In some cases, legal counsel is not necessary to correct a minor mistake on a previously filed Form 5471.
However, filing a late Form 5471 leads to AUTOMATIC penalties. The government may possibly view the errors or omissions as “willful”. Such persons should engage legal counsel to fully evaluate the facts and circumstances, assess the potential civil and criminal exposure, discuss the benefits and burdens of these various options, and explore the optimal solution in each case.
A U.S. person with an unreported account at a Swiss financial institution or in a jurisdiction which the U.S. government considers a tax haven, or who maintained an account at a foreign financial institution currently under investigation for assisting U.S. taxpayers with evading tax, should immediately consult with legal counsel.
The attorney-client privilege provides a critically important protection allowing any analysis of whether the person’s conduct may be viewed by the government as willful or criminal to remain protected from disclosure to the IRS. Communications with accountants or non-lawyer tax professionals are not covered by any attorney-client or similar privilege.
No correction options are available to a U.S. person who is already under IRS audit or whose noncompliance has already been identified by the government. Thus, time is of the essence to correct Form 5471 mistakes, particularly in light of new requirements on foreign banks to disclose U.S. account holders to the IRS under FATCA.