IRS threatening fine letter for TFSA 3520 error

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echo
Posts: 25
Joined: Tue Apr 09, 2013 2:02 pm

IRS threatening fine letter for TFSA 3520 error

Post by echo »

Hello everyone,
I just received a letter from IRS pointing out a TFSA 3520 filing error for year 2020. To line 3 I chose "no" to "US agent" but crossed part I line 15-18 as "N/A", which is totally incorrect, because the instruction says if answer to line 3 is "no" I'm required to fill out part I line 15-18. I was required to fix this otherwise there will be penalty. This is my huge mistake for copying previous years' 3520 without carefully checking it.

I was wondering if anybody can help me with the following questions:
1. Are TFSA account owners considered "US agent" or not? I have just two TFSA deposit savings account with TD and Tangerine respectively and both banks hotline agents have confirmed they were set up as deposit savings account, not as Trust. Unfortunately I didn't close TFSA when moving to US years ago and have been filing 3520 and 3520a since then.

2. If I choose "no" to "US agent",
a. part I line 15 am I considered the beneficiary? Or if I listed family members as "beneficiary" before should I fill in their names?

b. line 18 trust documents. When I filed my first 3520 years ago for the first time, I called TD/Tangerine and was told they will not provide any documents. They led me to their online page description of TFSA products. So I attached print out copy of those webpages in my first 3520 filing. After that I made a mistake of crossing out part I line 15-18 as "n/a" for following years until now.
I no longer have the original account opening agreement. I'm waiting to talk to the TD branch manager on week days to see how soon they can dig out the old docs from back office because easy line can't help with this. Tangerine hotline also can't help because their back office is closed on weekends. I was wondering if I should print out those bank webpage description again like I did for my first 3520 filing, or should I find the original account opening agreement copies with banks for submission?
For "trust financial documents" should I submit the TFSA bank statements? I have included the interest from these bank accounts on 1040 every year.

3. Except the first 3520 filing every year after that I have crossed out line 15-18 as "n/a". Should I fix all those previous years even if IRS letter only listed year 2020? I don't want to open up more fine possibilities for myself.

Any input?
echo
Posts: 25
Joined: Tue Apr 09, 2013 2:02 pm

Re: IRS threatening fine letter for TFSA 3520 error

Post by echo »

Can somebody provide some input?
I followed the post by hapless years ago to do the forms. I know some has chosen "yes" to line 3 and listed themselves as "US" agent. But for years I have chosen "no" to "US agent" question, was wondering if I change my answer now will that cause any extra hustle?
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: IRS threatening fine letter for TFSA 3520 error

Post by nelsona »

Please don't bump your post.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
cqhg
Posts: 16
Joined: Fri Dec 14, 2018 11:18 pm

Re: IRS threatening fine letter for TFSA 3520 error

Post by cqhg »

echo wrote:
> Can somebody provide some input?
> I followed the post by hapless years ago to do the forms. I know some has
> chosen "yes" to line 3 and listed themselves as "US"
> agent. But for years I have chosen "no" to "US agent"
> question, was wondering if I change my answer now will that cause any extra
> hustle?


You should appoint yourself as a US Agent, then it's easy to fill the 3520.

You'll need to complete the following (in addition to the other required fields)

you will add some items to complete on the page 1 of 3520:
---Page 1: line 2a,line 3 and line 3a
(line 2a:
Name of foreign trust: you can make such as" XXXTFSA", XXX can be your last name.
Address you should write your US address
but the country you should input Canada, because the foreign trust is in Canada)

---Page 2 and page 3: leave blank

---then go to page 4:
---part II---line 20, line 21a , line 22 and line 23
if you made some distributions, you have to complete part III: line 24 and line 27

----Page 5:
line 29 and line 30

----page 6:
leave blank


In order to authorize a U.S. person to act as an agent for
purposes of section 6048(b)(2) or for purposes of section
6048(c)(2)(A), the trust and the agent must enter into a
binding agreement substantially in the format reflected under
AUTHORIZATION OF AGENT in the Instructions for Form
3520-A, amended as required. Attach a copy of the
authorization to Form 3520.
(Above is from 3520 instruction Page 5)

US Agent AUTHORIZATION OF AGENT is on the page 5 in the following:
https://www.irs.gov/pub/irs-pdf/i3520a.pdf
cqhg
Posts: 16
Joined: Fri Dec 14, 2018 11:18 pm

Re: IRS threatening fine letter for TFSA 3520 error

Post by cqhg »

echo wrote:
> Can somebody provide some input?
> I followed the post by hapless years ago to do the forms. I know some has
> chosen "yes" to line 3 and listed themselves as "US"
> agent. But for years I have chosen "no" to "US agent"
> question, was wondering if I change my answer now will that cause any extra
> hustle?

