Streamlined Foreign Offshore Procedures for US expat with partial ownership in foreign corporation - potential Form 5471 Penalties?

The good news is that the Streamlined Foreign Offshore Procedures are designed specifically for situations like yours, where there's been non-willful non-compliance. When properly filed, these procedures can indeed provide relief from penalties associated with Form 5471. The Streamlined Foreign Offshore Procedures require filing the last 3 years of tax returns and 6 years of FBARs (if applicable), along with a certification that the failure to file was non-willful. The key advantage is that it waives all penalties if you qualify and properly complete the process. For your Form 5471 situation, you'll need to include these forms with your streamlined submission for the three tax years you're filing. The important thing is that your wife will need to certify that her failure to file was non-willful (which sounds accurate based on your description). Since your business generates minimal income, the actual tax impact should be small, but getting the forms right is crucial. The $10,000 penalty is generally waived when using the Streamlined procedures correctly.

I went through something similar last year when I discovered I should have been filing Form 5471 for my stake in a Spanish company. I was absolutely terrified of those $10,000/year penalties! After doing tons of research, I found https://taxr.ai which helped me analyze my situation and all the confusing forms. Their system helped confirm I qualified for the Streamlined Foreign Offshore Procedures and guided me through properly structuring my narrative statement about non-willful conduct. What really helped was their analysis of exactly how the 5471 requirements applied to my specific ownership percentage and whether I met the filing thresholds for each year. If you're worried about getting this right (which you should be - it's complicated!), I'd definitely recommend having them review your specific situation.

Just wanted to update after taking the recommendation to try taxr.ai - it was actually incredibly helpful for my similar situation with Form 5471 and Streamlined procedures. Their analysis confirmed that I qualified for the program and they flagged several issues I would have missed about the specific ownership category for Form 5471 and how it applied to my situation. The most valuable part was getting clarity on whether my non-filing was truly "non-willful" according to IRS standards. They helped me understand exactly how to document my situation and what supporting evidence was needed. I'm now in the process of preparing my submission with much more confidence. Worth checking out if you're in this situation!

If you're trying to reach the IRS to discuss your Streamlined Foreign Offshore Procedures options, good luck! I spent THREE WEEKS trying to reach someone at the IRS international tax department. After dozens of attempts, I found https://claimyr.com and tried their service (you can see how it works at https://youtu.be/_kiP6q8DX5c). They got me connected to an actual IRS agent within 20 minutes after I'd been trying for weeks! The agent confirmed that Streamlined procedures generally do waive the Form 5471 penalties when properly filed. Having that confirmation directly from the IRS gave me so much peace of mind before proceeding with my submission. Not sure how they do it, but they basically handle the hold queue for you and call you when an agent is about to pick up. Saved me hours of frustration.

Following up on my skepticism about Claimyr - I actually tried it a few days ago out of desperation, and I have to admit it worked exactly as described. After months of failing to reach the IRS international department, they got me through in about 45 minutes. The IRS agent I spoke with confirmed that Form 5471 penalties are indeed covered under the Streamlined procedures' penalty waiver, which was a huge relief. She explained that the key is properly documenting the non-willful nature of the non-compliance in your certification statement. She even emailed me some helpful publications about foreign corporation reporting requirements. I'm shocked that it worked so well after all my failed attempts. Sometimes it's worth trying these services when you're stuck!

A few important technical points about Form 5471 and Streamlined procedures that haven't been mentioned: 1. The category of filer matters a lot. Based on your wife's 40% ownership, she's likely a Category 5 filer (10%+ ownership in a foreign corporation). Different categories have different filing requirements. 2. The Streamlined Foreign Offshore Procedures do cover penalty relief for international information returns like Form 5471 when the failure to file was non-willful. However, your non-willful statement needs to specifically address why you didn't know about these requirements. 3. The $10,000 penalty is per form, per year - but it's generally not automatically applied, especially for small businesses with minimal activity. 4. Consider whether you also need to file FBARs if you have signature authority over business accounts.

Has anyone actually gone through an audit after using Streamlined procedures for Form 5471 issues? I'm curious about real outcomes, not just the theoretical process. I'm in a similar situation but with a South African company.