There is evidence from both tax practitioners and from individuals that Americans abroad are suffering from a “Form 3520A” penalty epidemic. Some of the best discussion of both the scope and technicalities of this problem may be found at Tax Connections. See particularly the posts here, here and here. (Mr. Carter’s original post was also reproduced at American Expat Finance.) The posts have attracted commentary from a number of tax professionals. The IRS Taxpayer Advocate has been invited to intervene.
“Tax Compliant” Americans Abroad are just a penalty waiting to happen!
Americans abroad are potentially required a very large number of IRS forms. My point is simple. It’s the “possible” requirement to file International Information Returns that makes Americans abroad so vulnerable to the IRS penalty regime. As I commented at Tax Connections:
The only reason that the Form 3520A penalty was imposed was because a Form 3520 was filed!