Penalty on late 3520 assessed inaccurately despite OK reason
Moderator: Mark T Serbinski CA CPA
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Penalty on late 3520 assessed inaccurately despite OK reason
Hi all - I submitted Forms 3520/3520A last summer prior to the September deadline. I sent in forms for prior years, after learning that they were required. I made the September deadline, and did not owe any taxes from these Forms - I simply didn't know they existed, and I filed them late. There were numerous accounts over several years.
I was then asked to send in an explanation of why they were late. I sent one in my initial submission, but did so again. This required numerous responses by me, as I received different letters for each year and account, which occurred over several weeks.
Recently, I've received several letters indicating that my explanation was acceptable, and no penalty would be assssed for several of these accounts. This is as expected, based on information from this Forum as well as the IRS' own documentation. However, today I received 4 letters indicating they did not receive my explanation and were fining me $10,000 for each violation. (Note that a couple of these accounts contain under $1000.)
As I was confused, I phoned the IRS to explore this further. The agent I spoke with indicated that the address on the IRS letter was wrong, and he provided the address that I should have used in submitting my explanations. (Note that I had never seen this address before on prior correspondence or requests from the IRS for information.) He also said to disregard the penalties.
This is quite a frightening experience! Does anyone have any other ideas as to how to address this? I feel I need some other way of addressing this, as my initial mailings were either not received or not read. I'm also confused because some of them were, in fact, received and processed correctly. Help!
I was then asked to send in an explanation of why they were late. I sent one in my initial submission, but did so again. This required numerous responses by me, as I received different letters for each year and account, which occurred over several weeks.
Recently, I've received several letters indicating that my explanation was acceptable, and no penalty would be assssed for several of these accounts. This is as expected, based on information from this Forum as well as the IRS' own documentation. However, today I received 4 letters indicating they did not receive my explanation and were fining me $10,000 for each violation. (Note that a couple of these accounts contain under $1000.)
As I was confused, I phoned the IRS to explore this further. The agent I spoke with indicated that the address on the IRS letter was wrong, and he provided the address that I should have used in submitting my explanations. (Note that I had never seen this address before on prior correspondence or requests from the IRS for information.) He also said to disregard the penalties.
This is quite a frightening experience! Does anyone have any other ideas as to how to address this? I feel I need some other way of addressing this, as my initial mailings were either not received or not read. I'm also confused because some of them were, in fact, received and processed correctly. Help!
Not a professional opinion.
Hi,
Sorry to hear you're still caught up in this mess. Where did you send your responses? I sent mine to:
IRS service center
2970 Market Street
Philadelphia, PA 19104
I got the address from the IRS in Philadelphia. Did you send your original responses by some sort of courier so you have proof you mailed it? I also was told somewhere to make sure that every response is in it's own envelope, even if you send them all together in the same courier package. If you have proof of mailing, I would copy it and send it along with your explanation again and explain that it was already mailed and that some of the other years/ accounts have already had the explanation accepted and penalties waived. I don't know what else you can do. Hopefully someone reads your letter this time and responds appropriately. Good luck!
Sorry to hear you're still caught up in this mess. Where did you send your responses? I sent mine to:
IRS service center
2970 Market Street
Philadelphia, PA 19104
I got the address from the IRS in Philadelphia. Did you send your original responses by some sort of courier so you have proof you mailed it? I also was told somewhere to make sure that every response is in it's own envelope, even if you send them all together in the same courier package. If you have proof of mailing, I would copy it and send it along with your explanation again and explain that it was already mailed and that some of the other years/ accounts have already had the explanation accepted and penalties waived. I don't know what else you can do. Hopefully someone reads your letter this time and responds appropriately. Good luck!
cdnamerican,
I found this under title 26 of the us irc code. Not sure if i am reading it correct..(.and would entertain any and all to clarify...please), but it seems to me this 2010 amendment states that if you are fined 10k for a 1000 dollar account, as in your case... that rhe 'secretary' shall refund such excess to the taxpayer, whereas the old rules specified that the “In no event shall the penalty under this subsection with respect to any failure exceed the gross reportable amount.â€
In other words, would you not get 9k back if you paid them 10k?
2010—Subsec. (a). Pub. L. 111–147, in concluding provisions, inserted “the greater of $10,000 or†before “35 percent†and substituted “At such time as the gross reportable amount with respect to any failure can be determined by the Secretary, any subsequent penalty imposed under this subsection with respect to such failure shall be reduced as necessary to assure that the aggregate amount of such penalties do not exceed the gross reportable amount (and to the extent that such aggregate amount already exceeds the gross reportable amount the Secretary shall refund such excess to the taxpayer).†for “In no event shall the penalty under this subsection with respect to any failure exceed the gross reportable amount.â€
I found this under title 26 of the us irc code. Not sure if i am reading it correct..(.and would entertain any and all to clarify...please), but it seems to me this 2010 amendment states that if you are fined 10k for a 1000 dollar account, as in your case... that rhe 'secretary' shall refund such excess to the taxpayer, whereas the old rules specified that the “In no event shall the penalty under this subsection with respect to any failure exceed the gross reportable amount.â€
In other words, would you not get 9k back if you paid them 10k?
