Unfortunately, the IRS seems to enjoy issuing penalties. Below are some of the penalties that relate to foreign real estate investors.

Form 5471 is an Information Return of US Persons With Respect to Certain Foreign Corporations. Failure to timely file a Form 5471 is generally subject to a $10,000 penalty per information return, plus an additional $10,000 for each month the failure continues, beginning 90 days after the IRS notifies the taxpayer of the failure, up to a maximum of $60,000 per return.

Form 5472 is an Information Return of a 25% Foreign-Owned US Corporation or a Foreign Corporation Engaged in a US Trade or Business. Failure to timely file a Form 5472 is subject to a $25,000 penalty per information return, plus an additional $2,5000 for each month the failure continues, beginning 90 days after the IRS notifies the taxpayer of the failure, with no maximum penalty.

Form 8865 is a Return of US Persons with Respect to Certain Foreign Partnerships. Failure to timely file a Form 8865 is generally subject to a $10,000 penalty per information return, plus an additional $10,000 for each month the failure continues, beginning 90 days after the IRS notifies the taxpayer of the failure, up to a maximum of $60,000 per return. There are additional rules to calculate this penalty.

Sometimes, it’s possible to get the penalties removed. If you’ve received a notice for these penalties make sure you work with an experienced CPA to try to get them removed.