Form 3520: Reporting Foreign Trusts, Inheritances and Gifts.
IRS Notice CP15 - Tax Penalties
Form 3520 and IRS Notice CP15
You Are Required to Report Foreign Trusts, Inheritances, and Gifts Using IRS Form 3520.
Hiring an Experienced US International Tax Attorney Will Make Your Life A Lot Less Complicated.
IRS Notice CP15 Means The IRS Has Already Charged You With Failure to File or You Filed an Incorrect Form 3520.
If you have not yet filed IRS Form 3520 (reporting foreign trusts, inheritances and gifts) or have filed incorrectly for the tax year in which reporting was due, or if you have received an IRS Notice CP15, contact us immediately for guidance and a confidential consultation.
IRS Notice CP15 means that the IRS has already charged you with a civil penalty that carries a substantial fine. To dispute the penalty, you must first pay the IRS penalty in full, and then file a claim for a refund. You only have 30 days to meet the notice deadline after which interest will begin to accrue. Contact us.
IRS Notice CP15 TAX ALERT for Tax Years 2022 & 2023 ONLY!
Important IRS Update: Limited-Time Penalty Relief Opportunity.
Due to a landmark IRS provision, our firm now qualifies for special IRS status that allows us to request penalty relief for clients who received a 2022 and/or a 2023 IRS Notice CP15 - relief that is typically unavailable through most tax firms.
This is a significant opportunity. Time is limited. Contact us immediately to take advantage of this provision while it remains in effect.
IRS Notice CP15 - Tax Penalties
When a person receives an IRS Notice CP15, it typically means a penalty has been assessed—often related to late filing of Form 3520, 5471, or another international form. The notice will usually include:
- The amount of the penalty.
- The reason for the penalty.
- Instructions for how to pay or appeal.
Response Time: You generally have 30 days from the date on the notice to respond or appeal the penalty.
This is critical if you plan to:
- Request abatement or relief.
- Dispute the penalty.
- Submit reasonable cause arguments.
If you miss the 30-day window, you may still be able to request penalty relief, but it becomes harder, and you might need to go through additional steps like filing a Form 843 (Claim for Refund and Request for Abatement) or even appealing through the IRS Office of Appeals.
IRS Notice CP15 and Form 3520: What You Need to Know.
Let’s walk through what happens if you have received an IRS Notice CP15, because you have not filed IRS Form 3520 or have filed incorrectly including wrong information or filed late.
If you understand the requirements and deadlines associated with IRS Form 3520, then receiving a Notice CP15 can be avoided.
If you are a US taxpayer or citizen who has recently received a gift or inheritance from abroad or if you have assets held in a foreign trust, reporting these transactions to the IRS can be complicated (see summary below).
Form 3520:
IRS Notice CP15
IRS Notice CP15 is a notification sent by the IRS to inform taxpayers that they may be subject to penalties for failing to comply with reporting requirements related to foreign assets.
IRS Notice CP15 is triggered when the IRS discovers that an individual has failed to file Form 3520 or has filed it incorrectly. This notice serves as a reminder for taxpayers to address any filing discrepancies and potential penalties.
Notice CP15 typically outlines what actions need to be taken by the taxpayer in order to rectify any discrepancies or missing information on their US Federal tax returns.
It is important to carefully review and respond to Notice CP15 in order to address any potential compliance issues. It is best to consult with an experienced US international tax attorney.
Taxpayers who receive Notice CP15 are required to take-action within a certain timeframe specified in the notice. Failure to respond appropriately or provide requested information could result in additional penalties being assessed by the IRS.
Also, taxpayers may receive IRS Notice CP15 if their foreign trust has been identified for further review by the agency.
Individuals who receive Notice CP15 must address any issues promptly and should seek an experienced tax attorney to ensure full compliance with tax laws and regulations.
Form 3520
Form 3520 is required for US taxpayers who meet certain thresholds and have financial interests in these types of assets.
It is important for taxpayers to understand that both IRS Notice CP15 and Form 3520 carry potential penalties for non-compliance, so it is essential to timely adhere to the requirements and deadlines associated with filing Form 3520 and responding to the IRS Notice CP15.
Individuals who have transferred assets to a foreign trust must also report this information on Form 3520.
You are required to file Form 3520 if you received a gift of more than $100,000 (subject to change) from a foreign person or estate or a gift of more than $15,601 (subject to change) from a foreign partnership or corporation.
Key Deadlines and Penalties Associated with Form 3520
One key date for IRS Form 3520 is the annual filing deadline, which falls on April 15th for most taxpayers. Failure to file Form 3520 by this deadline can result in significant penalties being imposed by the IRS. You must submit Form 4868 to extend the filing deadline until October 15th. For that tax year.
