Did You Receive a Semi-Automated Penalty Assessments For Late Filed Form 3520's & 3520-A's – We Can Help!

On April 10, 2019, we posted US Taxpayers Are Receiving Automated Penalty Assessments For Late Filed Form 5471's & 5472's - We Can Help!  where we discussed that we have been receiving a many calls from businesses who have received penalty notices regarding late filed or non-filed Form 5471 & 5472's and that we discussed ways to defend against these automatic assessments and request penalty abatement including the Reasonable Cause Defense and First-Time Offender Abatement (FTA) Defense.

The same arguments are equally as effective when defending the even more egregious late filing penalties, associated with Form 3520 & Form 3520-A. 

 

The key to successfully having these penalties abated, more so today than ever before, is to hire an Experienced Tax Attorney, to develop the facts and distinguish adverse case law, especially when requesting penalty abatement based upon "Reasonable Cause".

Penalties for Late Filing or Failure to File Form 3520

IRC section 6677 provides for stiff penalties if Form 3520 is not timely filed or is incomplete or incorrect. The initial penalty is the greater of $10,000 or—

• 35% of the gross value of any property transferred to a foreign trust if a U.S. person fails to report the creation of or transfer to a foreign trust;
• 35% of the gross value of the distributions received from a foreign trust by a U.S. person who fails to report receipt of the distribution; and
• 5% of the gross value of all of a foreign trust’s assets treated as owned by a U.S. person under the grantor trust rules (IRC sections 671–679) if the U.S. owner fails to report required information. The owner is also subject to an additional 5% penalty if the foreign trust itself fails to file a timely Form 3520-A [“Annual Information Return of Foreign Trust With a U.S. Owner”; see IRC section 6048(b)], does not provide all required information, or provides incorrect information. 

Penalties for Late Filing or Failure to File Form 3520-A

The U.S. owner is subject to an initial penalty equal to the greater of $10,000 or 5% of the gross value of the portion of the trust's assets treated as owned by the U.S. person at the close of that tax year if the foreign trust (a) fails to file a timely Form 3520-A, or (b) does not furnish all of the information required by section 6048(b) or includes incorrect information. Criminal penalties may be imposed under sections 7203, 7206, and 7207 for failure to file on time and for filing a false or fraudulent return.