By the A.M. Costa Rica wire services

Fury and frustration over the way the U.S. Internal Revenue Service has been hitting expat and stateside individuals alike with eye-wateringly large penalty notices in connection with IRS forms 3520 and 3520-A has been building, with the result that an organized protest movement appears to be forming. That is according to a recent post on TaxConnections.com, a California-based news and analysis website for U.S. tax professionals.

According to American Expat Finance journal report in July the Form 3520/3520-A penalty notices issue was publicized earlier this year when an experienced certified public accountant based in Minnesota named Gary W. Carter came forward, via TaxConnections.com, to detail how five of his overseas clients (so far) had been hit with them.

As Carter explained in his piece, individual U.S. citizens who hold non-U.S. (or foreign) trusts are expected to file a Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, and the trusts themselves are required to file a Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner, every year.

If the trust doesn't file a Form 3520-A, the U.S. owner of the trust is required to file a substitute Form 3520-A with their Form 3520.

In his column for TaxConnections, which was republished by the American Expat Financial News Journal with the permission of both TaxConnections.com and Carter, Carter detailed how easily – and disastrously – things went wrong for his clients, speculated that the scale of similar penalty notices could be huge and suggested that, by extension, these penalty notices could represent a huge, if not a particularly tax-payer-friendly, money-maker, for the IRS.

The response from readers to Carter's piece over the months since it ran has been huge, according to Kat Jennings, TaxConnections founder and chief executive, who on Friday published some of these comments, along with a request that tax professionals and taxpayers help by sharing their experiences as well, in order to enable her and TaxConnections to further bring the matter to the attention of the IRS and the National Taxpayer Advocate, an IRS in-house ombudsman's office.

Although she said she couldn't reveal the name of a powerful organization that is beginning to address the matter of the allegedly-unfair IRS Form 3520 and 3520-A penalty notices, Jennings said it was fair to note that the matter was gaining attention and traction behind the scenes.

Full report on Tax Connections’s readers complains on IRS forms 3520 and 3520-A can be reached at American Expat Finance journal site.




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Have you file complain on 3520 and 3520-A form?  We would like to know your thoughts on this story. Send your comments to news@amcostarica.com

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