Great News For IRS Form 3520-A Filers Effecting Thousands Of Taxpayers

Gary Carter

The IRS Office of Associate Chief Counsel (International) has agreed to investigate an erroneous penalty campaign by the IRS targeting foreign trust owners who have timely filed Substitute Form 3520-A. If you  have clients who have received one of these Form 3520-A penalty notices, we need your input.

The IRS would like specific information from taxpayers who have been targeted, so I have created a password protected information form to distribute to practitioners.  Your client (or you) should complete the form, save it, then open it to ensure the data is there before sending it back to me. Request Form from me at


Out of frustration with the IRS, I published a blog article last summer describing my experience with one of my clients who had received a $10,000 penalty notice for Form 3520-A after properly filing the form. The comments and reactions to the article have indicated the problem is systemic and pervasive, potentially affecting thousands of taxpayers. The Taxpayer Advocate office has been unable to help.

I happened to sit next to Mark Koziel, Executive Vice President of the AICPA at a dinner in October. I described the problem to him. He sent my article to Eileen Sherr with the AICPA Tax Policy & Advocacy Team.

On November 15, the AICPA Trust, Estate and Gift Tax Technical Resource Panel met with IRS representatives from the Office of Associate Chief Counsel and described the issue. The IRS attorneys then had a call with the IRS processing and penalty groups responsible for these penalty notices and relayed our concerns. The processing and penalty groups agreed to a follow up call with the AICPA in January to address the issue, but first wanted to get details about individuals affected.

Update on the client I wrote about: Over 9 months of calls and letters to the IRS about this client’s penalty notice produced no results. Finally, yesterday we called for an update and the agent immediately cancelled the penalty and said the client would be receiving a letter of apology from the IRS.

We had the same result with another client this morning. If you have clients in this situation, I suggest giving the IRS a call. I think our efforts are finally producing results.

My membership in is a direct result, thanks to the help and support of Kat Jennings.

I would like to get responses back to the IRS as soon as possible. Tax Practitioners can request the form directly from me.


Gary  Carter   PhD, MT, CPA


Gary Carter, President of GW Carter, Ltd., was a tax professor at the University of Minnesota’s Carlson School of Management and the Associate Director of the Carlson School’s Master of Business Taxation Program until June, 2010. He received a B.A. in accounting from Eastern Washington University in 1977, a Master of Taxation degree from the University of Denver in 1980, and a Ph.D. in taxation from the University of Texas at Austin in 1985. Early in his career he worked as a revenue agent for the State of Alaska, and later in public accounting for both a regional CPA firm and a Big Four Firm. His current practice was started in 1999. He has conducted tax seminars on various tax topics and has published several books on taxation.

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4 comments on “Great News For IRS Form 3520-A Filers Effecting Thousands Of Taxpayers

  • Your post includes:

    “I think our efforts are finally producing results. My membership in is a direct result, thanks to the help and support of Kat Jennings.”

    Yes, the efforts appear to be definitely producing results.

    I think that Gary Carter and Kat Jennings deserve special thanks for their efforts in understanding the problem. publicizing the problem and continuing to work toward resolution.

    This is an issue that is far deeper and more significant than the 3520A penalties per se. It has to do with accountability of the IRS and the right of all taxpayers to a fair tax system that they can understand.

    Thank you!

  • Hi Gary,

    As someone affected by this penalty threat by the IRS, I want to thank you and your luck that you were seated next to someone who actually had the power to do something about this at the IRS! Thank you for carrying this through to a satisfactory conclusion. I hope the IRS can get down to the bottom of why this happened – although we, the taxpayer will probably never know why we were so unfairly targeted.

    This is yet another example of why Americans abroad need our own effective representation in Washington, so we don’t have to rely on serendipity to actually get our problems resolved – never mind all the billable hours spent by you trying to fix it!

    What a waste of everyone’s resources!

    • Thanks Suzanne – But most of the time I have spent and will continue to spend unraveling this are UN-billable hours.

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