The Internal Revenue Service is giving holders of foreign retirement trusts an exemption from some of the information reporting requirements, along with the abatement of penalties.
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The IRS cautioned that only taxpayers who have complied with their income tax obligations related to the trusts could rely on the revenue procedure. Nevertheless, the document includes procedures describing how eligible taxpayers can request the abatement of penalties that have been assessed or a refund of penalties that have been paid for failure to comply with the information reporting requirements for a tax-favored foreign trust.
The Treasury Department and the IRS plan to issue proposed regulations that would modify the requirements under section 6048 of the Tax Code to exclude eligible individuals’ transactions with, or ownership of, tax-favored foreign trusts from the information reporting requirements. They are asking for comments about these and similar types of foreign trusts that should be considered for an exemption from the reporting requirements.
Section 6048 was enacted in 1996 and generally requires annual information reporting of a U.S. taxpayer’s transfers of money or other property to, ownership of, and distributions from, foreign trusts. Section 6677 imposes penalties on U.S. taxpayers for failing to comply with section 6048.
