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Archive for Foreign Asset Reporting

Foreign Trusts: IRS Continues To Issue Bogus Form 3520-A Penalty Notices – My Letter To The IRS

Gary Carter

When I was a kid we lived across the street from the Wolfermans. The Wolfermans got a dog. One day I was in my yard, and their dog was barking. Mr. Wolferman came out, clapped his hands and called the dog. The dog joyfully bounded to Mr. Wolferman. Mr. Wolferman then proceeded to spank the dog, apparently for barking. I remember thinking what a fool Mr. Wolferman was for doing that – the dog would never come to him again when called.

A couple of weeks ago I described the traumatic experience of a client who had received a $10,000 penalty notice from the IRS for a completely invalid purpose. As the owner of a foreign trust, my client had done all she could have done to comply with the filing requirements of a foreign trust owner. She was compliant, yet was slapped with a $10,000 penalty. See Foreign Trusts: IRS Penalty Notices For Late Forms 3520-A Traumatize Many Innocent Taxpayers!

Since then, I have learned firsthand of dozens of similar notices, and I suspect there have been thousands issued for the same invalid purpose. Then, this week, another client contacted me about receiving the exact notice under the exact circumstances.

Below is the letter I wrote to the IRS on behalf of the client who received the latest notice. The recipients of these notices represent  foreign trust owners who are doing their best to obey the law (the Wolfermans’ dog) only to be punished by a formidable but misguided tax collection agency (Mr. Wolferman). Would one blame the dog for wandering off to find someone kinder and wiser to pledge allegiance to (as in expatriation)?

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Foreign Asset Reporting Requirements

Venar Ayar - Foreign Assets Reporting Requirements
Understanding Foreign Asset Reporting

US tax code can be very confusing. This is especially true when it comes to reporting foreign assets. The IRS has a number of complex regulations regarding foreign assets and how they are reported, any of which can cause headaches for those filing. To give you some insight into the FBAR and other relevant forms, here is Ayar Law’s guide to foreign asset reporting requirements.

Foreign Asset Reporting Forms

The Internal Revenue Service has a variety of forms when it regards foreign asset reporting. The most common of these forms are:

  • Form 3520 – Foreign Trust and Gifts
  • Form 3520-A – US Owner of a Foreign Trust
  • Form 5471 – Foreign Corporation
  • Form 8865 – Foreign Partnership
  • Form 8621 – Passive Foreign Investment Company
  • Form 8938 – Specified Foreign Assets
  • FBAR – Report of Foreign Bank and Financial Accounts (also known as FinCen 114)

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