A long-standing client mentions a brother in Frankfurt who left her something, or a small manufacturer sets up a sales company in Ontario, and international tax services stop being a phrase on a national firm's website. They become a filing deadline on your calendar.
Most of that work is not exotic planning. It is information reporting, meaning annual forms that tell the government what exists abroad. Those forms carry their own penalties, the penalties apply even when no tax is owed, and an unfiled one can hold the assessment period on the return open.
So the decision to offer international tax services is a capacity decision before it is a technical one.
What International Tax Services Actually Cover
The phrase covers two directions and three kinds of work.
Inbound work serves foreign people and companies with US income or US operations. Outbound work serves US people and companies with foreign income, foreign entities or foreign accounts. Your engagement letters should follow that line, because the forms and the exposure differ on each side.
Within either direction the work divides three ways. Information reporting is the annual duty to disclose what exists abroad. Computation is the arithmetic the Internal Revenue Code demands once something does exist: foreign tax credits, income inclusions from a controlled foreign corporation, transfer pricing on related-party dealings. Planning is what the service pages lead with, and it is the part that recurs least. The reporting comes back every year.
Sell the third and you inherit the first two.
The Information Returns Are the Expensive Part
Form 5471 is used by certain US persons who are officers, directors or shareholders in certain foreign corporations, and it satisfies the reporting requirements of sections 6038 and 6046 (IRS, Instructions for Form 5471, Rev. December 2025).
Missing it is costly on its own terms. A $10,000 penalty is imposed for each annual accounting period of each foreign corporation, and if the information is still not filed 90 days after the IRS mails a notice of the failure, an additional $10,000 per foreign corporation is charged for each 30-day period, limited to a maximum of $50,000 for each failure (IRS, Instructions for Form 5471).
Form 5472 is the inbound mirror, filed by a 25% foreign-owned US corporation or a foreign corporation engaged in a US trade or business that had a reportable transaction with a foreign or domestic related party. A penalty of $25,000 is assessed on a reporting corporation that fails to file when due and in the manner prescribed, and a further $25,000 applies for each 30-day period after the 90-day notice period ends (IRS, Instructions for Form 5472, Rev. December 2024).
Form 8938 reports specified foreign financial assets. For a specified individual living in the United States and not married, the threshold is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the year, and for married taxpayers filing jointly it is more than $100,000 and more than $150,000 (IRS, Instructions for Form 8938).
FinCEN Form 114, the Report of Foreign Bank and Financial Accounts, is a separate filing on a separate system. It is required when the aggregate value of foreign financial accounts exceeds $10,000 at any time during the calendar year, and the Form 8938 filing requirement does not replace or otherwise affect the obligation to file it (IRS, comparison of Form 8938 and FBAR requirements).
Form 3520 catches the fact pattern a general practice meets most often. A US person who receives more than $100,000 from a nonresident alien individual or a foreign estate and treats it as a gift or bequest has to report it, and a separate inflation-adjusted threshold under section 6039F applies to amounts treated as gifts from foreign corporations or foreign partnerships (IRS, Instructions for Form 3520, Rev. December 2025).
Two different penalty regimes sit behind that one form, and the percentages are what make them dangerous. On an unreported foreign gift, section 6039F carries 5% of the amount for each month the failure continues, not to exceed a total of 25%. On the transfer and distribution parts of the same form, section 6677 carries an initial penalty equal to the greater of $10,000 or 35% of the gross value of property transferred to a foreign trust in Part I, or 35% of the gross value of distributions received from one in Part III (IRS, Instructions for Form 3520).
Where Each Form Goes, and When
The deadlines are the trap, because these forms do not all travel with the income tax return.
| Form | Where it is filed | Due date |
|---|---|---|
| Form 5471 | Attached to your income tax return | With that return, including extensions |
| Form 5472 | Attached to the reporting corporation's income tax return | With that return, including extensions |
| Form 8938 | Attached to your annual return | With that return, including extensions |
| FinCEN Form 114 | Separately, through FinCEN's BSA E-Filing System | Received by April 15, automatic extension to October 15 |
| Form 3520 | Separately, to the IRS service center in Ogden | The 15th day of the 4th month after the tax year ends, the 15th day of the 6th month for a filer living and working abroad, or the 15th day of the 10th month with an income tax extension |
| Sources: IRS, Instructions for Form 5471, Instructions for Form 5472, Instructions for Form 8938, comparison of Form 8938 and FBAR requirements, Instructions for Form 3520. |
The Form 3520 date deserves its own line in your workflow. It is computed from the end of the person's own tax year rather than taken from the return, and the instructions say plainly that it may differ from and is not tied to the due date of that income tax return. An income tax extension does move it, to the 15th day of the 10th month, but a preparer who assumes the two dates are the same object will eventually meet a year where they are not.
