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IRS Has Problems With Foreign Trust Tax Forms

In late August 2012, the American Institute of Certified Public Accountants (“AICPA”) requested that the Commissioner of the Internal Revenue Service resolve problems regarding the IRS’s faulty processing of Form 3520, entitled “Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts” (the “Form”).

According to AICPA, certain taxpayers have been receiving letters threatening penalties for non-compliance, when, in fact, the Form has been properly completed and timely filed.

Examples of the IRS’s errors include: (a) requests to taxpayers to complete Part II of the Form (pertaining to the U.S. Owner of a Foreign Trust) when taxpayers did not fall within such classification; (b) erroneous requests to taxpayers to provide additional information when the question was simply answered in the negative; (c) claims that taxpayers were required to provide explanatory statements when in fact such statements were included as part of the filing; and (d) incorrect assertions that taxpayers did not timely file the Form.

Rush to the Finish Line
Foreign Account Tax Compliance Act ("FATCA")

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