Alternative to back-filing 8891

[mackayr]

I have read numerous articles and posts about people who have not filed 8891 forms on a timely basis. Quite often, it is suggested that the person back-file the 8891 (and equivalent documents pre-2003) and that the IRS generally accepts the filing. However, this is obviously done with a degree of risk in that the IRS is not obligated to accept the filing, and may impose significant penalties on the individual.

Although my understanding of US tax law is limited, I wonder if it may sometimes be a better approach to merely go back and report the missed income, and start filing 8891 on a going forward basis. Considering the low return rates in recent years, I can certainly conceive of situations where some people would rather pay a little bit of tax now (and essentially be double-taxed on it) to avoid the risk of the significant penalties for failing to file 8891.

I'm curious to hear thoughts on this approach.

[nelsona]

The problem is that 8891 not only serves to make the election to defer (if you don't defer you coan pay that tax yearly if you wish), its that 8891 also satisfies the 3520 filing requirement, so you really have no option to file either 8891 or 3520 (go with 8891).