Help - IRS letter indicating penalty for late 3520

[zad888]

calvin_g: It was a civil penalty notice...IRC Section 6677. I have not responded to notice. My original response was sent back in Jan. to which they responded that "no action was necessary on my account."

primo: my sentiments exactly [they must have received it].

I am in the process of writing to them and enclosing all correspondences and my 2010 form 3520A. I initially submitted both 2009 and 2010 together in one envelope so I don't know why they are still asking me to explain why it was filed late.
Oh, I've phoned them so many times yesterday and they did suggest to resend the letters/forms and an explanation to the person that initially requested for it. My mistake was I just sent it to the address listed on the notice. Someone also suggested that I call the Business Unit [day shift] as this is handled in that department and they will be able to help me...NOT! I had to wake up at 3am to call and get the same answer and even suggested to get my contact info, if i wanted, and someone could call me back but that could take as long as 30 days!! :shock:

Thanks for the address and all the suggestions...wish me luck!!!

[shopgirl1]

Am very interested to hear what other people's experiences are on this. Have also received the 'penalty proposed' letter but without any specific agent to call. Having already gone through a nonsensical IRS call center conversation on another matter, I will just try to parse out a letter to send in.

Good luck to all.

[shopgirl1]

Anyone seen this:
http://voices.yahoo.com/how-negotiate-p ... 55993.html

Also, anyone receive a phone call from the IRS on this? In the letters that I received, they request a phone number. However, I have yet to hear of anyone receiving an actual call from the IRS to discuss their 3520/A letters.

[blairgoates]

Would the CRA assist the IRS in collecting a CIVIL penalty ? I doubt it. Maybe I am mistaken, but assuming the worse case and a penalty is assessed....how can they collect ?

[primo]

CRA won't collect taxes or penalties for the IRS on Canadian or dual citizens if the event occurred while the person was a Canadian. They won't even collect FBAR penalties on any residents of Canada no matter what the citizenship because those penalties aren't actually taxes and don't fall under the tax treaty. Jim Flaherty has said this in the media and in form letters sent out when asked about FBAR I don't know what other means the IRS would have to collect if someone has no US assets and isn't a resident there.

[tsanaha]

FBAR penalty is under title 31 US code. Even IRS can not collect FBAR penalty on US residents unless DOJ takes the case to the court for a judgement.

3520 penalty is under title 26, and IRS can collect the penalty -- I am not sure if CRA will collect them for IRS on Canadian residents (US expats).

[nelsona]

CRA ghas already said they will not.

[tsanaha]

There is a difference between FBAR penalty and 3520 penalty because they are under different titles of US codes.

FBAR penalty won't become a debt until the court judgement while 3520 penalty is under Revenue code, and the service can collect them as if they were tax due.

Even if CRA won't collect it for IRS, would it be some problem when entering US and also would it look bad on credit report (I am not sure if Canadian residents care about this or not).

Just a question and to make a point the difference between FBAR and 3520 forms and penalties.

[nelsona]

You already made that point. Primo and I have answered the question you had, which was: "I am not sure if CRA will collect them for IRS on Canadian residents (US expats).".

They will not.

[calvin_g]

Back to my 3520-A issue... I found that from the IRS manual section. It goes

http://www.irs.gov/irm/part20/irm_20-00 ... ml#d0e3592

20.1.9.14 (04-22-2011)
IRC 6677(a) and (b) – Foreign Trusts with U.S. Owners - Form 3520-A

1. The penalties for failure to file Form 3520-A are similar to the penalties for failure to file Form 3520 except that IRC 6677(b) changes the amount of the initial penalty to the greater of $10,000 or 5 percent of the gross reportable amount. The gross reportable amount is defined in IRC 6677(c)(2) as the gross value of the portion of the trust's assets at the close of the year treated as owned by the U.S. person.

2 If a foreign trust fails to file Form 3520-A, the penalties are imposed on the U.S. person who is treated as the owner of the foreign trust. The grantor trust rules are in IRC 671 through 679. The U.S. owner may be able to avoid penalties by attaching a substitute Form 3520-A to a timely filed Form 3520.


So I indeed filed my 3520 timely and attached a substitute 3520-A form to it because my RESP "trust" never filed 3520-A for me. They say us owner which is me, "may" be able to avoid penalties. I wish they say "will".

[CdnAmerican]

There are also comments in different manual places about penalties which seem to indicate that in any event, the maximum penalty would never exceed the value of the trust. This is helpful for an account with a very small amount of money, and brings the fear factor down just a little bit.

[primo]

Just an update on my situation. Hope it helps set some minds at ease. I received 2 letters proposing penalties for late filing 3520A from 2009 and 2010. I had never filed US returns, am dual citizen since birth and lived in Canada for the last 40 years after moving here as a child. I back filed all of my 1040's and 3520s/3520A's this year with no tax owing. I just received letters from the IRS saying that they have accepted my explanation and no penalties will be applied for the late 3520As based on the explanation of my circumstances. It took the IRS about 30 days to make their determination. Thanks to all of you for your support and suggestions.

[MGeorge]

Hi Primo - thanks for keeping us updated. I backfiled forms 3520 and 3520A for my TFSA early this month for the tax years of 2010 and 2011. I'll keep everyone posted if I hear anything back. I too have lived in Canada since birth - and backfiled 6 years of 1040s and FBARs in mid 2011.

[primo]

Hi MGeorge,
Hope your 3520/3520As go through without a hitch. At least there is lots of help here if you start getting crazy IRS letters. Now I'm just waiting for my certificate of loss of nationality. Then it's all finished!

[CdnAmerican]

Primo - that is good news indeed about the resolution of those 3520/3520A's! I have a different problem. I have received numerous letters requesting explanations for my late forms. I have sent these in; however, I am now getting letters again requesting explanations - which I sent in early June (within 30 days of the IRS letter). I am prepared to simply send in the prior explanation again.

But, I have a new problem, in that I received two letters requring an explanation for a 3520 for an account which was late in a tax year that I did not submit (i.e., the account was opened in 2009; they are requesting an explanation for my late submission for the 2007 tax year). I have also received a letter requesting an explanation for a late 3520 for a TIN that is not on any of my accounts!

I should note that I have positive resolution to 1 of my accounts, with a letter stating no penalty will be given. I am raesonably confident all of these will be resolved in that way, eventually, given no unreported tax liability.

Is there any better strategy than simply mailing back these letters with explanations? I fear that calling will not produce any resolution, but am open to that idea if it would help.