2010—Subsec. (a). Pub. L. 111–147, in concluding provisions, inserted “the greater of $10,000 or†before “35 percent†and substituted “At such time as the gross reportable amount with respect to any failure can be determined by the Secretary, any subsequent penalty imposed under this subsection with respect to such failure shall be reduced as necessary to assure that the aggregate amount of such penalties do not exceed the gross reportable amount (and to the extent that such aggregate amount already exceeds the gross reportable amount the Secretary shall refund such excess to the taxpayer).†for “In no event shall the penalty under this subsection with respect to any failure exceed the gross reportable amount.â€
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THanks everyone for your replies!
Graubart - Yes, that was where I initially sent the forms, as well as the first revision. It seems that after that revision the forms were transferred to the Philadephia office, and then the requests for explanations were lost in the transfer.
Mach7 - Yes, I think you are right; I think you are at the penalty area for the 3520, but I've seen similar language for the 3520A as well. THis is a little heartening, I suppose.
Primo - THat other address may indeed be the correct one. However, the IRS letters gave me the generic Philly address. I would think that documents should get to the right place either way, but it's hard to say.
As a follow-up, I spoke with a quite helpful agent today who was very reaswonable and who (I believe) said she coudl waive the penalty, and wanted to do some further investigation. That sounds very fair to me, and hopefully this will be all resolved soon. It seems like the IRS proceses often don't work well, but that when I speak with a human I often get good service. I just find it anxiety-provoking to get multpile letters stating I owe $10,000!
Graubart - Yes, that was where I initially sent the forms, as well as the first revision. It seems that after that revision the forms were transferred to the Philadephia office, and then the requests for explanations were lost in the transfer.
Mach7 - Yes, I think you are right; I think you are at the penalty area for the 3520, but I've seen similar language for the 3520A as well. THis is a little heartening, I suppose.
Primo - THat other address may indeed be the correct one. However, the IRS letters gave me the generic Philly address. I would think that documents should get to the right place either way, but it's hard to say.
As a follow-up, I spoke with a quite helpful agent today who was very reaswonable and who (I believe) said she coudl waive the penalty, and wanted to do some further investigation. That sounds very fair to me, and hopefully this will be all resolved soon. It seems like the IRS proceses often don't work well, but that when I speak with a human I often get good service. I just find it anxiety-provoking to get multpile letters stating I owe $10,000!
Not a professional opinion.
@graubart The initial forms are sent to Utah but letters requesting an explanation for late filing and proposing penalties are coming from Philadelphia.
@CanAmerican My letters also had the generic Philadelphia address but I called to see whether I could courier to that address and was given the Market St. address. I would still think they would get delivered either way. When I first started filing my 1040s etc. I didn't realize that there was a separate address for couriers. I sent them to the PO boxes and everything was still received and signed for. Glad you reached someone reasonable today. Sounds like you will get it straightened out eventually. Just stressful in the meantime. As a last resort, there is the tax payer advocate service(TAS). Good luck.
@CanAmerican My letters also had the generic Philadelphia address but I called to see whether I could courier to that address and was given the Market St. address. I would still think they would get delivered either way. When I first started filing my 1040s etc. I didn't realize that there was a separate address for couriers. I sent them to the PO boxes and everything was still received and signed for. Glad you reached someone reasonable today. Sounds like you will get it straightened out eventually. Just stressful in the meantime. As a last resort, there is the tax payer advocate service(TAS). Good luck.
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Well, maybe I can put this matter to rest. I spoke again with the IRS agent I spoke to on Thursday, and in fact the penalties have been reversed. Whew! I'm not sure what to take away from this story; perhaps the moral is that the letters should be taken seriously but also with a grain of salt. Perhaps (when the taxpayer is not cheating, that is) following up letters with calls (when the proper agent is found) is the best way to go. I'm not sure. But in any event, Thanks to those who responded & I hope I am OK now.
Oh, another piece that I'll be following from this thread involves making sure that I sent response letters in separate envelopes, with separate cover letters. I suspect that my prior strategy (sending in one cover letter to cover multiple IRS letters) did not work well with their filing system (probably being scanned on to one trust but not the rest within their computer system, I am guessing).
Thanks!
Oh, another piece that I'll be following from this thread involves making sure that I sent response letters in separate envelopes, with separate cover letters. I suspect that my prior strategy (sending in one cover letter to cover multiple IRS letters) did not work well with their filing system (probably being scanned on to one trust but not the rest within their computer system, I am guessing).
Thanks!
Not a professional opinion.
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Good to hear CndAmerican! Hope the IRS sends you something in writing soon to say you're in the clear.
It was an IRS agent that told me about the separate envelopes when I called to see if my 6 years of tax returns were processed. She said that sometimes in the mail room, everything gets stapled into one package and then only the top return gets processed. Turns out all of my 6 years did get processed properly but the agent said I was lucky. Seemed incredible to me but I made sure from that point on to respond to every letter from them individually and in separate envelopes.
It was an IRS agent that told me about the separate envelopes when I called to see if my 6 years of tax returns were processed. She said that sometimes in the mail room, everything gets stapled into one package and then only the top return gets processed. Turns out all of my 6 years did get processed properly but the agent said I was lucky. Seemed incredible to me but I made sure from that point on to respond to every letter from them individually and in separate envelopes.