Penalties

Late filing and late payment. Section 6651 imposes penalties for both late filing and late payment, unless there is reasonable cause for delay.

Reasonable-cause determination. If you receive a notice about penalties after you file Form 708, send an explanation and we will determine if you meet reasonable-cause criteria. Do not attach an explanation when you file Form 708.

If you received a distribution from an electing foreign trust on or after January 1 of the year for which the trust’s domestic trust election is terminated and the election becomes an imperfect election (see Terminating the election in the event of an imperfect election , later), your failure to timely file and pay are due to reasonable cause and not willful neglect for purposes of section 6651 provided that you file Form 708 and pay the section 2801 tax within a reasonable period of time after being notified by the trustee of the foreign trust or

otherwise becoming aware that a valid election was not in effect when the distribution was made. For this purpose, a reasonable period of time is not more than six months after you are notified by the trustee or six months after you otherwise become aware that a valid election is not in effect.

Return preparer. Penalties may also be applied to Form 708 preparers. See section 6694, the related regulations, and Ann. 2009-15, 2009-11 I.R.B. 687, available at IRS.gov/pub/ irs-irbs/irb09-11.pdf , for more information.