An International Information Reporting Penalty may apply if you have financial activity from foreign sources and you don’t follow tax laws, rules, and regulations. We mail you a notice if you owe a penalty and charge monthly interest until you pay the amount in full. On this page What to do if you got an IRS notice How we calculate the penalty Forms and regulations Interest on a penalty Pay a penalty Remove or reduce a penalty Dispute a penalty Request a refund Avoid a penalty What to do if you got an IRS notice Check that the information on the notice is correct. The notice has information about the penalty, the reason for the charge and what to do next. Follow the instructions. If you can correct an issue in the notice, there may be no penalty. If the information is not correct or you don’t agree, you may be able to dispute the penalty. For details, see Understanding Your IRS Notice or Letter. How we calculate the penalty We calculate International Information Return Penalties differently depending on the return you file. Continuation Penalties may apply and increase until you file a complete and correct return or reach the maximum penalty amount. Forms and regulations You may need to file certain information return forms if you do business in a country other than the U.S. or have: Financial assets in a foreign country Ownership in a foreign business Financial activity from a foreign source Get details on International Information Return Penalties with the tax law in Title 26 of the U.S. Code in the Internal Revenue Code (IRC). Specified foreign financial assets Certain individuals and domestic entities must report specified foreign financial assets if the value is more than a certain amount. See Form 8938, Statement of Specified Foreign Financial Assets Tax law: IRC Section 6038D Penalty Computation: You may be subject to a penalty of $10,000, if you don't file a complete and correct Form 8938 by the due date. If the IRS mails you a notice about failing to file a Form 8938 and you don't file the form within 90 days, an additional continuation penalty of $10,000 for each 30-day period after the 90-day period has expired may apply. The maximum continuation penalty is $50,000. Ownership of foreign corporations Officers, directors, and shareholders in certain foreign corporations must report their ownership interest and financial activity. See Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations Tax law: IRC Section 6038, IRC Section 6046, IRC Section 6679 Penalty Computation: You may be subject to a penalty of $10,000 for each failure to file a complete and correct Form 5471 by the due date. If the IRS mails you a notice about failing to file a Form 5471 and you don't file the form within 90 days, an additional continuation penalty of $10,000 for each 30-day period after the 90-day period has expired may apply. The maximum continuation penalty is $50,000. Foreign-owned U.S. corporation or a foreign corporation engaged in a U.S. trade or business Corporations must report certain transactions with a foreign or domestic party. See Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business Tax law: IRC Section 6038A and IRC Section 6038C Penalty Computation: You may be subject to a penalty of $25,000 for each failure to file a complete and correct Form 5472 by the due date. If the IRS mails you a notice about failing to file a Form 5472 and you don’t file the form within 90 days, an additional continuation penalty of $25,000 for each 30-day period after the 90-day period has expired may apply. There is no maximum penalty amount. Foreign trusts and gifts U.S. persons and executors of estates of U.S. deceased individuals must report: Contributions to, and distributions from foreign trusts Ownership in a foreign trust under the grantor trust rules Receipt of certain large gifts from foreign persons See Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts Tax law: IRC Section 6039F, IRC Section 6048, IRC Section 6677 Penalty computation: Form 3520 Part I You may be subject to an initial penalty equal to the greater of $10,000 or 35% of the total contributions you failed to report on Form 3520 Part I. If the IRS mails you a notice about failing to file the form and you don’t file within 90 days, an additional continuation penalty of $10,000 for each 30-day period after the 90-day period has expired may apply. The total initial and continuation penalties cannot exceed the total unreported contributions. Form 3520 Part II You may be subject to an initial penalty equal to the greater of $10,000 or 5% of the total assets of the trust you failed to report on Form 3520 Part II. If the IRS mails you a notice about failing to file the form and you don’t file within 90 days, an additional continuation penalty of $10,000 for each 30-day period after the 90-day period has expired may apply. The total initial and continuation penalties cannot exceed the total unreported trust assets. Form 3520 Part III You may be subject to an initial penalty equal to the greater of $10,000 or 35% of the total distributions you failed to report on Form 3520 Part III. If the IRS mails you a notice about failing to file the form and you don’t file within 90 days, an additional continuation penalty of $10,000 for each 30-day period after the 90-day period has expired may apply. The total initial and continuation penalties cannot exceed the total unreported distributions. Form 3520 Part IV You may be subject to a penalty for each month, or part of a month, that you fail to report certain foreign gifts on Form 3520 Part IV. The penalty amount is equal to 5% of the value of the unreported foreign gift(s), and the total penalty won't exceed 25% of the value of the unreported foreign gift(s). Foreign trusts with a U.S. owner Foreign trusts with at least one U.S. owner under the grantor trust rules must report information about the