Today, we will delve deeper into the broad scope of IIR penalties, dispelling the misconception that it only affects affluent individuals and corporations. At Crystal Clear Tax, we understand the importance of grasping these complexities and advocate for fair changes in the system.
Misconception
Contrary to popular belief, IIR penalties don’t just affect wealthy taxpayers with bad intentions. They disproportionately impact individuals and businesses with more modest resources, making it a widespread issue that needs attention. Immigrants, small businesses, and low-income individuals often find themselves unintentionally caught up in IIR penalties due to a lack of awareness and access to specialized tax expertise.
Sections 6038 and 6038A
An example is found in IRC §§ 6038 and 6038A penalties, affecting those reporting U.S. persons with interests in foreign partnerships and corporations. Immigrants establishing U.S. business entities involving family members abroad may unknowingly trigger filing obligations and face penalties for IIR non-compliance. Small businesses, constituting 83% of IRC §§ 6038 and 6038A penalty assessments, bear the brunt of these penalties, often due to inadvertent oversights.
Section 6039F
The disproportionate impact of IIR penalties is evident in IRC § 6039F penalties related to foreign gift and inheritance reporting. U.S. persons receiving gifts from foreign individuals can face penalties of up to 25% of the gift’s value for failing to file the required form. Surprisingly, these penalties disproportionately affect lower- and middle-income individuals, making the system seem unnecessarily punitive.
At Crystal Clear Tax, we recognize the need for a more equitable IIR penalty regime. Our expertise extends to addressing the unique challenges faced by single mothers entrepreneurs, and individuals from diverse professions. We offer a range of services to meet their specific needs, including:
- Accounting and Bookkeeping.
- Financial Advisory.
- Tax Services.
Book a discovery call with us today.
