IRS Penalties and Reasonable Cause
I received an IRS notice assessing an international information return penalty. What should I do?
Short answer
First, read the entire notice, identify the form and year involved, and calendar the response deadline. Check whether the assessment is correct before deciding whether to dispute it, request relief or pay. A timely, documented response is important, but the available procedure depends on the notice and the type of penalty.
Who this applies to: This applies to taxpayers receiving IRS assessments involving international information returns such as Forms 5471, 5472, 3520 or 8938.
Identify exactly what the IRS assessed
Read every page, including response instructions, appeal information and payment details. Confirm the taxpayer name, identification number, tax period, form and penalty provision. Different international information return penalties have different requirements and procedures. A notice may concern an omitted form, a late filing, substantial incompleteness or continued noncompliance after earlier correspondence. Preserve the envelope and earlier letters if delivery or the sequence of notices may matter to the response.
Compare the notice with your records
Gather complete copies of the original and amended returns, extensions, information forms, attachments and proof of filing. Distinguish evidence that an income tax return was filed from evidence that the required international attachment was included and complete. Review the underlying reporting obligation: entity ownership, transactions and tax residency can determine whether a form was actually required. If records suggest an IRS processing error, explain the mismatch with specific supporting documents rather than merely asserting timely filing.
Choose the correct response and relief basis
A dispute that no penalty was legally due is different from a request to forgive a valid penalty. Reasonable cause may be available depending on the provision and facts. First-time abatement is not a general solution for international information return penalties. Some notices provide administrative review or appeal options; others arise at a different procedural stage. Use the address, method and timing specified for the applicable process. Keep copies and reliable evidence that the response was sent.
Correct filings and monitor the account
Determine whether missing or incorrect forms need correction and how they should be submitted. A penalty response letter alone does not necessarily fulfill the filing obligation, and a late form alone does not necessarily request relief. Continued failure after IRS notification can create additional exposure under some provisions. Track future correspondence, account activity and any agreed actions. Payment, refund claims and collection alternatives have distinct consequences and deadlines, so obtain advice before choosing a procedural route.
Practical example
Hypothetically, a company receives a Form 5472 penalty notice but has delivery proof for its filing. It should assemble the complete submitted package and identify whether the dispute concerns receipt, timing, completeness or the actual reporting requirement.
Common mistakes
- Ignoring the notice while waiting for an accountant to locate records.
- Sending only the missing form and assuming the assessed penalty disappears.
Filing requirements
- Create a file with all notices, returns, attachments, extensions and filing evidence.
- Submit the appropriate response and any necessary corrective filings through their respective procedures.
Potential penalties
- Interest and possible additional penalties can apply; responding does not automatically suspend collection or every deadline.
What to consider next
- Calendar the notice deadline immediately.
- Determine whether the issue is an error, a filing correction or a relief request.
- Ask Chirino USA to review the notice and coordinate a documented response.
Discuss your situation with Chirino USA
Every situation depends on its facts. If you would like a professional to review yours, message us on WhatsApp, email us, or request a consultation — in English or Spanish.
General information, not tax advice
This page provides general educational information about U.S. federal tax rules. It is not individualized tax, legal or accounting advice, and it does not create a client relationship. Results depend on each taxpayer's specific facts.
Written by Roger I. Chirino, founder of Chirino USA Accountants & Advisors P.A.
Supported by licensed CPAs, IRS Enrolled Agents (EAs), and experienced U.S. tax professionals focused on cross-border compliance and planning.
Related questions
What counts as reasonable cause for IRS penalty relief?
Does first-time penalty abatement apply to international information return penalties?
What happens if Form 5472 is filed incorrectly?
What happens if Form 5472 is filed late?
Do foreign companies owned by U.S. taxpayers need to be reported?
I moved to the U.S. and still own my foreign company. What changes?