The IRS Provides Good News for Certain American Expats
If so, there may be good news for you, according to Mary Beth Lougen, President of American Expat Tax Service. This week the IRS issued new guidance in Rev. Proc. 2020-17 that may exempt qualifying U.S. citizens and residents with Foreign Trusts from the onerous reporting requirements. This means that you may not have to file the Form 3520, due April 15th, and Form 3520A, due March 16th going forward if you qualify.
What Foreign Trust qualifies according to the IRS? According to Mary Beth the IRS states in the guidance; " This revenue procedure provides an exemption from the information reporting requirements under section 6048 of the Internal Revenue Code for certain U.S. citizen and resident individuals with respect to their transactions with, and ownership of, certain tax-favored foreign retirement trusts and certain tax-favored foreign nonretirement savings trusts."
But there is more good news. Mary Beth notes that the new procedures provide an opportunity to request abatement of penalties has imposed and a refund of penalties paid for tax years 2016 – 2018 or earlier years if paid in the last two years. A Form 843 should be used to file for this relief.
According to Mary Beth to be eligible a taxpayer…
· Must be compliant with all requirements for filing a U.S. federal income tax return (or returns) covering the period such individual was a U.S. citizen or resident.
· To the extent required under U.S. tax law, has reported as income any contributions to, earnings of, or distributions from, an applicable tax-favored foreign trust on the applicable return (including on an amended return).
More information can be found on the IRS website at … https://www.irs.gov/
Mary Beth Lougen is President of American Expat Tax Services (https://www.amexpattax.com) which is an income tax preparation firm that specializes in all areas of US Income Tax Preparation, Compliance, and IRS Problem Resolution for American Expats. She has over 30 years of US Income Tax experience including cross-border and expat taxes. Mary Beth has a Master's in Law and taxation, is an Enrolled Agent, a U.S. Tax Court Practitioner (USTCP), and is also a respected writer and instructor in cross-border taxation.
Mary Beth Lougen