The IRS has issued Rev Proc 2020-17, 2020-12 IRB, that exempts from information reporting requirements certain tax-favored foreign trusts that are established and operated exclusively or almost exclusively to provide pension or retirement benefits, or to provide medical, disability, or educational benefits. The procedure also provides guidance on how to request abatement, or a refund, of penalties for failure to comply with these information reporting requirements.
- An applicable tax-favored foreign trust means a tax-favored foreign retirement trust or a tax-favored foreign non-retirement savings trust.
- An eligible individual means an individual who is, or at any time was, a U.S. citizen or resident and who is compliant (or comes into compliance) with all requirements for filing a U.S. federal income tax return (or returns) covering the period such individual was a U.S. citizen or resident, and to the extent required under U.S. tax law, has reported as income any contributions to, earnings of, or distributions from, an applicable tax-favored foreign trust on the applicable return (including on an amended return).
- A tax-favored foreign retirement trust means a foreign trust for U.S. tax purposes that is created, organized, or otherwise established under the laws of a foreign jurisdiction (the trust’s jurisdiction) as a trust, plan, fund, scheme, or other arrangement (collectively, a trust) to operate exclusively or almost exclusively to provide, or to earn income for the provision of, pension or retirement benefits and ancillary or incidental benefits, and that meets certain requirements established by the laws of the trust’s jurisdiction.
- A tax-favored foreign non-retirement savings trust means a foreign trust for U.S. tax purposes that is created, organized, or otherwise established under the laws of a foreign jurisdiction (the trust’s jurisdiction) as a trust to operate exclusively or almost exclusively to provide, or to earn income for the provision of, medical, disability, or educational benefits, and that meets certain requirements established by the laws of the trust’s jurisdiction.
Procedures for Requesting Abatement or Refund of IRC Sec. 6677 Penalties.
Since the IRC Sec. 6677 penalties no longer apply to eligible individuals who fail to report applicable tax-favored foreign trusts, the IRS has provided such individuals who have been assessed or paid IRC Sec. 6677 penalties within the IRC Sec. 6511(a) limitations period, with procedures for requesting abatement of penalties assessed or refund of penalties paid.
Read more at: Tax Times blog
