Information Return Submission Procedures offered by the IRS? Keep reading!

The Delinquent International Information Return Submission Procedures (also known as the IRS Delinquent Procedures) allows US taxpayers to disclose their failure to file Forms 926, 3520, 3520-A, 5471, 8621, 8865 and/or 8938 without paying any penalty.

In years past, the Delinquent Procedures was limited to those disclosing foreign asset noncompliance but only if those foreign assets had not given rise to even a single penny of unreported earnings.  Since then, however, the IRS updated the Delinquent Procedures rules to provide that those who have reasonable cause for failure to file a required international information return may, regardless of the amount of unreported income from a foreign asset, resolve that noncompliance by submitting the form(s) and a reasonable cause statement.  

If the argument of reasonable cause is accepted by the IRS, the Service does not impose a penalty on the now-revealed delinquent or amended filings.  Just as importantly, after the passage of what is typically three years from date of delinquent or amended filing of these Forms, the taxpayer also gains legal certainty that the noncompliance may never be punished with a civil (monetary) penalty.  In other words, the taxpayer’s problems are resolved for zero penalty.

Stated another way, if you failed to: 

• File the Form 926 (‘Return by a U.S. Transferor of Property to a Foreign Corporation’), and/or,
• File the Form 3520 (‘Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts and Inheritances’), and/or,
• File the Form 3520-A (‘Annual Information Return of Foreign Trust With a U.S. Owner’), and/or,
• File the Form 5471 (‘Information Return of U.S. Persons With Respect To Certain Foreign Corporations’), and/or,
• File the Form 8621 (‘Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund’), and/or,
• File the Form 8865 (‘Return of U.S. Persons With Respect to Certain Foreign Partnerships’), and/or,
• File the Form 8938 (‘Statement of Specified Foreign Financial Assets’), and/or,
• Report on your income tax return (Form 1040) the income from one or more foreign financial accounts or assets…

and your failure occurred for reasonable cause, then the IRS’ Delinquent International Information Return Submission Procedures – also known as the IRS Delinquent Procedures – allows you to resolve your non-compliance without paying any of the statutory penalties.

A conceptually identical program – the Delinquent FBAR Submission Procedures – offers the same relief for failure to file a timely, correct and complete Report of Foreign Bank and Financial Accounts (FBAR, formally known as the FinCEN Form 114): where the failure to file the FBAR occurred for reasonable cause, no penalty may be imposed or sustained.  

IRS Delinquent International Information Return Submission Procedures Requirements

The IRS Delinquent Procedures requires a taxpayer to make a voluntary disclosure of his or her non-compliance through the following steps:

• Amend or late-file US income tax returns and the associated international information returns (Forms 926, 3520, 3520-A, 5471, 8865 or 8938).  While the Procedures do not mandate a particular time period (in other words, it does not require a particular ‘look-back period’), best practices are to cover at least three years (or, if the less, the number of years for which the taxpayer failed to file or filed incorrectly.)
• Pay the tax that is due on those amended returns, plus statutory interest.
• Attach to the late-filed materials a reasonable cause statement.  This is a narrative statement which must accomplish the challenging goal of proving a negative: that the US taxpayer had no reasonable pathway to become aware of the taxpayer’s international information return filing obligation.  Since reasonable cause is a powerful defense to all possible non-reporting penalties, it is not easy to establish and will be reviewed closely by the IRS and challenged if insufficient.  

For individuals disclosing noncompliance under the protective provisions of the IRS Delinquent Procedures, the two most common forms of reasonable cause are:

• Reasonable ignorance (26 CFR 1.6664-4(b)(1))
• Reliance upon the advice of a paid professional whom the taxpayer believed in good faith to be competent to advise the taxpayer in meeting his/her tax and reporting obligations, but whom in fact, was not competent to do so (26 CFR 1.6664-4(b)(2), Example 1)

Disclosing Via the IRS Delinquent Procedures Is Less Expensive Than Any Other Disclosure Option, Including the Streamlined Domestic Offshore Procedures 

If you are factually qualified to make an argument of reasonable cause and have US tax counsel to craft a winning reasonable cause statement, the IRS Delinquent International Information Return Submission Procedures is the most financially desirable method of addressing prior foreign asset reporting noncompliance.  Through these procedures, your exposure to fines arising from foreign asset-related tax and/or informational noncompliance, fines that could normally (as provided in the statutes) total hundreds of thousands if not millions of dollars, can be reduced literally to zero.