trust, its U.S. beneficiaries and any U.S. person who is treated as an owner of any portion of the foreign trust. If the foreign trust doesn’t file Form 3520-A, the U.S. owner must file a substitute Form 3520-A to report the information. See Form 3520-A, Annual Information Return of a Foreign Trust With a U.S. Owner Tax law: IRC Section 6048 and IRC Section 6677 Penalty computation: You as the U.S owner may be subject to an initial penalty equal to the greater of $10,000 or 5% of the gross value of the portion of the trust's assets treated as owned by you at the close of the tax year, if a Form 3520-A or a substitute is not filed. If the IRS mails you a notice about failing to file a Form 3520-A and you don’t file the form within 90 days, an additional continuation penalty of $10,000 for each 30-day period after the 90-day period has expired may apply. The total initial and continuation penalties cannot exceed the value of your assets in the trust. Controlled foreign partnerships Report certain activity of controlled foreign partnerships including transfers, acquisitions, dispositions, and changes in foreign partnership interests. See Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships. Tax law: IRC Section 6038, IRC Section 6038B, and IRC Section 6679 Certain U.S. persons owning interests in a foreign partnership and certain U.S. transferors may be subject to a penalty of $10,000 for each failure to file a complete and accurate Form 8865 by the due date. If the IRS mails such person a notice about failing to file a Form 8865 and they file the form within 90 days, an additional continuation penalty of $10,000 for each 30-day period after the 90-day period has expired may apply. The maximum continuation penalty is $50,000. They may also be subject to a penalty that reduces your foreign tax credit. Certain U.S. persons who contributed property to a foreign partnership in exchange for an interest in the partnership may be subject to a penalty equal to 10% of the fair market value of the property at the time of the contribution for each failure to file a complete and accurate Form 8865 by the due date. This penalty is subject to a $100,000 limit unless the failure is due to intentional disregard. Certain U.S. persons that acquire, dispose, or proportionally change a foreign partnership interest may be subject to a penalty of $10,000 for each failure to file a complete and accurate Form 8865 by the due date. If the IRS mails such person a notice about failing to file a Form 8865 and they don’t file the form within 90 days, an additional continuation penalty of $10,000 for each 30-day period after the 90-day period has expired may apply. The maximum continuation penalty is $50,000. Interest on a penalty We charge interest on penalties. The date we begin to charge interest varies by the penalty type and amount. Interest increases the amount you owe until you pay your balance in full. For more information about the interest we charge on penalties, see Interest. Pay a penalty You can pay online or by mail with a check. Pay your penalty in full to stop future penalties and interest from adding up. Apply for a payment plan If you can't pay the full amount of your penalty on time, pay what you can now and apply for a payment plan. You may reduce future penalties and interest when you set up a payment plan. Remove or reduce a penalty We may be able to remove or reduce some penalties if you acted in good faith and can show reasonable cause. You may have reasonable cause if you: Acted responsibly before and after the failure occurred and Have significant reasons or the failure resulted from circumstances beyond your control Not all International Information Reporting Penalties qualify for reasonable cause. By law, we cannot remove or reduce interest unless the penalty is removed or reduced. For more information, see penalty relief. Dispute a penalty If you disagree with the amount you owe, you may dispute the penalty. Call us at the toll-free number at the top right corner of your notice or letter or write us a letter stating why we should reconsider the penalty. Sign and send your letter along with any supporting documents to the address on your notice. Have this information when you call or send your letter: The notice or letter we sent you The penalty you want us to reconsider (for example, a Form 1099-NEC late filing penalty) For each penalty, an explanation of why you think we should remove it If a notice or letter we sent you has instructions or deadlines for disputing the penalty, pay careful attention. You must follow the instructions to dispute the penalty. If you didn't receive a notice or letter, get telephone assistance. Request a refund If you pay the penalty, you may file Form 843, Claim for Refund and Request for Abatement, and include: A letter that explains why you believe the penalty does not apply A copy of the notice we sent you Copies of any supporting documents Avoid a penalty You can avoid a penalty when you: File International Information Returns on time. Prepare the returns with correct information. Apply for an extension of time If you need more time to prepare your tax return, apply for an extension of time to file. This does not grant you an extension of time to pay. A payment plan can help you pay over time. Get help You can authorize someone to contact the IRS on your behalf See if you qualify for help from a Low Income Taxpayer Clinic If you can't resolve the penalty on your own, contact Taxpayer Advocate Service, an independent organization within IRS If you can't find what you need online, call the IRS number on your notice or letter (prepare for long wait times). For more help, contact the International Taxpayer Service Call Center Related Special Filing Season Alerts IRS operations status Forms, Instructions & Publications International Taxpayers Penalty Appeal Eligibility
