3520-A Penalty

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MGeorge
Posts: 313
Joined: Fri Jun 22, 2012 9:23 am
Location: Canada

Re: 3520-A Penalty

Post by MGeorge »

Hello Caninus,

One position you can take is that the instructions on the due date for filing a substitute 3520A attached to a 3520 are confusing. The trustee is responsible for filing 3520A by March 15 in order to relieve you of the obligation of completing a substitute 3520A and attaching it to the 3520.
Look at the questions on 3520 "Did the foreign trust file a 3520A?". Well, on March 14th, you can't answer this question. On March 16th you can - because you didn't get your trust owner statement and on the 16th of March, it's past due. So, only after March 15th do you know that YOU have to attach a substitute 3520A to the best of your ability.

I have always believed (but haven't tested it) that the 3520A, filled out as a substitute is merely an attachment to your 3520, due when your 1040 is due.

I would even resist using the term file a 3520A as a foreign trust owner. The trustee failed to file it, not you. When the trustee fails to file 3520A, you have to add 3520A-like information to your 3520. You could even do this in plain text not on form 3520A as a substitute. That is just my opinion and I am not an expert - far from it.

Best of luck!
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MGeorge is neither an accounting nor taxation professional.
CdnAmerican
Posts: 245
Joined: Tue Aug 30, 2011 12:15 am

Re: 3520-A Penalty

Post by CdnAmerican »

Caninus - Thanks for the update! Yes, that is good news indeed. I suspect their delivery time for your cheque may not be terribly fast but will probably happen :) . It does seem like talking to a human is a good strategy when common sense is required, so I'm glad this worked out well for you!
Not a professional opinion.
aed11
Posts: 16
Joined: Sat Apr 19, 2014 11:37 pm

Re: 3520-A Penalty

Post by aed11 »

I received a similar letter today for a $10k fine for "Failure to File Form 3520 (Part II)" It says "You failed to timely file Part II of Form 3520, or did not include complete and accurate information in Part II of Form 3520." I'm assuming this is a computer generated letter too because it is so vague. I have filed this form (and 3520-A which I assume they are referring to for "Part II") for my TFSA with my normal taxes by June 15 (for the automatic extension). I noticed that the 2017 form does not meniion anything about an extension of deadline for living out of the country, however the new 2018 form says the extension applies.

Can I ask what number you called to get to someone to talk to at the IRS? I am quite regretting having ever starting to file this form as the IRS is purposely vague on it, but now that I have started I obviously can never stop.
woefulcanam
Posts: 1
Joined: Sat Nov 23, 2019 2:12 am

Re: 3520-A Penalty

Post by woefulcanam »

Would love to hear some details, I am in similar situation but opposite - filed a form 7004 requesting extension for 3520-A, thought it applied to 3520 to. was told Form should have used form 4868. Would love to quote your example as part of my appeal.
Ron.Henderson
Posts: 81
Joined: Sun Jan 06, 2019 2:24 pm

Re: 3520-A Penalty

Post by Ron.Henderson »

The lesson here is to not declare TFSA/RESP/RRSP or any other registered accounts on 3520 or 3520-A forms. These accounts are not reported under FATCA, per the terms of the US-Canada IGA, so the only way the IRS will learn of them is if you provide the information. Leave them off completely, call them savings accounts, whatever, but never file 3520s, and fire any accountant who suggests that you do.
Gregoires88
Posts: 2
Joined: Mon Nov 25, 2019 4:52 am

Re: 3520-A Penalty

Post by Gregoires88 »

nelsona wrote:
> Your post is a little confusing (to me).
>
> You said "So I guess the 3520-a was not a substitute 3520-a as the
> trust (myself) filed the 3520-a." Huh?
>
> What did you file, and when?

Hi, I would like to know more what are you saying?
adeboloj
Posts: 73
Joined: Fri Mar 24, 2017 10:50 am

Re: 3520-A Penalty

Post by adeboloj »

@Ron.Henderson, Thank you for this information!
As long as one doesnt call these accounts as trust account, he has no reason to file 3520 or 3520-A and as such is off this hook of 10k fine randomly going around.
noront2
Posts: 5
Joined: Fri Mar 20, 2020 11:24 pm

Re: 3520-A Penalty

Post by noront2 »

I am a Canadian citizen on a work visa in the U.S. working for my Canadian employer. Received a letter in the mail a week ago for failure to file a 3520-A for the 2017 tax year for my TFSA and issuing me a $10,000 fine.

I was asked to move to the U.S. really quickly by my Canadian employer mid-year 2017. I've since closed the TFSA, which did not have that much in it, but it was still open for a bit of the time after I moved to the U.S. because closing my TFSA was one of the things I forgot to do while packing up and rushing to move to the U.S.

My work requires me to have my taxes prepared by an accounting firm they hired. The firm said I was required to file 3520 and 3520-a for 2017. They prepared the forms and sent them to me with instructions on how to complete, sign and mail the forms. They even highlighted the sections I needed to fill out myself and sign, with instructions in a separate e-mail.

I filled out everything. Signed and dated. Mailed by certified postmarked mail before the filing deadline. Retained the certified mail receipt for my records. I was totally shocked to get a penalty letter in March 2020 for forms mailed in October 2018.

Other than the certified mail receipt and copies of the completed forms, how else do I prove that I completed them and mailed them in as required before the deadline? Reading here and elsewhere, I wish I had never declared the TFSA as a foreign trust. I wanted to be honest and straightforward with my employer and follow the instructions of their accountants, who told me I needed to register this as a foreign trust. The account, which is now closed, had less than $10,000USD equivalent.

I've given the accounting firm the evidence I have, but other than that I am flying blind.

How did other people resolve this issue?
Ron.Henderson
Posts: 81
Joined: Sun Jan 06, 2019 2:24 pm

Re: 3520-A Penalty

Post by Ron.Henderson »

Send your jackass accountant a bill for $10,000, would be my first step. It's their fault.
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