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Farhy v. Commissioner and International Information Reporting Penalties
June 9, 2023
U.S. taxpayers that own or control certain foreign corporations, foreign partnerships or foreign trusts are required to disclose the activities, usually with forms attached to a tax return. If not reported timely or properly on the designated forms, these U.S. taxpayers may be subject to significant penalties. A recent Tax Court Ruling for Farhy v. Commissioner brought to light how the Internal Revenue Service (IRS) applies these penalties. The main issue argued whether the law actually grants the IRS the authority to assess and collect these penalties.