# IRS fine



## sammygirl12

sammygirl12 said:
Original Post
Please someone HELP! I am a dual national living in Australia. I have not lived in the US for over 25 years. I do not work in the US or have any property or bank accounts in the US. I have been putting in my tax returns and forms for the last 8 years with an accountant in the US. Because our tax year runs differently I just received a TEN THOUSAND DOLLAR late penalty, even though all my forms have been submitted. I just received the penalty today which is the end of the 30 days I am allowed to ask for an appeal. I never owe any taxes. Please what should I do. Any advice would be appreciated


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## Bevdeforges

Something doesn't sound right here. Normally a late filing penalty is a percentage of the taxes owed - so if you didn't owe any taxes, the penalty should be 0. Is this perhaps something having to do with the FBAR filing? (which is a separate thing - does not go in with your tax returns).


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## JustLurking

Bevdeforges said:


> Something doesn't sound right here. Normally a late filing penalty is a percentage of the taxes owed - so if you didn't owe any taxes, the penalty should be 0.


Form 3520-A for an Australian Superannuation plan being treated as a foreign grantor trust? From IRS Medic:


> *The IRS is improperly and automatically assessing $10,000 Form 3520-A penalties - what to do now
> *
> The IRS has assessed many of our clients and others taxpayers around the globe who might have even correctly filed Form 3520-A and Form 3520 with substantial penalties - often $10,000. What gives? What can be done about this? In this article we will explain many situations in which a Form 3520-A is required so that you can have a good idea if the IRS's penalty assessments are something you should push back on.


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## sammygirl12

Sorry I wasn't that clear! my penalty charge is under SEction 6677 of the Internal REenue Code for FAilure to File Form 3520-A. It was included in my tax returns...my US accountant replied that the date changed to an earlier date and it was late. It was late as the Australian tax year is different and he was waiting for the information from my accountant. We never owe taxes and pay plenty of tax in Australia. and its 10K USD which is almost 20K in AUD! I just received it today which is the 29th of August...They have me 30 days to lodge an appeal in the US and that was from the date July 29th! I just received it from my accountant.


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## JustLurking

sammygirl12 said:


> Sorry I wasn't that clear! my penalty charge is under SEction 6677 of the Internal REenue Code for FAilure to File Form 3520-A.


Possibly useful and/or relevant:

https://www.americanexpatfinance.co...-form-3520-filing-can-easily-go-wrong-and-did


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## Nononymous

This is the Form 3520-A mess that has hit a lot of people, apparently. 

The lesson here is that dual citizens with no US assets or income sources should *not* be filing US tax returns. No good will come of it.


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## sammygirl12

you try to do the right thing and then you get hit with a huge penalty! I just need to know what I need to do from here to dispute it since the day of disputing has passed and I only received the bill yesterday!


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## Nononymous

My advice would be:

Don't pay the bill, don't file tax returns next year, and above all don't answer any mail you receive from the IRS.

If you are an Australian citizen with no US assets or income, you can simply tell them to sod off.


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## sammygirl12

What is the legal ramifications of this


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## underation

Perhaps you could contact the Tax Advocate?


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## Nononymous

sammygirl12 said:


> What is the legal ramifications of this


Worst case might be eventual loss of US passport (not citizenship, just passport) if a debt exceeds US$51k. Otherwise under current law the IRS has no ability to collect penalties from you in Australia, so it could be safely ignored.

The 3520-A problem seems to be a sudden thing that happened to a bunch of people, so presumably - one hopes - there might be a fix. 

You said you'd been filing for 8 years. Let me guess, FATCA came along circa 2010 and you got scared and decided to "do the right thing" by hiring an accountant and filing US tax returns despite having left the US 25 years ago and having no financial or employment ties? 

It generally doesn't end well. You would have been much better off continuing not to file. But what's done is done. At this point your choices are to fight the penalty or go dark by ceasing all communication with the IRS. It rather depends on how much access you want to the US in future - do have family that you wish to visit, or expect an inheritance in the future? These can be complicating factors. You could also renounce US citizenship, but doing so won't clear away a past debt.


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## Nononymous

See also:

https://www.taxconnections.com/taxb...or-tax-professionals-and-taxpayers-worldwide/

https://www.taxconnections.com/taxb...-3520-a-penalty-notices-my-letter-to-the-irs/


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## Bevdeforges

sammygirl12 said:


> What is the legal ramifications of this


Unless you have financial assets located in the US, the legal ramifications shouldn't be much of a much. 

There is a law now that they can withhold your US passport if you have an outstanding debt to the IRS of $50,000 or more. But as a dual national, you only need a US passport if you are headed to the US.

