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An analysis by Alvarez & Marsal, Taxand US
The recent tax ruling Farhy v. Commissioner, 160 T.C. 6 (2023) has found that the IRS’s long-held position on a procedural rule for certain information reporting penalties was incorrect.
This decision may represent a real opportunity for taxpayers whose claims for a “reasonable cause” exception to the penalty for failing to timely file international information returns were summarily rejected by the IRS.
The implications of the Farhy case are uncertain but could be far-reaching — it is potentially applicable to numerous other penalties for failure to file international information returns that the IRS has systematically assessed following the same procedures it followed in Farhy.
Kenneth Brewer, Alan Cathcart and Emily L. Foster of Alvarez & Marsal, Taxand US, assess the case in more detail here.
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