CCA 201104041: Failure to file Form 5471 extends the assessment period

Plain-English summary

Chief Counsel explained how the HIRE Act amendment to IRC § 6501(c)(8) applies when required information is not reported under IRC § 6038. A failure to file Form 5471 for a tax year extends the assessment period for the entire tax return to which the information relates, including Forms 1040 and 1065, when the limitations period was still open on March 18, 2010. The later August 10, 2010 amendment limits the extension to the related item or items when the failure resulted from reasonable cause and not willful neglect. The advice concerns how long the IRS may assess tax when Form 5471 information is missing.

Ruling snapshot

• Question: How does a failure to file Form 5471 affect the assessment period for related tax returns?
• Outcome: Advice given.
• Key authorities: IRC §§ 6038 and 6501(c)(8); HIRE Act § 513; Pub. L. 111-226, § 218.

Full text (IRS public release)

ID: CCA_2010122014535444 Number: 201104041
Release Date: 1/28/2011
Office: ----------------------------
UILC: 6501.00-00

From: ---------------------
Sent: Monday, December 20, 2010 2:54:02 PM
To: ---------------------------
Cc: ------------------------------------------
Subject: RE: 5471s

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Section 6501(c)(8), as amended by the Hiring Incentives to Restore Employment Act (“HIRE”), Pub. L. 111-147 (124 Stat. 106), § 513, provides, in relevant part, that in the case of any information which is required to be reported to the Secretary under section 6038, the time for assessment of any tax imposed with respect to any tax return, event, or period to which such information relates shall not expire before the date which is 3 years after the date on which the Secretary is furnished the information required to be reported. The amendment applies to returns filed after March 18, 2010, or returns filed on or before that date if the section 6501 period (determined without regard to such amendments) for assessment of such taxes was not expired as of that date.

The HIRE Act amendment to section 6501(c)(8), therefore, clarifies that a failure to file Form 5471 for a particular tax year would extend the time for the assessment of tax with respect to any tax return to which the information relates. The inclusion of “tax return” in section 6501(c)(8) means the extended period applies to an entire tax return and is not limited to adjustments to income related to the information required to be reported. See Technical Explanation of the Revenue Provisions Contained in Senate Amendment 3310, The “Hiring Incentive to Restore Employment Act,” Under Consideration in the Senate, JCX-4-10 (February 23, 2010). Assuming the section 6501 limitations period was open as of March 18, 2010, amended section 6501(c)(8) operates to extend the time for assessment of tax with respect to any tax return, including Forms 1040 and 1065, to which the information relates.

Please note that section 6501(c)(8) was further amended on August 10, 2010, to provide that if the failure to furnish the required information is due to reasonable cause and not willful neglect, the extended limitations period only applies to the item or items related to such failure and not the entire tax return. Pub. L. 111-226 (124 Stat. 2403), §

218. This provision is effective as if included in section 513 of the HIRE Act.
     Depending on the facts, this could affect the taxpayer in your case.