The terms of the Delinquent Procedures are financially superior to the IRS’ Streamlined Domestic Offshore Procedures, since that program requires payment of a one-time, one-year penalty equal to 5% of the undisclosed foreign financial assets.  

The stark differences between (a) the ‘default’ statutory penalties for foreign asset noncompliance, (b) the penalty required for noncompliance disclosed via the Streamlined Domestic Offshore Procedures, and (c) the zero penalty outcome available in a successful Delinquent Procedures disclosures, means that facts and the attorney you choose to argue them, are key.

IRS disclosure attorney Andrew L. Jones knows what facts establish reasonable cause, and how to effectively argue those facts and the applicable law of reasonable cause in a reasonable cause statement required by the Delinquent Procedures.  An attorney who understands the factual and legal distinctions between noncompliance for reasonable cause (which can be addressed by the Delinquent Procedures) and negligence (which can be addressed by the Streamlined Procedures) and can effectively argue the taxpayer’s eligibility in a reasonable cause statement, will be the difference between the taxpayer paying massive financial penalties and paying no penalties at all.

Eligibility for the Delinquent International Information Return Submission Procedures Hinges on Whether Taxpayer’s Noncompliance Occurred for Reasonable Cause or Through Negligence

The IRS’ Delinquent Procedures disclosure option is only available to those taxpayers whose noncompliance occurred for reasonable cause, and requires participants to document the non-willful and non-negligent nature of their noncompliance through a reasonable cause statement.

Reasonable cause, as noted above, is an extremely complex legal standard but can be summarized as noncompliance which occurred because the US person had no possible reasonable pathway to awareness of one’s tax or informational reporting obligation.  

In the area of international information return noncompliance, the two most common types of reasonable cause are:

• Ignorance of the law: the taxpayer (through the taxpayer’s IRS voluntary disclosure attorney) proves a negative by arguing through facts and law that the taxpayer neither knew, nor even had any reasonable pathway way to know of any of his foreign asset reporting or tax obligations.
• Reasonable reliance on the advice of a third person (typically a paid income tax return preparer) who, unbeknownst to the taxpayer, was actually incompetent to correctly advise the taxpayer: here, the taxpayer shows that he engaged an individual (usually a tax preparer, often a CPA) to meet his US tax and informational reporting obligations, then either:
  • Gave documentation directly showing, or explicitly told (either verbally or in writing) the tax return preparer of his ownership of, or other reportable relationship with, foreign assets, or explicitly told or gave documentation to that individual reflecting a reportable event (such as, in a single year, an inheritance of greater than $100,000 from a foreign person’s estate or a gift greater than $100,000 from a living foreign person – these events would be reportable on Form 3520, Part IV), or,
  • Gave the tax return preparer documentation or told that individual either verbally or in writing, facts which should reasonably have alerted a competent professional that the taxpayer had a reporting obligation or, 
  • Gave the tax return preparer document or told that individual either verbally or in writing facts which were substantial clues to the possibility of a reporting obligation.  In this approach, the client’s counsel argues that a competent income tax return preparer would reasonably have noted these clues and asked further questions in response to them (and had the preparer asked such questions, such questions would have led to discovery of further facts confirming the client’s reporting obligations) 

As this preceding section shows, establishing reasonable cause either through ignorance of the law or through reasonable reliance on a paid professional is a challenging task.  Your disclosure to the IRS is best handled by an attorney with a strong record of experience and success with this disclosure program.

Call IRS Delinquent Procedures tax attorney Andrew L. Jones now at (415) 745-1924 for a free, fully confidential consultation to determine if you are eligible to solve your foreign account problems through the Delinquent International Information Return Submission Procedures!

