Taking stab at 3520, -A for TFSA

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andtyl
Posts: 4
Joined: Mon Feb 11, 2013 8:16 pm
Location: Vancouver BC

Post by andtyl »

Thanks CdnAmerican and Diskdoctor.

I agree that if the trust gave me any statement at all, it would be a Foreign Grantor Trust owner Statement, not a Foreign Grantor Trust Beneficiary Statement. That's what I filled out on my self-prepared 3520-A. However, line 29 asks about a Foreign Grantor Trust Beneficiary Statement, so my first impulse is to answer the specific question that they asked, not the question that they should have asked.

I also agree wholeheartedly that the form and instructions are not well written. But judging from the number of letters I have gotten from the IRS demanding further information about the $75 in dividends that I actually got from my TFSA last year, apparently in the eyes of the IRS all foreign trusts are, by definition, set up to avoid tax.

CdnAmerican, when you suggest not checking the 3rd box on page 1, do you mean the one that says, "You are the US person who, during the current tax year, recieived a distribution from a foreign trust"?
CdnAmerican
Posts: 245
Joined: Tue Aug 30, 2011 12:15 am

Post by CdnAmerican »

Yes, that's the box I was referring to. But I honestly don't know. I just thnk that a distribution seems to imply that money from another person/entity came to me. For a TFSA, it doesn't seem to apply, as long as I am claiming what I've earned in interest. But really this is more of a question for a pro, I think.
Not a professional opinion.
andtyl
Posts: 4
Joined: Mon Feb 11, 2013 8:16 pm
Location: Vancouver BC

Post by andtyl »

OK, thanks again!
Diskdoctor
Posts: 75
Joined: Wed Apr 21, 2010 9:46 am
Location: Winnipeg

Post by Diskdoctor »

[quote="andtyl"]CdnAmerican, when you suggest not checking the 3rd box on page 1, do you mean the one that says, "You are the US person who, during the current tax year, recieived a distribution from a foreign trust"?[/quote]

I left the 3rd box on page 1 checked for the accounts where I withdrew money since this is technically a 'distribution' and the instructions didn't seem to allow for me not checking it. I can see why CdnAmerican takes the approach of not checking it though. I did not fill out part III since the instructions seem to be clear that I shouldn't since I'm the owner.

[quote="andtyl"]I agree that if the trust gave me any statement at all, it would be a Foreign Grantor Trust owner Statement, not a Foreign Grantor Trust Beneficiary Statement. That's what I filled out on my self-prepared 3520-A. However, line 29 asks about a Foreign Grantor Trust Beneficiary Statement, so my first impulse is to answer the specific question that they asked, not the question that they should have asked. [/quote]

Personally I think the instructions are clear that you don't have to fill out part III but if you feel you still need to fill it out I would check N/A on both lines 29 and 30. Since you are not a beneficiary the beneficiary statements are not applicable to you. According to the instructions "If the question on line 29 or 30 is not applicable, check the N/A box."
regrettingthis
Posts: 7
Joined: Mon Mar 04, 2013 8:35 pm

Post by regrettingthis »

Hi Everybody,

I've read through this thread but I'm still lost!

I made the mistake of opening a TFSA in 2009 not knowing the hassle it would cause. I found out the summer of 2012 that I was required to file in the US. Overwhelmed (I also had to the the 1040 and fbar), I hired somebody to do the last 6 years of taxes for me (I cannot afford this again). I figured that once I got them back, I could follow what he did and do them myself. So I'm starting with the 3520-A as I just got an email from the company that did it last year, telling me they are due.

I'm going through what he did, and I have some concerns that he didn't do it right. I cannot figure out where he got some of the numbers from. I've tried using the exchange rates for all different periods of last year, and nothing. As well, he didn't even fill in the EIN. I called and got an EIN from the IRS today, and she seem baffled as to how I filed these forms without it last year. Now I'm concerned they weren't properly filed/reported some how.

But my real issue is that when I opened my TFSA, I immediately invested almost all of it into stock. I haven't sold any stock, so I haven't actually made money officially, but it has obviously gone up and down over the years.

The guy who did my taxes ONLY filled out Part III. He did not touch Part II. And he only did lines 1, 6, 11, 20, and 21. All of which I can't figure out how he got those numbers even with the exchange rate. I need help with this.

Furthermore, he did NOT fill out a 3520. He only did the 3520-A. As well, he assigned ME as the US Agent. And from reading, that does seem right.

Insight?

I'm in Vancouver, is there somewhere I can go for tax help?
andtyl
Posts: 4
Joined: Mon Feb 11, 2013 8:16 pm
Location: Vancouver BC

Post by andtyl »

Hi all-
Regarding my earlier question about filling out part III of form 3520, I spoke with the tax lady (who works for a very large international tax firm with a square green logo) and she said their line was to put "yes" for line 29; that is, yes I have recieved a Foreign Grantor Trust Beneficiary Satement. So the several of you who suggested that were right. I think checking N/A is equivalent, so those who suggested that are probably right too. Diskdoctor, I like your logic for checking N/A on this box. I don't know if logic applies when trying to deal with the IRS though.

