IRS Provides New Guidelines for Appealing International Penalties

October 13, 2010, 02:05 PM

In August 2010, the IRS published guidelines with respect to a taxpayer’s right to appeal international penalties assessed against the taxpayer on a prepayment basis. The new guidelines, located in section 8.11.5 of the Internal Revenue Manual, outlines the taxpayer’s prepayment appeal rights. The taxpayers are divided into two categories and, depending on the category, the taxpayer will either be able to receive accelerated or non-accelerated pre-payment appeal rights. The first category (“Category 1”) taxpayers are those with assets totaling $100 million or more or who have been designated a Category 1 taxpayer. The penalties that qualify under this category generally are associated with a taxpayer failing to provide information or maintain records related to transfers or exchanges between or to certain foreign corporations and foreign financial asset information (“Section 6038 Penalties”). The second category (“Category 2”) taxpayers are generally those that are not Category 1 taxpayers or taxpayers who are assessed with penalties for failing to provide a statement relating to resident status, gifts from foreign persons or termination by an individual losing US citizenship. The Category 1 taxpayers that have a qualifying penalty assessment are eligible for the accelerated pre-payment appeal procedures. The Category 2 taxpayers that have a qualifying penalty assessment are eligible for the non-accelerated pre-payment appeal procedures. Click here for more information on the new international prepayment program. –Elaina L. Blanks