Form 3520 Foreign Trust Reporting for Tax Counsel: Navigating 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 CLE/CPE webinar with Q&A


Conducted on Thursday, April 6, 2017

Recorded event now available

or call 1-800-926-7926
Program Materials

This CLE/CPE webinar will provide tax counsel with a comprehensive and practical guide to a deep exploration into 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% 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 how to claim relief from penalties for failure to file, or incorrect filing, of Form 3520. Tax advisers can help their clients avoid costly penalties by navigating the 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 aid you in keeping 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

Benefits

The panel will discuss 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, such as Forms 5471, 8865, 8621 and Schedule B?
  • What are the filing requirements for the U.S. beneficiary of a foreign non-grantor trust?
  • What are the penalties, and relief provisions, for failure to file a Form 3520 or Form 3520-A?
  • What are the processes for establishing a reasonable cause exception for penalty abatement?

Faculty

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

Director
Aronson

Ms. Dougherty has extensive experience assisting clients with U.S. tax reporting and compliance for offshore assets and...  |  Read More

Richard S. LeVine
Richard S. LeVine

Of Counsel
Withers Bergman

Mr. LeVine's practice focuses on cross-border estate, gift and income tax planning for owners of privately held...  |  Read More

Aaron T. Kriss
Aaron T. Kriss

Day Pitney

Mr. Kriss assists corporations, partnerships, investment managers and entrepreneurs in structuring their business...  |  Read More

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