Only an Experienced IRS Delinquent Procedures Tax Attorney Can Properly Advise You Regarding Reasonable Cause and Write a Winning Reasonable Cause Statement 

IRS Delinquent Procedures tax attorney Andrew L. Jones is highly qualified to provide you swift, effective and fully-confidential representation for your voluntary disclosure:

• He has guided hundreds of clients through the collective disclosure of over $300 million in previously-unreported foreign assets (statistics as of September 2024).  Andrew has advised clients with undisclosed or hidden foreign bank accounts and financial assets ranging in value from $150,000 to eight figures.
• Andrew earned his J.D. and LL.M. in Taxation, with distinction, from Loyola Law School, Los Angeles, and has since 2009 limited his work as a tax attorney solely to international taxation and foreign account reporting controversies, compliance and planning.
• Not a single one of Andrew’s clients’ Streamlined Domestic Offshore Procedures or Streamlined Foreign Offshore Procedures filings have ever been challenged or rejected by the IRS.
• Andrew’s clients who disclosed their noncompliance via the Delinquent International Information Return Submission Procedures are rarely examined about those filings, even more rarely penalized, and of the handful who initially received penalty notices, none have paid, most have defeated those penalties through subsequent proceedings, and an even smaller number remain in IRS proceedings with excellent prospects to defeat those penalties.
• A substantial number of Andrew’s clients have successfully disclosed foreign asset noncompliance through the Delinquent International Information Return Submission Procedures and/or the Delinquent FBAR Submission Procedures.  Where fact-appropriate and acceptable in risk profile, Andrew has aggressively deployed reasonable cause arguments, winning zero-penalty results in virtually every instance.  This is a record of vigorous and effective advocacy which stands in sharp contrast to the risk-avoidant mindset of numerous other international asset disclosure attorneys whose solution for every instance of noncompliance – regardless of the facts – is to disclose via the Streamlined Procedures, leaving their innocent clients to pay an unnecessary penalty.

• Andrew will be your sole point of contact in your voluntary disclosure, from your first call and email to your last.  He responds personally to all your calls and messages, personally supervises the accounting phase (amendment of returns and/or FBARs) of your engagement and personally writes every word of your narrative statement (the Certification of Non-Willfulness for asset disclosures via the Streamlined Domestic Offshore Procedures, and the reasonable cause statement for asset disclosures via the Delinquent International Information Return Submission Procedures). 

Ask our competition whether they do the same: we think you’ll quickly learn that no other law firm offers this personal service commitment.

• Andrew has assisted taxpayers with undisclosed foreign accounts in countries around the globe, including (as examples) the United Kingdom, Switzerland, Germany, France, China, Malaysia, Philippines, Japan and dozens and dozens of other countries.  His clients have included those with large private wealth management accounts in Switzerland’s most notorious banks – banks that were or are under active US criminal investigation and banks that employed account managers indicted criminally by the US.  He has also worked with clients who owed tens or hundreds of thousands of dollars in unpaid US tax.
• Andrew’s clients have had a wide variety of additional factors complicating their offshore voluntary disclosures, including:
  • The spouse who opened the foreign account is now deceased.
  • Clients who received their accounts via a foreign inheritance (an inheritance event which may also be reportable on the Form 3520 if sufficient in value)
  • Clients who survived the Holocaust or who have other personal or familial-origin reasons, not related to avoidance of US tax, for owning accounts in traditional tax, privacy or secrecy havens like Switzerland.
  • Clients who did not know of their obligation to report their accounts on the FBAR, or had a good-faith misunderstanding of the FBAR filing requirement and/or US taxation of foreign bank account earnings.
  • Elderly clients and their adult children/caretakers.
  • Clients with signature authority over (but no beneficial interest) in hidden foreign bank accounts or with interest in foreign corporations, trusts or partnerships that controlled undisclosed foreign bank accounts.
  • Clients who are US permanent residents (resident aliens) and are anticipating or are already in the process of acquiring US citizenship at time of discovering the issue of undisclosed foreign accounts.
  • Foreign account disclosure clients who are divorced, separated, and estranged from spouses.
  • Clients who at the same time as pressure or investigation by the US Department of Justice of their original custodial bank, moved their account to another bank in the same or another jurisdiction (and may have even done this multiple times)
  • Clients with unreported or misreported foreign retirement arrangements such as pensions, annuities and/or life insurance policies
  • Clients who were mis-advised by prior preparers and can only establish their reasons for substantial tax and/or informational noncompliance through documentation (and often, an affidavit from) that former preparer

Call Delinquent International Information Return Submission Procedures tax attorney Andrew L. Jones now at (415) 745-1924 for a free, fully confidential consultation to determine if you are eligible for this faster, simpler and less expensive option to solve your foreign account problems!

Every foreign account or asset disclosure is unique and you will get personalized service directly with Andrew, with access evenings and weekends to meet your schedule.

Call now – (415) 745-1924!