Tax Controversies and Form 5472’s Reporting and Record-Keeping Requirements of Foreign-Owned U.S. Corporations and Foreign Corporations Doing Business in the U.S., by Frank Agostino, Esq. and Phillip Colasanto, Esq.

As of 2015, over 6.8 million United States (US) workers were employed by foreign-owned companies. To ensure that foreign investment and foreign business activity is reported and taxed, Internal Revenue Code (IRC) §§ 6038A and 6038C impose reporting and substantiation requirements on foreign-controlled businesses. IRS Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business, is used to report the information required under IRC §§ 6038A and 6038C. The consequence for failing to file IRS Form 5472 includes the denial of deductions for payments to related parties, an initial $25,000 failure to file penalty, and continuation penalties of $25,000 per 30-day period until the taxpayer gets into compliance. Below, we review the reporting and record-keeping requirements of Foreign- Owned U.S. Corporations and Foreign Corporations doing business in the US. …

Reporting Federal Changes to the New Jersey Division of Taxation, by Frank Agostino, Esq. and Naché Patoir, Esq.

While taxpayers are not required, by statute or otherwise, to file federal amended returns to correct errors or omissions, if the Internal Revenue Service (“IRS”) makes a final determination regarding changes to a taxpayer’s taxable income, such taxpayer is required to report these changes on their state tax returns. Similarly, federal income tax changes resulting from a taxpayer’s filing of an amended return or filing of a domestic or offshore voluntary disclosure must also be reported. The states have different requirements for reporting federal changes. This article will discuss the notice of federal change requirements of the New Jersey Division of Taxation (the “Division”). …

How a Taxpayer Can Recover Fees & Costs from the IRS in Administrative Cases Going to the Appeals Office, by Frank Agostino, Esq. and Steven Lechter, JD.

When a tax professional represents a taxpayer in an administrative proceeding before the Internal Revenue Service (“IRS”), and the taxpayer prevails, Section 74302 provides procedures by which the taxpayer may recover the administrative costs incurred during the proceeding.3 This article will review Section 7430 including (a) when and how to recover administrative costs, (b) whether and how to make a qualified offer under Section 7430(g) (i.e., the “qualified offer rule”4) and (c) when and whether to make a claim for costs. …

TAC Tip: Collection Alternatives and Unfiled Tax Returns for Individuals, by Desa Lazar, Esq.

A major obstacle preventing Collection Division’s consideration of collection alternatives is the exis- tence of unfiled tax returns. The compliance check records relied on by the Collection Division to evaluate proposed collection alternatives include 10 years of filing history. Although the IRS may not be actively pursuing the filing of the delinquent returns, periods with delinquent return status must be addressed so that the IRS can move forward with proposed collection alternative. …

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