Hey Pros,
Here is a quick background before I get into the international issues:
-She is retired, only US income is from pension & IRA accounts
-2018 was the last return filed. She was out of the US in Italy when it locked down due to Covid last year. She didn't return to the states until December. So 2019 is now late, and 2020 hasn't been filed yet, but will go on extension.
This was a new client meeting. Came in originally because she wanted to amend her 2018 tax return because her previous CPA firm did not include losses from an international business she owned, and thought the losses would offset her US income.
Here is a summary of the international businesses:
- Business #1 - Located in Italy
- Was originally organized in 2018 as Saocietà a Responsabilità Limitata SRL - a Corporation - of which she was a 99% owner, and her partner was 1% owner
-In April 2019 she sold 98% of her interest to her partner (so now she is 1% owner, and he is 99%), and the company was re-organized as Società in accomandita semplice (S.a.s.) - Which from my research would be considered a partnership in the US
-The business has only ever generated losses
-Business was never included on the originally filed US return for 2018. They added Form 8938 with Italian bank account information, but nothing about the business
-Business #2 - Located in Morocco
-Also opened in 2018, she is the 100% owner, and it is organized as Société Responsabilité Limitée Associe Unique - My research is not definitive on this, sometimes it looks like it could be filed as a disregarded entity on her US tax return, but I think more likely it has to go on the 5471 as a C Corp
-Just like the Italian business, it was never included on the originally filed US return for 2018. They added Form 8938 with Moroccan bank account information, but nothing about the business
Pros...I am not sure how to tackle this one. Although it looks like it, she doesn't have a lot of money, because my first thought was to send her to an international lawyer. I'm trying to figure out the most streamlined way to get her back into compliance. Especially if the international stuff is just mostly informational reporting. Here are my thoughts, let me know what you think:
1) In 2018 the Italian & Moroccan businesses are considered corporations, and no income would flow through to her, I think we could use the IRS Delinquent International Information Return Submission Procedures to get her up to date. If anyone has done this before I would appreciate advice on if you think its a viable option
2)
-Since the Italian corp was 99% owned by her for the first 4 months of the year, I still believe it needs Form 5471.
-Going forward after April 2019, since she only owns 1% of the partnership, I do not believe that needs Form 8865, or any special reporting (please let me know if you believe I am wrong about that)
-The Moroccan company is still 100% owned by her, so it will still require 5471 (again, I assume this would not be properly classified as a disregarded entity although I am not 100% sure)
- Although a return does not need to be amended, because the return was never filed and is now late, my guess is she still needs to use the IRS Delinquent International Information Return Submission Procedures
Whew...and all of this in the middle of season.
Thank you all for the help and advice, I really appreciate it!