You can change your answer at any time, you just need to attach the "AUTHORIZATION OF AGENT" form.
echo
Posts: 25
Joined: Tue Apr 09, 2013 2:02 pm

Re: IRS threatening fine letter for TFSA 3520 error

Post by echo »

Thank you cqhg for giving such detailed instruction! Greatly appreciated!
I took a look at the "AUTHORIZATION OF AGENT" form. I'm not sure if TD and Tangerine are willing to sign these forms as trustee? They just confirmed again to me my accounts are only personal deposit savings accounts, not trust accounts. I'm able to get updated client agreements terms and conditions from both banks, but saying "yes" to "US agent" certainly seems easier in terms of filling out the forms!
Thanks again!
cqhg
Posts: 16
Joined: Fri Dec 14, 2018 11:18 pm

Re: IRS threatening fine letter for TFSA 3520 error

Post by cqhg »

echo wrote:
> Thank you cqhg for giving such detailed instruction! Greatly appreciated!
> I took a look at the "AUTHORIZATION OF AGENT" form. I'm not sure
> if TD and Tangerine are willing to sign these forms as trustee? They just
> confirmed again to me my accounts are only personal deposit savings
> accounts, not trust accounts. I'm able to get updated client agreements
> terms and conditions from both banks, but saying "yes" to
> "US agent" certainly seems easier in terms of filling out the
> forms!
> Thanks again!

Canada bank will not help you to sign anything, even though Canada bank considers it a personal deposit account, it's ultimately up to the IRS to decide whether its a foreign trust or a personal deposit account.

you can sign it yourself to authorize yourself on the" AUTHORIZATION OF AGENT" for both authorizing and accepting an agent. It doesn't matter if you act as an agent for yourself.

When I first arrived in the US this is what my accountant did (it's Deloitte accountant).
echo
Posts: 25
Joined: Tue Apr 09, 2013 2:02 pm

Re: IRS threatening fine letter for TFSA 3520 error

Post by echo »

On "AUTHORIZATION OF AGENT" I guess I will sign at both "signature of trustee (or other authorized person" and "signature of agent". I will also need to update 3520a because I also answered "no" to "US agent" on 3520a.

Extremely helpful, thank you cqhg!
Diskdoctor
Posts: 75
Joined: Wed Apr 21, 2010 9:46 am
Location: Winnipeg

Re: IRS threatening fine letter for TFSA 3520 error

Post by Diskdoctor »

echo wrote:
> To line 3 I chose "no" to "US agent" but
> crossed part I line 15-18 as "N/A", which is totally incorrect,
> because the instruction says if answer to line 3 is "no" I'm
> required to fill out part I line 15-18.

I was just looking at this. Previously I have usually filled out lines 15-18 but rereading the statement at line 3 it states "If 'No', and you are required to complete Part I, complete lines 15 through 18." The AND is key. You are only required to fill out Part I if there was a reportable event (i.e. you created the trust, added money to the trust, or you died). Perhaps you did add money to the account in the year in question in which case you do need to fill out those lines. If not it shouldn't be necessary.
echo
Posts: 25
Joined: Tue Apr 09, 2013 2:02 pm

Re: IRS threatening fine letter for TFSA 3520 error

Post by echo »

That's a very good point! I didn't have any reportable event in 2020. Didn't add money to the trust, still alive:)

I went to read the instruction for form 3520. On page 8 it says

"Lines 15 through 18. If you checked “No” on line 3, acknowledging that the foreign trust did not appoint a U.S. agent who can provide the IRS with all relevant trust information, complete lines 15 through 18."

Sounds like if you checked "no" on line 3, you will have to fill out line 15 through 18 with or without any reportable event?

But line 15 to 18 is under Part I Schedule B Gratuitous Transfer.

Really confused...
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