Form 3520 Foreign Trust Reporting for Tax Counsel: Filing Requirements and Penalty Abatements for Delinquencies

Establishing Reasonable Cause Exceptions, Appeals Prior to Payment, Collection Due Process, and More

Recording of a 90-minute premium CLE/CPE video webinar with Q&A


Conducted on Thursday, May 20, 2021

Recorded event now available

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Course Materials

This CLE/CPE course will provide tax counsel with a comprehensive and practical guide to a deep exploration into the reporting regime for U.S. taxpayers' ownership of foreign trust assets on IRS Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. The panel will detail the events and transactions that require reporting and discuss tax counsel's role in remedying an absent or incorrect filing, including navigating the penalty abatement process for failure to correctly and timely file a Form 3520.

Description

Form 3520, the Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, is one of the most complex tax reporting forms in the IRS international tax reporting regime. Taxpayers who own an interest in a foreign-based trust, or receive gifts, inheritances, or distributions from a foreign source, are required to report these foreign "reportable events," even if the taxpayer does not receive income from these foreign sources.

A significant challenge for taxpayers is determining whether a taxpayer qualifies as a "responsible party" for purposes of filing a Form 3520. As in most U.S. tax reporting of foreign activities, extremely steep penalties apply for failure to correctly and timely file Form 3520, including a base penalty of 35 percent of the value of the reportable event. While Section 6677 provides for reasonable cause relief, the provisions to claim that relief are complex and burdensome for taxpayers and tax counsel alike.

Tax counsel and advisers need to have a thorough understanding of the regime for reporting foreign-based trusts, including claiming relief from penalties for failure to file or incorrect filing of Form 3520. Tax advisers can help their clients avoid costly penalties by navigating foreign trust reporting rules.

Listen as our experienced panel provides a deep dive into the filing requirements and specific sections of Form 3520, along with a discussion of penalties and relief provisions, to help you keep clients with foreign trust holdings compliant with IRS rules.

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Outline

  1. Determining owners and responsible parties
  2. Reportable events
    1. Obligations
    2. Gratuitous transfers
    3. Qualified obligations
    4. Distributions and calculations
    5. Gifts and bequests
    6. Other form items
  3. IRC Section 6677 penalties for failure to file and relief provisions
    1. Calculation of penalties
    2. Section 6048 special rules
    3. Reasonable cause exception
  4. Form 3520 reporting and schedule preparation

Benefits

The panel will review these and other key issues:

  • What "reportable events" trigger a Form 3520 filing requirement?
  • What is the overlap between Form 3520 and other foreign information reporting requirements?
  • What are the filing requirements for the U.S. beneficiary of a foreign non-grantor trust?
  • What are the penalties and relief provisions for failing to file a Form 3520 or Form 3520-A?
  • What are the processes for establishing a reasonable cause exception for penalty abatement?

Faculty

Diosdi, Anthony
Anthony V. Diosdi

Partner
Diosdi Ching & Liu

Mr. Diosdi is an experienced trial lawyer who regularly defends individuals and corporations in matters involving tax...  |  Read More

Dougherty, Alison
Alison N. Dougherty, J.D., LL.M., CPA

Partner
Aronson

Ms. Dougherty specializes in U.S. international tax reporting, compliance, consulting, planning, and structuring as a...  |  Read More

Walker, Steven
Steven L. Walker

Attorney
Law Offices of Steven L. Walker

Mr. Walker's practice focuses on representing businesses and individuals facing tax controversies before the...  |  Read More

Access Anytime, Anywhere

Strafford will process CLE credit for one person on each recording. CPE credit is not available on recordings. All formats include course handouts.

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