The Assessment Period That Stays Open
A penalty is a number you can quote. An open assessment period is not, and it is the larger exposure.
If a complete Form 3520 is not filed by the due date, including extensions, the time for assessment of any tax relating to the events reported in Parts I through III will not expire before the date that is 3 years after the date on which the required information is reported, under section 6501(c)(8) (IRS, Instructions for Form 3520).
Form 8938 works the same way and reaches further into the return. If you fail to file it, or fail to report an asset you were required to report, the statute of limitations for that tax year may remain open for all or a part of your income tax return until 3 years after the date on which you file Form 8938 (IRS, Instructions for Form 8938).
There is a second clock alongside it. If gross income omits an amount relating to specified foreign financial assets and the omission is more than $5,000, any tax owed for that year can be assessed at any time within 6 years after the return was filed (IRS, Instructions for Form 8938).
Read those together and the practical rule is simple. A client with unfiled Forms 5471, 5472 or 8938, or an unfiled Form 3520 covering Parts I through III, does not have closed years for what those forms relate to, and telling them a year is safe because three seasons have passed is the kind of confident sentence that ends in a malpractice claim.
What the Supreme Court Settled About FBAR Penalties
The size of a nonwillful FBAR penalty used to depend on which way you counted, and the two ways were not close.
Alexandru Bittner filed late reports covering five years and then corrected them. Because the government took the view that nonwillful penalties apply to each account not accurately or timely reported, and his five reports collectively involved 272 accounts, it calculated the penalty due at $2.72 million (Bittner v. United States, decided February 28, 2023).
The Court held that the $10,000 maximum penalty for the nonwillful failure to file a compliant report accrues on a per-report, not a per-account, basis (Bittner v. United States).
Willful violations are a separate track and the holding does not soften them. For the subclass of willful violations involving a failure to report the existence of an account, the maximum penalty is either $100,000 or 50% of the balance in the account at the time of the violation, whichever is greater (Bittner v. United States).
One more detail belongs in the file note rather than the client email: civil FBAR penalty maximums in Title 31 of the United States Code are adjusted annually for inflation, so the statutory figure is a floor for the arithmetic and not the number that lands (IRS, Report of Foreign Bank and Financial Accounts).
The IRS Changed How It Assesses Foreign Gift Penalties
The most useful recent development for a small firm is procedural rather than statutory.
The IRS ended its practice of automatically assessing penalties at the time of filing for late-filed Forms 3520, Part IV, which deal with reporting foreign gifts and bequests, and said it would begin reviewing reasonable cause statements attached to late-filed Forms 3520 and 3520-A for the trust portion of the form before assessing any section 6677 penalty (National Taxpayer Advocate blog, October 24, 2024).
The numbers behind that change explain why it mattered. Over the four years from 2018 through 2021 the IRS abated section 6039F penalties assessed on Form 3520, Part IV totaling more than $179 million per year, an abatement rate of 67 percent of the penalties assessed and 78 percent of the dollars assessed. Over the same period, even taxpayers who reported $400,000 or less in income received an average penalty of over $235,000 (National Taxpayer Advocate blog).
For a firm, that turns the reasonable cause statement into real work rather than boilerplate. Reasonable cause is the taxpayer's affirmative showing of the facts that explain a late or missing filing, and it now sits in front of the assessment rather than behind it. Build the facts while the client still remembers them.
GILTI Was Renamed and Rewritten for Tax Years After 2025
The statute moved under everyone in 2025, which matters if your checklists and continuing education notes predate it.
Public Law 119-21 struck the term global intangible low-taxed income, the mouthful behind GILTI, from section 951A and inserted net CFC tested income. The same section struck foreign-derived intangible income from section 250 and inserted foreign-derived deduction eligible income. Both amendments apply to taxable years beginning after December 31, 2025 (Public Law 119-21, section 70323).
CFC there means controlled foreign corporation. The name in your software, your workpapers and your client letters is now the old one.
The rename is not the whole change. That same law struck subsections (b) and (d) of section 951A, under a heading that reads Repeal of tax-free deemed return on foreign investments, so the inclusion is now net CFC tested income with no reduction for a deemed return on tangible assets (Public Law 119-21, section 70323). Update the computation before the season, not just the labels.
