Taking stab at 3520, -A for TFSA

intrepidca · Post by **intrepidca** » Wed Feb 29, 2012 12:09 am

It seems to me that the March 15 due date applies to the foreign trust, not the taxpayer. I think its so that the IRS gets the 3520A's ahead of time and can then match them up with the 3520's when they come in. Notice the question #22 says what to do in case you answer "no":

If â€œNo,â€ to the best of your ability, complete and attach a substitute Form 3520-A for the foreign trust.

I would assume that "attach" means attach to this form (3520) which is filed along with your 1040 which is due on April 15.

Alex · Post by **Alex** » Wed Feb 29, 2012 5:04 pm

Thanks very much for your helpful reply.

I may be reading too much into it and will check again. My impression had been that we (or our bank) both file 3520a as a separate form to the Ogden office and attach part or all of it to our 3520 when we file our taxes, with a second copy of 3520 also going to Ogden. I will look again.

Alex

skongalong · Post by **skongalong** » Mon Mar 05, 2012 3:43 am

Wow, thanks everyone for the great info in this thread! I think the first post on this thread is spot on (except that most TFSA's won't have a US Agent).

There was some discussion on where to report distributions (withdrawals from TFSA's). Some posters thought it should be recorded in form 3520 in Part III "Distributions to a U.S. Person From a Foreign Trust During the Current Tax Year". The original poster said that this section will never be used for TFSA's because it doesn't apply to owners. I believe he is correct. People were worried about not reporting the distribution anywhere, but I think that's also correct. No need to report it anywhere and no need to pay tax on it...

The instructions for 3520 Part III say:
If you received an amount from a portion of a foreign trust of
which you are treated as the owner and you have correctly
reported any information required on Part II and the trust
has filed a Form 3520-A with the IRS, do not separately
disclose distributions again in Part III.

I understand this to mean that since we've been reporting income on our 1040 yearly from bottom of page 3 on 3520-A "2011 Statement of Foreign Trust Income Attributable to U.S.Owner", we don't need to report any distributions since there's no tax owed on it.

That's my 2 cents!

lanman2000 · Post by **lanman2000** » Mon Mar 05, 2012 11:57 am

skongalong you're on the same page as me with all of this. The only issue I have found is that when you do take money out of a TFSA the balance sheet will go from some amount down to some lower amount. On the 3520a for it where would you show the withdrawl??? Would you enter a distribution on 3520a line 17 to a US owner since you're the owner of the TFSA?

17a Enter the fair market value (FMV) of total distributions from the trust to all persons, whether U.S. or foreign . .
b Distributions to U.S. owners:

or do you just leave that blank and the mere change in networth between start and end of year on the balance sheet is sufficient?

It's a bit confusing...

skongalong · Post by **skongalong** » Sat Mar 10, 2012 12:10 am

Yeah, looks like to me you should put the distribution value in 3520A on lines 17a and 17b. You are the owner of the TFSA afterall.

graubart · Post by **graubart** » Sat Mar 10, 2012 12:22 pm

My reading of the instructions for 3520 and 3520-A (When and Where To File) is that the forms are sent only to Odgen and do not accompany the 1040.

Does anyone see anywhere that says to include these with the 1040?

lanman2000 · Post by **lanman2000** » Sat Mar 10, 2012 12:38 pm

[quote="skongalong"]Yeah, looks like to me you should put the distribution value in 3520A on lines 17a and 17b. You are the owner of the TFSA afterall.[/quote]yep I did that but I didn't check the box for distributions on the 3520 because its always been my money. I'm not getting new money. I believe if you do check the dist box then the amounts need to be reported as income on the 1040.

intrepidca · Post by **intrepidca** » Tue Mar 13, 2012 3:23 pm

It looks like you're right that 3520 is filed separately from the 1040. The 3520-A (if filed by the individual) is still attached to the 3520 then, which would still be due on the date your 1040 is due, however, as indicated in the instructions for 3520:

"In general, Form 3520 is due on the date that your income
tax return is due, including extensions."

skongalong · Post by **skongalong** » Tue Mar 13, 2012 3:35 pm

My input:

Yes, the 3520 and 3520A are sent to a different address then the 1040. Yes, they are due the same day as the 1040.

Yes, yearly income from 3520A should be reported on the 1040, even if you didn't have a distribution (withdrawal from TFSA). The TFSA is not a tax-free account in the US afterall. The income you report is from the table at the bottom of Page 3 called "2011 Statement of Foreign Trust Income Attributable to U.S. Owner".

lanman2000, I agree with you. I'm no tax expert though! :)

lanman2000 · Post by **lanman2000** » Thu May 17, 2012 10:59 am

Well i took a stab at filling out the 3520/3520a for my TFSA and now I got a notice from IRS because I filled it out wrong. I'm correcting it and now wondering about 3520 line 23. It is the "gross value of the portion of the foreign trust you are treated as owning". I closed the TFSA during 2011 so I'm wondering whether this amount on line 23 should be 0 (zero) or should be the value right before closing the account. Do you guys have any insight?

skongalong · Post by **skongalong** » Thu May 17, 2012 2:26 pm

Interesting... What did the IRS complain about specifically?

graubart · Post by **graubart** » Thu May 17, 2012 5:23 pm

I both opened and closed a TFSA in 2011. I also filled out the 3520/3520a as best I could based on the instructions and this forum thread. I entered 0 for line 23. If the total value is 0, I don't see how your portion could be any larger.

I haven't heard anything from the IRS as yet. I, too, would be interested in what specifically the IRS had to say.

primo · Post by **primo** » Sun May 20, 2012 8:32 am

I also got that letter stating I had not filled out lines 20 to 23. In fact I got one for all 3 years that I sent in. I had filled those lines out. I did NOT close my account so I had the full amount of the account for line 23. The only thing I chenged in my reply, was to staple the 3520 with the corresponding 3520A, and I put each year in a separate envelope. I wrote a letter with each year and expalined in plain English why I answered each question the way I did and that I would be happy to provide futher info if they could give me a better explanation about what the issue was. That was about 6 weeks ago so I may still hear back. There are other people on this forum that have had the same thing happen.

primo · Post by **primo** » Sun May 20, 2012 8:45 am

Here is the other thread about the 3520 error letter. Search for:

How to contact IRS after their letter indicating 3520 error?

zad888 · Post by **zad888** » Tue Jun 12, 2012 12:05 am

Hi Diskdoctor, you mentioned about form 3520a line 19:

Line 19 â€“ Here we include a number which accounts for the change in value of contributions and income due to fluctuations in the average yearly exchange rate. This is necessary to balance the balance sheet.

Did you include this amount in your 1040 / schedule B? Does anyone know?

Serbinski Accounting Firms

Taking stab at 3520, -A for TFSA

No need to fill out 3520 Part III