November 6th, 2024
New Opportunities for Forms 3520 Penalty Relief
Posted in: Tax Law Tagged: Jeremy M. Vaida
Author: Jeremy M. Vaida
Recently, the IRS revised its penalty approach for late-filed foreign gifts and inheritances reported on Forms 3520. Previously, individuals who filed these forms after the deadline often faced automatic penalties, which could take months, and sometimes even years, to get resolved. With the IRS’s new procedures, taxpayers can now include a reasonable cause statement along with their late-filed Forms 3520, to the extent they relate to foreign gifts and inheritances, which the IRS will review before applying any penalties, helping those who unintentionally missed the filing deadline to avoid burdensome costs.
The IRS initially introduced these International Information Return (IIR) penalties to prevent tax evasion and ensure that assets or income held abroad were properly reported. However, these penalties have often affected taxpayers who may be wholly unaware of such reporting requirements. Between 2018-2021, over two-thirds of 3520 penalties were ultimately abated, highlighting how automatic assessments disproportionally impacted taxpayers.
This change makes it an ideal time for taxpayers with previously unreported foreign gifts and inheritances to come forward and file Forms 3520. With years of practical experience in this area, Stein Sperling is ready to assist clients prepare strong reasonable cause statements, ensuring they have the best chance to avoid unnecessary penalties.