The Individual Returns Are Not the Easy Ones
Firms quote expatriate and inbound individual work as if it were a domestic individual return with one extra schedule, and that is where the unbilled hours come from.
The foreign earned income exclusion is $132,900 for tax year 2026, up from $130,000 for tax year 2025 (IRS, tax inflation adjustments for tax year 2026).
An exclusion of that size often means no tax due, which is exactly why these engagements get underpriced. The exclusion reduces tax; it does not reduce the filing. The same client may still owe an FBAR and a Form 8938, and still need a foreign tax credit computation behind the return, so the hours sit in the reporting rather than in the liability.
Refer It, Hire It, or Build the Bench
Three routes handle this work, and the honest test for each is different.
Refer it when the volume is one or two clients a year and the exposure is concentrated in judgment: treaty positions, entity classification, transfer pricing. You keep the relationship and the domestic work, and someone else carries the position.
Hire it when the work is steady enough to fill a person and specialized enough to justify one. The constraint is rarely the salary. It is whether anyone left in the firm can review what that person produces.
Build the bench when the volume sits in the mechanical layer: account inventories, currency translation, schedule preparation, and tracking the holdings that feed the Form 5471 filer-category call. That layer scales with people. Judgment does not.
The failure mode is predictable. A firm sells the planning conversation, wins the client, and then discovers the recurring compliance is a stack of forms and a block of hours nobody scoped. Work the compliance calendar out before the engagement letter, the same way you would size any capacity commitment before a busy season.
Skip all three when nobody in the firm can review an international information return. Capacity is the wrong purchase for a review problem, and the first fix is a reviewer who knows these forms, bought or trained.
What Offshore Staff Can Carry on International Work
Preparation capacity helps here, within limits worth stating plainly.
An offshore preparer can build the foreign account inventory from statements, apply the required exchange rates, populate the schedules, maintain the ownership chart the firm's filer-category calls are made from, and keep the reasonable cause documentation file current. That is real work.
What does not move is the position taken on the return, the reasonable cause argument, the client conversation about a disclosure, and the signature. Those stay with the licensed people in your firm, and your firm's partner signs the return the same way as on any domestic engagement.
The mechanics of moving client data offshore are the same for this work as for any other, and the consent rules, the credential checks and the cost structures are covered in their own right in outsourcing tax preparation to India, hiring offshore CPAs and the cost to outsource tax preparation.
Questions Firms Ask
How Does International Tax Work for a US Client?
US citizens and residents are generally taxed on worldwide income, and the main tools that reduce double taxation are the foreign tax credit, the foreign earned income exclusion for earned income, and whatever a relevant treaty provides. Running alongside that, and largely independent of whether tax is owed, is a set of information returns that report what exists abroad. The second set is where most small-firm exposure sits.
Which Clients Trigger International Tax Filings?
A foreign bank account, a foreign employer, an interest in a foreign company, a gift or inheritance from abroad, an interest in a foreign trust, or a non-US spouse. None of those announce themselves on a tax organizer, and clients rarely volunteer them because nothing about them feels like a US tax event. Ask directly, in writing, every year.
Can a Small Firm Offer International Tax Services?
Yes, if the scope is narrow on purpose. Pick the two or three fact patterns your client base actually produces, learn those forms properly, build the checklist, and refer everything else out. A firm that advertises the whole category and staffs for none of it ends up carrying penalty exposure it never priced.
What Should a Firm Do About a Client's Late Filing?
Treat the reasonable cause statement as the deliverable. Gather the facts, document what the client knew and when, and file the delinquent return with the statement attached rather than filing bare and arguing later, since the IRS said it would review those statements before assessing the trust-portion penalty on Forms 3520 and 3520-A.
Start With the Filings You Already Owe
International tax services sound like a planning practice and behave like a compliance practice. The forms carry their own penalties, several of them keep the assessment period open until they are filed, and the deadlines do not all follow the income tax return. Price that reality first, then decide whether to refer, hire or build.
Accountably places trained offshore accountants and tax preparers inside US CPA, EA and accounting firms, working on the firm's own software and SOPs, with the signature and the final judgment staying with the firm. Since 2022 that has meant 20+ US firms and 30+ placements.
The way in is deliberately small. A Free 40-Hour Proof Pilot puts a fixed block of your own representative work through the offshore team and your review chain, so your reviewer grades real output before a client file is committed. If a placement is not the right fit inside the first 30 days, the 30-Day Fit Guarantee replaces them free.
Don't trust us. Test us.