Code 6677, penalty for failure to file 3520

[Mach7]

First would like to apologize for stepping on CdnAmericans thread.

With respect to 6677 of the Internal Revenue Code, the information
advises that failure to file the 5520 form could lead to a 35% penalty of the gross reportable amount and;

If any failure described in the preceding sentence continues for more than 90 days after the day on which the Secretary mails notice of such failure to the person required to pay such penalty, such person shall pay a penalty (in addition to the amount determined under the preceding sentence) of $10,000 for each 30-day period (or fraction thereof) during which such failure continuesn after the expiration of such 90-day period. [b]In no event shall the penalty under this subsection with respect to any failure exceed the gross reportable amount.[/b]

Does this last sentence mean what i think it means? In other words, they cannot penalize you for more than the gross reportable amount? Or more than the 'fund' is worth?

In other words

[Mach7]

i meant failure to file the 3520 form

[primo]

That's how I understand it.

[CdnAmerican]

HI Mach7 - No worries about the thread issue. I agree with primo - that's kind of how I understand it as well. It doesn't add up to me that you could get dinged more than the value of the account. It seems like some of the penalties appear draconian, but then the actual guidance the IRS uses seems much more reasonable.

In terms of your other question from before about whether or not to file, my honest take is that it's a good thing to do everything properly, once one knows about an error in filing. I am still assuming that the IRS will be fair to people whose mistake is simply not knowing about a form (which is quite different from intentionally or trying to avoid taxes). Perhaps I am being overly optimistic but I am confident that my situation will be resolved fairly, based on info from this forum, the lack of people complaining about fines for such things (e.g., being fined after late-filing voluntarily), and the IRS' own guidance previously (though I haven't seen any recent guidance suggesting amnesty for filing a late 3520).

Thanks for your input on this stuff & good luck on your end!