I would definitely get in touch with the Taxpayer Advocate to see what they may or may not be able to do for you. If nothing else, registering your problem with them will give the Taxpayer Advocate office a bit more ammunition for their annual report on problems encountered in the system.


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## underation

Bevdeforges said:


> Unless you have financial assets located in the US, the legal ramifications shouldn't be much of a much.
> 
> There is a law now that they can withhold your US passport if you have an outstanding debt to the IRS of $50,000 or more. But as a dual national, you only need a US passport if you are headed to the US.
> 
> I would definitely get in touch with the Taxpayer Advocate to see what they may or may not be able to do for you. If nothing else, registering your problem with them will give the Taxpayer Advocate office a bit more ammunition for their annual report on problems encountered in the system.


According to a Forbes item (https://www.forbes.com/sites/kellyp...s-in-danger-of-losing-passports/#1845cf8b7012), the IRS is decertifying taxpayers at risk of losing their passports if there’s an open TAS case.

These apparently numerous 3520-A cases might be treated similarly if open with the TA.


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## perryf

Hi Sammygirl, you are not alone. Many, many people have been hit with this penalty for form 3520A including myself. My fine was $10,000 and I live in Australia too. Others have been hit for much more - read the comments below some of the articles online by Gary Carter, a US based tax professional at Tax Connections. If you're not comfortable with going dark as suggested, your tax preparer needs to submit a protest letter. I wish I had read the example by Gary Carter on the Tax Connections site- see below. The article below provides a copy of the letter he sent on behalf of his clients who were hit with the same 3520A penalty. Basically, the IRS is wrong to impose this penalty if the 3520A was submitted alongside your 3520 by its deadline. There is also the option of submitted a reasonable cause letter if for some other reason. And, of course, there is the whole other question about whether anyone with a government mandated superannuation account Australia should even be filing these forms, as it may be they don't count as "foreign trusts": https://www.taxconnections.com/taxb...ty-notices-my-letter-to-the-irs/#.XWhU35MzbfY

It appears that the IRS doesn't care about folks 'doing the right thing' and some of the belief that the IRS wouldn't target 'minnows' overseas or people who have little or no connection to the USA (e.g., accidentals) needs to be re-thought.


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## sammygirl12

I'm sorry this has happened to you as well! It is so upsetting when you really are trying to be a law abiding citizen!. Thank you so much for reaching out. I have given my accountant permission to protest on my behalf. I hear this is a lengthy process. The issue is also that I know that this years return will be late as it is being submitted at the moment! I don't have a spare 20K AUD to pay these unwarranted fines. I am a citizen of Australia and I pay all my taxes! I haven't lived in the US for 25 years and don't own anything in the US, no property, banks, income! I will never live there and will never ask for social security etc! This seems criminal to me!


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## Stevesolar

sammygirl12 said:


> I'm sorry this has happened to you as well! It is so upsetting when you really are trying to be a law abiding citizen!. Thank you so much for reaching out. I have given my accountant permission to protest on my behalf. I hear this is a lengthy process. The issue is also that I know that this years return will be late as it is being submitted at the moment! I don't have a spare 20K AUD to pay these unwarranted fines. I am a citizen of Australia and I pay all my taxes! I haven't lived in the US for 25 years and don't own anything in the US, no property, banks, income! I will never live there and will never ask for social security etc! This seems criminal to me!


Based on your circumstances - if it were me - I would simply “go dark” and ignore any further communication from the IRS.
You are well beyond their reach, it seems!


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## sammygirl12

The problem with that is that I still visit the states to visit family and that worries me


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## underation

perryf said:


> ... whether anyone with a government mandated superannuation account Australia should even be filing these forms, as it may be they don't count as "foreign trusts": https://www.taxconnections.com/taxb...ty-notices-my-letter-to-the-irs/#.XWhU35MzbfY


If Australians hit by this could co-ordinate protests to their MPs and the Australian tax agency, maybe this issue could be raised at governmental level? 

And similarly co-ordinated protests in each affected country might draw international attention to what really sounds like a deliberate “fundraising campaign” by the IRS.

Another article raising the issue - this time in Canada:
https://www.newsmax.com/t/finance/a...onth=11&date=12&id=890286&oref=www.google.com

And Law360 seems to have a piece about the IRS requesting feedback about trust-related forms? 
Behind a paywall. Not sure if it’s talking about this form.
https://www.law360.com/tax-authorit...eedback-on-burden-of-foreign-trust-gift-forms


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## underation

underation said:


> ...what really sounds like a deliberate “fundraising campaign” by the IRS.


Or maybe it isn’t? Could these fines over the due date for Form 3520-A be caused by the failure to provide correct information about the due date for Form 3520? 