Failure to File Form 3520 without an extension or missing the extended deadline may result in significant penalties imposed by the IRS
Taxpayers report this information on Forms 3520 and/or on Form 3520-A. Section 6677 imposes a penalty for failure to timely file Form 3520 (April 15th.) reporting information required in Parts I-III and for failure to timely file Form 3520-A (March 15th deadline). Deadlines are subject to change.
Additionally, if you fail to report certain transactions related to foreign trusts on Form 3520, you may be subject to additional penalties. Penalties can add-up quickly, so it is important to ensure that you meet the deadline each year.
Form 3520-A
There is also Form 3520-A is an additional, less commonly required form that is submitted by a trustee when there are beneficiaries or owners of the trust that are U.S. taxpayers.
The failure to file a timely IRS Form 3520-A means the IRS can assess a monetary penalty equal to the greater of $10,000 or 5% of the gross value of the portion of the foreign trust.
If failure to timely file continues more than 90 days after notification, the IRS may assess additional continuation penalties of $10,000 for each 30-day period in which the non-filing continues.
Common Mistakes to Avoid When responding to a IRS Notice CP15 or filing Form 3520
A common mistake to is failing to accurately report foreign gifts, inheritances, or transfers from foreign trusts.
Another common mistake is missing filing deadlines for Form 3520 or failure to respond to IRS Notice CP15.
The rules and regulations surrounding foreign trusts are complex. It is crucial to stay informed about the specific deadlines associated with these forms and notices in order to avoid late filings, penalties or noncompliance issues.
Not properly filling out Form 3520 can lead to errors that may trigger audits or scrutiny from the IRS.
Another common mistake when filing Form 3520 is not properly reporting transactions with foreign trusts. If you are a beneficiary of a foreign trust or have certain interests in a foreign trust, you may be required to submit additional information along with Form 3520.
Seeking guidance from a tax professional such as a US tax attorney experienced in international taxation can help individuals complete these forms effectively and stay compliant with IRS tax requirements.
Tips for Responding to IRS Notice CP15 and Resolving Issues
Responding to IRS Notice CP15 can be intimidating. First, it is essential to carefully read the notice and understand what specific information the IRS is requesting or what action they want you to take.
Second, gather all relevant documents and information related to your foreign trusts, gifts, or inheritances as requested in the notice. We recommend you use a qualified US tax attorney as a go-between, between you and the IRS.
Lastly, ensure that you meet all deadlines specified in the notice for responding to or providing additional information. Give your international tax attorney sufficient time to respond to the IRS.
Summary
U.S. persons (and executors of estates of U.S. decedents) need to file Form 3520 to report:
Certain transactions with foreign trusts.
Ownership of foreign trusts under the rules of sections Internal Revenue Code 671 through 679.
Receipt of certain large gifts or bequests from certain foreign persons.
IRS Form 3520 including Foreign Trusts, Inheritances, and Foreign Gifts:
You file if you are:
(a) a U.S. transferor who, directly or indirectly, transferred money or other property during the current tax year to a foreign trust;
(b) a U.S. person who (1) during the current tax year, transferred property (including cash) to a related foreign trust (or a person related to the trust) in exchange for an obligation, or (2) holds a qualified obligation from the trust that is currently outstanding; or
(c) the executor of the estate of a U.S. decedent and (1) the decedent made a transfer to a foreign trust by reason of death, (2) the decedent was treated as the owner of any portion of a foreign trust immediately prior to death, or (3) the decedent’s estate included any portion of the assets of a foreign trust. File a separate Form 3520 for each foreign trust.
You are a U.S. owner of all or any portion of a foreign trust at any time during the tax year. Complete all applicable identifying information requested below and Part II of Form 3520.
You are:
(a) a U.S. person (including a U.S. owner) or an executor of the estate of a U.S. person who, during the current tax year, received, directly or indirectly, a distribution from a foreign trust;
(b) a U.S. person who is a U.S. owner or beneficiary of a foreign trust and in the current tax year, you or a U.S. person related to you received (1) a loan of cash or marketable securities, directly or indirectly, from such foreign trust, or (2) the uncompensated use of trust property; or
(c) a U.S. person who is a U.S. owner or beneficiary of a foreign trust and in the current tax year such foreign trust holds an outstanding qualified obligation of yours or a U.S. person related to you. Complete all applicable identifying information requested below and Part III of the form.
You are a U.S. person who, during the current tax year, received certain gifts or bequests from a foreign person. Complete all applicable identifying information requested and Part IV of Form 3520.
Form 3520 and how to answer an IRS Notice CP15 can be complex and confusing.
Contact us for further advice.