# Has this happened to you? Huge IRS Streamline tax late penalties



## Popcorngirl

I am a U.S. citizen married a Canadian and became a unemployed housewife so I didn't know I was suppose to be filling fbars and 3520s for my TFSAs (I have a small social circle). 8 years later I found out and went through a tax company that handles cross border taxes. We read that if we went through the IRS's streamline process penalties would be waived and I would be caught up in my unwillful delinquency of reporting. 
Fast forward one year later and I'm getting notices from IRS that I am being penalized a astronomical sum of money for the late filing for every 3520 I submitted for 4 years! 
Have any of you had to deal with the same thing? What worked for you?


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## Nononymous

Sorry to hear this. Apparently there have been other reports of ridiculous fines for "late" 3520s. Follow the story, presumably there will be appeals and relief.

Sadly you are yet another poster child for the dangers of attempting tax compliance, and the general mendacious stupidity of the cross-border tax compliance industry. (Do you think the IRS really wants you to call your TFSA a trust and file a 3520? No, but the tax industry does. Well done. Bet they never mentioned that TFSAs are excluded from FATCA reporting so you could just leave them off your FBARs.)

Best thing you can do is get your Canadian citizenship, if you don't already have it. That affords protection from the IRS ever attempting to collect. Otherwise it's a pity you tried to become compliant.


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## underation

Popcorngirl said:


> I am a U.S. citizen married a Canadian and became a unemployed housewife so I didn't know I was suppose to be filling fbars and 3520s for my TFSAs (I have a small social circle). 8 years later I found out and went through a tax company that handles cross border taxes. We read that if we went through the IRS's streamline process penalties would be waived and I would be caught up in my unwillful delinquency of reporting.
> Fast forward one year later and I'm getting notices from IRS that I am being penalized a astronomical sum of money for the late filing for every 3520 I submitted for 4 years!
> Have any of you had to deal with the same thing? What worked for you?


Have you asked why fines aren’t being waived?


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## Bevdeforges

It's possible that they consider the 3520 forms "separate" from the tax return itself - but you never know.

Try contacting the Taxpayer Advocate Service. https://taxpayeradvocate.irs.gov/

From all accounts, there really do work in the interest of the taxpayers and I've seen a few of their reports to the IRS documenting some of the bigger inequities and insanities of the US tax system. https://taxpayeradvocate.irs.gov/about/how-weve-helped

It's at least worth a try.


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## underation

Nononymous said:


> Best thing you can do is get your Canadian citizenship, if you don't already have it. That affords protection from the IRS ever attempting to collect.


Bear in mind that that’s not retroactive.

Best thing the OP can do is try to get it sorted, either directly with the IRS or as has been suggested by asking assistance from the Tax Advocate.


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## Nononymous

The root of this particular problem is the compliance industry deciding that TFSA accounts are trusts, and telling customers to "play it safe" by filing 3520s, when there's no evidence that the IRS required this approach. It's equally reasonable to report TFSAs on FBARs as normal savings accounts, or for the more larcenous at heart to not report them at all because the US-Canada IGA excludes them from any FATCA reporting.

And now playing it safe seems to have backfired because there are reports of all sorts of late-filing form penalties on the 3520s.


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## underation

Nononymous said:


> The root of this particular problem is the compliance industry deciding that TFSA accounts are trusts, and telling customers to "play it safe" by filing 3520s


Indeed. When a tax adviser says filing is “safer”, they generally mean it’s safer for _them_. IMO.



> And now playing it safe seems to have backfired because there are reports of all sorts of late-filing form penalties on the 3520s.


Yes. Whereas, on the other hand, the penalty for not filing a 1040 is zero, where no tax is owed; and the penalty for not filing FBARs is not assessable, and therefore not collectible, outside the US.

The purpose of the Streamlined Procedures, it seems to me, is to get individuals to identify themselves as being legally in the wrong - helpfully supplying copious documentation for the IRS to use against them if it chooses.


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## DavidMcKeegan

You should have a good chance of fighting the penalties and your accountant should be able to help you with that. Also in the future, if you keep the TFSA and needed a 3520A, make sure you file it before March 15th as they have an early deadline and the IRS has been cracking down on those and assessing late penalties for the 3520 forms in particular. 

https://www.irs.gov/businesses/smal...alty-abatement-or-other-administrative-waiver


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## 255

Popcorngirl -- While I have not had your specific instance, I have had other situations with the IRS, including federal court (which I won.) When I went to court, the IRS was dead wrong and unreasonable. Since then, they've established the Taxpayer Advocate, as Bevdeforges mentioned. They also seem to be more reasonable (not all agents and not all the time,) but in the last few years I've had good luck contacting the person on the notice, and submitting whatever documentation they wanted for me to prove my case. I've had a positive result in each case (several.) Cheers, 255


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## Popcorngirl

Thank you all for your insight into this matter. Just to update I ended up getting a tax lawyer to help and for the streamline years it seems it's an administrative error of IRS, but other years my accountant's fault for not knowing the due date of March 15 for 3520A and not submitting correct extension. Hopefully working with the IRS Streamline hotline and with the argument the forms weren't needed on the first place I'll get them abated.


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## Nononymous

Popcorngirl said:


> Thank you all for your insight into this matter. Just to update I ended up getting a tax lawyer to help and for the streamline years it seems it's an administrative error of IRS, but other years my accountant's fault for not knowing the due date of March 15 for 3520A and not submitting correct extension. Hopefully working with the IRS Streamline hotline and with the argument the forms weren't needed on the first place I'll get them abated.


Just a reminder that anyone in Canada feeling compelled to file US tax returns (which is not at all necessary for Canadian citizens with no US-source income or assets) should be extremely wary of any advice to call a TFSA a "trust" and file 3520 forms. Given that TFSAs (like RRSPs, RESPs etc.) are not reported under FATCA per the IGA, it's quite feasible to not report them at all, or just list them as "savings" accounts on FBARs.

Generally speaking, cross-border tax accountants are not your friends here.


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## Jca1

I'm very curious to hear how this turned out. Were you able to get the penalties reversed?


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## Jca1

Also, if I may ask: did they assess the $10k/violation penalty, or the penalty as a percentage of the asset's value?


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