IRC 402(b) Foreign Pension Trust Account Taxation: Avoiding Form 3520-A, Form 3520, Form 8938 and FBAR penalties

Recording of a 110-minute CPE webinar with Q&A

Conducted on Tuesday, January 22, 2019

Recorded event now available

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Program Materials

This webinar will provide tax advisers with a deep dive into the tax rules governing foreign pension accounts, with a specific focus on avoiding penalties for noncompliance. The webinar will go beyond the basics to offer useful practice pointers on how the IRS approaches foreign pensions in an examination situation to prevent potentially costly tax penalties and sanctions.


The lack of clear guidance in the IRS's treatment of foreign pensions held by U.S. taxpayers has presented tax advisers with significant challenges in meeting compliance duties. Even the Government Accounting Office (GAO) issued a report in Jan. 2018, requesting the Service to provide more clarity on how taxpayers need to report interests in these accounts.

Most foreign retirement account plans are not considered "qualified plans" under IRC 401(a), which means the accounts generally do not qualify for tax-deferral treatment but are instead governed by Section 402(b) as a foreign trust. Depending on how the IRS applies 402(b) to a particular situation, employees holding foreign retirement accounts (and their beneficiaries) may receive harsher tax treatment than that of other non-tax-favored deferred compensation arrangements. This is particularly true in cases where the Service treats a foreign retirement account as a grantor trust.

Tax advisers must have a thorough understanding of the IRS rules on reporting foreign retirement accounts and how the Service may approach compliance examinations. With penalties for failure to file Form 3520-A set at a minimum of $10,000 per year, the consequences of a missed or incorrect filing are costly.

Listen as Sean O'Connor, Esq., Robert Hanson, Esq. and Anthony E. Parent, Esq. of Parent & Parent LLP offer practice pointers of how the IRS approaches foreign pensions in an examination situation.



  1. Information reporting for foreign pensions and trusts
    1. Classification of foreign pensions, annuities, and “social security”
    2. Forms 3520, 3520A, 8938 and FBAR
  2. Differentiation between foreign plans and “U.S. qualified plans”
  3. Section 402(b) provisions and treatment
  4. Grantor trust treatment
  5. Tax treaty applicability
  6. Identifying and remedying misreporting
    1. Disclosure program options
    2. The reasonable cause standard


The panel will discuss these and other important tactical issues:

  • Grantor vs. employee trusts: understanding the IRS's test and the arguments against it
  • The IRS's new 402(b) focus and when bifurcation is appropriate
  • Foreign pensions of highly compensated employees
  • Form 3520-A: when is it required along with 3520, FBAR and 8938; penalty mitigation strategies
  • What happens with PFICs inside a foreign pension
  • How to use tax treaties
  • Whether or not to use a disclosure program to clean up past misreporting


Hanson, Robert
Robert V. Hanson, Esq.

International Tax Attorney
Parent & Parent

Mr. Hanson is the lead attorney in the firm’s International Tax department. He received the CALI Academic...  |  Read More

O’Connor, Sean
Sean J. O’Connor

Supervising Tax Attorney
Parent & Parent

Mr. O’Connor has been with the firm for several years, most of which has been spent as the head of our tax...  |  Read More

Parent, Anthony
Anthony E. Parent

Founding Partner
Parent & Parent

Mr. Parent is the founding partner of his firm, and has a tremendous amount of success in opt-out audits and FBAR...  |  Read More

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