Steve, just a few quick observations. All of the reporting requirements we've discussed so far on this thread were conceived of and implemented after Sch C had long been in use. The required information reporting is in addition to the disclosures required in Sch C. Filing is a solid default position: no one is prosecuted or fined for making the disclosures, even if they have doubts about their being required. Non filing does not come with the same guarantee. Confusion among IRS agents about the requirements isn't recognized as a defense, so far as I'm aware, in a proceeding against a non-filer; nor is "not serving the purpose intended by the information forms"; nor is reporting all taxable income by other means, where those other forms of reporting are also required, as with Sch C. We understand, I think, that the reporting requirements give the IRS an easier shot at someone who is hiding income than they would have if they had to prove the income in order to make the case, but having fully paid all taxes is to a degree irrelevant in a case of non-filing, it seems to me, except perhaps as an argument in mitigation of the penalties. The reporting requirements represented by Forms 3520 and 3520a are brought to an end by the filing of a "final" report. When one has not been filed, the reporting process is still open in a case in which these forms were previously filed. It's easy to see where this could lead. _____________________ There are those who have never filed. They could consider the following. When it comes to foreign trusts, there are at least two ways the IRS could become aware of the existence of property held in a foreign trust, such as a fideisomiso: they could be given this information by either the Mexican Federal Government, or the banks who sponsor the fideicomisos. Non filing comes with no guarantee that they won't be. I'd like to add, in closing, that it's none of my business whether someone files, or their reasons for doing so or not doing so. I hope some of my comments has shed some light on the issues involved, however, for some readers who may be faced with them.
V true the 3520 takes a few minutes to complete because in my case I was simply reporting the ownership of the trust on page 1 and pages 2-6 were left blamk. Last year we did the 3520
I think it's worth noting that Form 3520a is the report made (in the case of a fideicomiso, by the owner of the trust, typically) on behalf of the trust, and 3520 is the report made by an individual who has transactions involving the trust (which will typically include the owner, as well as those who are beneficiaries, if there are any). In some respects, the 3520a, which must be filed by March 15, reminds me of a 1099, in that it alerts IRS as to what to watch for when the taxpayer files his return, and Form 3520 with it. Form 8938, which is also filed with the tax return, for those required to file it, contemplates that filers may also be filing Forms 3520a, and 3520, and has boxes to check indicating which were filed. It appears that, in our case, we are well below the Form 8938 reporting thresholds and are relieved from filing it, but not from filing 3520 and 3520a: we will also be filing the TD F 90-20.1 Treasury form, not because of the fideisomiso, but because of having a couple of accounts in local banks. For the answer to who is required to file 8938, I suggest the reader go straight to the IRS website. Do I need to file Form 8938, “Statement of Specified Foreign Financial Assets�
From New IRS Rule Benefits Only Foreign Dictators : "Why is the U.S. government subsidizing the tax collection efforts of foreign regimes? Because the U.S. wants other governments to do the same for it. The IRS taxes Americans globally, and through the Foreign Account Tax Compliance Act (FATCA) of 2010, wants to require any transnational financial companies to report account information on U.S. clients. The IRS claims that it's only fair to require U.S. banks to fulfill a similar requirement." The American Spectator : New IRS Rule Benefits Only Foreign Dictators Oh and BTW, this also will "drive foreign investment from the U.S."
These information filings become very easy after you've done them the first time: I suppose it took less than an hour to find, print, fill out, copy and get ready for mailing each of the required forms for this year which, for us, were 3520a, 3520 and TD F 90-20.1. It took tons longer than that, of course, to do our 1040, with all its attachments: some of you will know that IRS has increased its surveillance of capital gains reporting, and introduced a new form, 8949. The amount of reporting required of brokers and other third parties has been greatly increased. This is one change that I think will probably actually increase revenues as a result of better compliance.
the cheapest place I found the 7004 was at Untitled Page Did you find a better source? I'm quite seriously thinking of mailing (horrors!) the stupid form (3520) from here instead of paying those fees for a form that I'm not even convinced I have to f*ing file anywya. Pissed me off. Has anyone used MexPost recently? Since I'd not be using SSN anywhere in teh form, I am thinking it should be a go even if the form never does arrive. I'll just send another one end March when hubby goes back.
I ended up sending mine back with a person who was going to the U.S. If you didn't get that website from IRS, I wouldn't use it, unless I was sure it wasn't fraudulent. If the form is dropped in U.S. Mail, it's considered to be filed on the day it was mailed. That's not true of the Mexican Post. (You could use a service approved by the IRS, such as FedEx, but that would be far more expensive than the online option.) Unless you've got somebody there that's going to be in the U.S. by the 15th, that online service is still probably the cheapest option, at under $10. ________________________ IRS keeps increasing the clarity of the demand for these information forms: Schedule B now asks whether you are the grantor of, transferor to, or received a distribution from a foreign trust during the tax year, with a box to check, yes or no. If "yes", then they add this additional instruction: It is form, 3520a, which is the subject of this thread: Kathy writes about Form 7004, used to request an extension of time in which to file 3520a. In a case in which you are the owner of the trust, as in a fideicomiso, you are responsible for filing both the 3520a and the 3520. The 3520a is due March 15; the 3520 is due, generally, at the same time your tax return is due, which for someone living abroad is June 15. ________________________
For those who may be trying to complete Form 3520a, p. 3 (Foreign Grantor Trust Owner Statement), line 7, can seem a bit obscure. It reads, See what I mean? Here's what I wrote, in response [given here, in blank form, if you'd like to use it rather than writing one of your own]: This, or its equivalent, must be attached to Form 3520a in response to line 7; then, when you prepare Form 3520, you will need to attach a copy of both the "Foreign Trust Owner's Statement" (p. 3, Form 3520a) and a copy of this statement, or one similar to it that you prepared. Our trust instrument names us trustees: you should check to see if yours does the same when preparing the statement required by line 7, Form 3520a.
I'm glad you found it helpful, Kathy. Another question someone might run into when completing these forms is what to do about those portions of Form 3520a asking about income and expenses in the case of trust property which generates no income; for example, you don't rent your trust property. Of course it means all the income lines will read "zero"; but, what about the expense lines? Since I pay all the expenses related to the trust property myself (the trust doesn't pay them), and these are personal, not business expenses, I have elected to also "zero" the lines for expenses. The reasons are several; first, as owner of the trust I am personally responsible for paying them; second, my trust instrument also declares the same, that I am responsible for paying them. I have reasoned that I can simply treat them as personal expenses, outside the trust, and that's what I've done. This also means I don't need to consider opening a bank account for the trust. If I rented my trust property at some point during the year, the situation would be different, in that the trust would have had income in that tax year: I might also need to open a bank account for the trust, and show monies in, monies out, and monies maintained on deposit at the end of the year, when completing From 3520a, which, as I said earlier, appears to me to serve the same function as a 1099- to inform IRS as to what to watch for when the tax return is filed, later in the year. [As for those who itemize their personal, deductible expenses, and file Schedule A with their 1040 (I don't, because the standard deduction always exceeds the total of my otherwise deductible expenses), I have no opinion as to the deductibility of trust related expenses, since I haven't had a need to do any research on that question. Some of these expenses, such as property taxes, would be deductible if the property were located in the U.S.: if I were filing Schedule A, I'd look at that question to see if I might take a deduction for property taxes, for example.] ____________________
