What to Do If You Receive an IRS Letter 1352

IRS Letter 1352 is a specific communication that informs the recipient of a proposed penalty. This penalty relates to the failure to file a required international information return with the IRS. The letter serves as an official notification that the agency believes a filing obligation was not met and that financial penalties are being considered as a result.

The Reason for Receiving Letter 1352

This notice is specifically triggered when the IRS identifies a failure to file Form 5471, “Information Return of U.S. Persons With Respect to Certain Foreign Corporations.” The primary purpose of this form is to provide the IRS with information about the activities of foreign corporations that are controlled or owned by U.S. persons, helping to ensure compliance with U.S. tax laws on foreign income. The filing requirement for Form 5471 is not universal and applies only to specific categories of U.S. citizens or residents who have certain relationships with foreign corporations.

These categories generally include a U.S. person who acquires a significant interest in a foreign corporation or becomes an officer or director of a foreign corporation in which a U.S. person has a specified level of ownership. It also applies to U.S. shareholders who own a certain percentage of a foreign corporation’s stock.

How to Respond to the Notice

Upon receiving Letter 1352, a timely response is necessary to address the proposed penalty. The primary action required is to file the delinquent Form 5471 for the tax year in question. This form must be completed accurately and in its entirety, providing all the financial and ownership information required. Simply filing the form late is not sufficient on its own to resolve the penalty issue.

To request that the proposed penalty be waived, you must attach a detailed statement to the late-filed Form 5471. This statement must establish “reasonable cause” for the failure to file on time. The reasonable cause argument should be a factual explanation, made under penalties of perjury, detailing the circumstances that led to the non-filing. This is the taxpayer’s opportunity to demonstrate that the failure was not due to willful neglect but occurred despite exercising ordinary business care and prudence.

Potential Penalties for Non-Compliance

The penalties associated with failing to file Form 5471 are outlined in Internal Revenue Code Section 6038. The initial penalty proposed in Letter 1352 is $10,000 for each annual accounting period for which the failure exists. This amount is assessed for each Form 5471 that was not filed as required. The financial consequences can escalate if the failure is not rectified promptly.

After the IRS sends notification of the failure, a 90-day clock begins. If the required Form 5471 is not filed within that 90-day period, a “continuation penalty” of $10,000 is assessed for each 30-day period, or fraction thereof, that the failure continues. This continuation penalty can accumulate up to a maximum of $50,000 per return.