Regrettingthis, I feel for you because I was in the same boat. My solution was to close the TFSA. If you are in Vancouver, you could go to the tax lady at the New West branch of the large international tax firm with the square green logo. She seems to know what's going on.

Good news, I finally got a letter from the IRS saying that they are not going to charge me a penalty for filing the last three years' 3520 and 3520A late (because I didn't know they were required). I had reported the $75 of dividends on my 1040 form, so it's not like there was any tax due. I wonder how much money they spent examining this.
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

HRBlockheads are rarely right
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
regrettingthis
Posts: 7
Joined: Mon Mar 04, 2013 8:35 pm

Post by regrettingthis »

[quote="andtyl"]
Regrettingthis, I feel for you because I was in the same boat. My solution was to close the TFSA. If you are in Vancouver, you could go to the tax lady at the New West branch of the large international tax firm with the square green logo. She seems to know what's going on.
[/quote]

The issue around not closing my TFSA is that I have it invested in stock. So closing it requires selling the stock (not really the right time) and then having to deal with making the forms even more complicated because I will have earned capital gain.

[quote="andtyl"]
Good news, I finally got a letter from the IRS saying that they are not going to charge me a penalty for filing the last three years' 3520 and 3520A late (because I didn't know they were required). I had reported the $75 of dividends on my 1040 form, so it's not like there was any tax due. I wonder how much money they spent examining this.
[/quote]


Wait, they sent you a letter??? This is from filing your 1040 only right? Not from doing the 3520 in the past for your TFSA? I filed my 1040 last year for 3 years back (I didn't know either) and they mailed me two refund checks. I'd much prefer a letter (the checks were only worth like $30) saying I'm in the clear. I wonder why you got one and I didn't.

Has anybody else gotten these letters for either their TFSA, 3520/3520A, or the fbar?
primo
Posts: 93
Joined: Mon Jan 23, 2012 11:51 pm

Post by primo »

Quite a few people did get penalty letters about 3520/3520As but were able to resolve it successfully. See this thread:
http://forums.serbinski.com/viewtopic.p ... lty+letter
regrettingthis
Posts: 7
Joined: Mon Mar 04, 2013 8:35 pm

Post by regrettingthis »

Thanks for the link. What about getting no letter all? I never received anything last year after submitting for 3 years back.
Diskdoctor
Posts: 75
Joined: Wed Apr 21, 2010 9:46 am
Location: Winnipeg

Post by Diskdoctor »

regrettingthis,

I would take no response from the IRS as a good thing. They generally only respond when there's a problem.
Beowulf
Posts: 2
Joined: Mon Mar 11, 2013 10:49 am
Location: London, Ontario

Post by Beowulf »

My wife is a US citizen (resident in Canada since 1953 at the age of three) and I am now preparing 6 years of FBAR's and 3 years of 1040's for the Streamlined Filing process. An International IRS agent informed me that it was not necessary to file 3520/3520A forms for the streamlined filing process and that the IRS will request them if desired. However, I suspect that once she is in the IRS system, a letter concerning her TFSA's is likely. I have declared all interest and dividend income from her TFSA's, however after the Foreign Earned Income Exclusion, her passive income is not high enough for any tax to be owing for 2010, 2011 or 2012. This will be the case for the next two years as well and after that she will be renouncing her US citizenship. she is presently applying for Canadian citizenship.

So, my question: should I be filing 3520/3520A forms with the IRS for the last three years to the Ogden address? The streamlined filing submission goes to Texas.
regrettingthis
Posts: 7
Joined: Mon Mar 04, 2013 8:35 pm

Post by regrettingthis »

I had never heard of streamline filing so I looked it up. And right on their page it says that you need to file a 3520. Once you do the 3520, that form asks you to do a 3520a. So if to were me, I'd do those and send them off to Ogden. Plus I'd include the 3520 with my 1040. But that's just me. I'm certainly no tax expert.
Beowulf
Posts: 2
Joined: Mon Mar 11, 2013 10:49 am
Location: London, Ontario

Post by Beowulf »

The reference to the 3520 on the Streamlined Filing page is an example of what MAY be necessary if appropriate. The IRS agent advised that I did not need to and I will include his name and IRS # to justify the absence of the 3520/3520A with my filed returns.

I'll take your suggestion as one point for yes: file 3520/3520A forms to Ogden.

Any other thoughts?

One site on the internet (Collind Barrow) posted the following:

"Similar to RESP accounts, Tax-Free Savings Accounts (TFSAs) are not “tax freeâ€￾ for U.S. purposes. The income earned within a TFSA must be reported on the U.S. individual income tax return in the year earned. Depending on the structure of the TFSA, it may also be subject to the foreign trust filing requirements discussed above, although the IRS has not commented specifically on this issue. "

Has anyone received a specific comment form the IRS on this issue of the structure of a TFSA? Or is it simply that once you get into the 3520 filing stream, you are "flagged" as being required to file those forms?

The Streamlined Filing process is relatively new (came into effect September 1, 2012.), so I'm not sure how it will interact with the 3520/3520A filing requirement?
CdnAmerican
Posts: 245
Joined: Tue Aug 30, 2011 12:15 am

Post by CdnAmerican »

Just a bump for this really helpful post re: 3520/3520A form completion.
Not a professional opinion.
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