“Due Date for IRS Form 3520 for Non-Residents”
https://www.jdsupra.com/legalnews/due-date-for-irs-form-3520-for-non-35274/

The writer of that piece suggests the muddle should provide grounds for getting the 3520 penalty abated; perhaps that’s the case also for the 3520-A forms.

The Taxpayer Advocate might be able to look at this possibility?


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## underation

Stevesolar said:


> Based on your circumstances - if it were me - I would simply “go dark” and ignore any further communication from the IRS.
> You are well beyond their reach, it seems!


I’d suggest the opposite - make as much noise as possible.

No need for wrongly-penalised expats to let the IRS turn them into what the US likes to call “fugitives from justice.”

Not guilty hiding but righteous indignation. Keep the moral high ground. IMO


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## Nononymous

One thing is clear: nobody will be paying any US$10k fines here.

So send in the protest letter, contact the TAS, then wait and see. In the meantime, make plans to either cease filing US tax returns in future, or at least find a better accountant who's willing to treat your Super like a savings account instead of a trust, and not file a bunch of needless 3520 forms. (Doing so was a terrific money-maker for tax accountants, at least until these fines started blowing up in their faces.)


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## alan-in-mexicali

*Irs nightmare..!!!*

Dear Sammygirl:
The US IRS is a law unto themselves. Legally they have powers the FIB lack, ALL police lack … and are operated by underpaid overworked government idiots who are discouraged from THINKING... the IRS has several sets of "rules" which often counter each other... SO... I received a letter similar to yours.... except they wanted over $52,000!
1. NO EMAILS... SEND ALL replies via snail mail...MAKING SURE YOU KEEP COPIES OF ALL YOU SEND.
2. EXPLAIN YOUR CASE... WHY YOU DO NOT OWE ANY TAXES.. and include a COPY of their letter to you...
3. REPAET this procedure EACH time they send you a letter... PAY ZERO MONEY!!!! WHEN you answer the second [and subsequent] PACAKAGW a copy OF ALL PREVIOUS correspondence... snail mail... 
4. I t took me 6 YEARS and I can't remember how may "replies" before I receive a letter from the IRS that stated I OWED ZERO... framed it and had it on the wall for awhile....
REMEMBER: It only takes a 6th grade education to work for the government of the USA... Less IF your President!
GOOD LUCK>>>AND DON'T WORRY.... THEY CAN[T DO A THINKG TO YOU! JUST KEEP FILING [I am assuming that you file because you worked prior to relocating
and plan on getting SSA]


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## Jca1

I'm curious if $10k is greater than 30% of the value of the part of your super being reported as a grantor trust. It appears the IRS has discretion to issue either penalty, whichever is greater, but most of the cases I hear about are $10k rather than the 30% penalty which could be much worse in many cases.

This recent rash of penalties also seems to challenge best practices surrounding filing forms 3520 and 3520-a. The conservative approach might no longer be to file the forms if there is doubt about whether they're required, but rather to avoid filing them if there is any doubt, as filing the forms seems to be what attracts the penalties.

Regardless, I am sorry to hear of your plight.


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## Nononymous

Jca1 said:


> ...filing the forms seems to be what attracts the penalties...


Words to live by. 

Extend that logic all the way to the 1040.


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## sammygirl12

I am not ever going to live in the States or apply for my social security. I was just trying to do the legal right thing and be compliant. I signed a paper allowing the US accountant to file any pleas on my behalf. I just feel like everything is out of my control. We NEVER owe anything ever and I am just an ordinary Australian dual citizen. I cannot pay 10K US...who has that kind of money? I am extremely stressed about this and feel I don't have adequate legal representation. I am wondering if I need a lawyer?


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## Bevdeforges

Don't get too wrapped up in all the "discussion" here. There are lots of various approaches - some more "legal" than others. What is your accountant advising you to do? I would, in any case, contact the Taxpayer Advocate and see what they advise. (Seriously, they do seem to represent the taxpayer in these matters. And they do report back to Congress on overriding issues they encounter.)


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## sammygirl12

Sorry is there a tax payer adovacate in Australia?


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## sammygirl12

My Accountant is uncontactable due to the hurricane!


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## underation

sammygirl12 said:


> I am not ever going to live in the States or apply for my social security. I was just trying to do the legal right thing and be compliant. I signed a paper allowing the US accountant to file any pleas on my behalf. I just feel like everything is out of my control. We NEVER owe anything ever and I am just an ordinary Australian dual citizen. I cannot pay 10K US...who has that kind of money? I am extremely stressed about this and feel I don't have adequate legal representation. I am wondering if I need a lawyer?


You’re evidently one of many who’ve been unfairly hit with this. You’re not alone. I agree with Bevdeforges about contacting the Taxpayer Advocate. Let them sort it, and try not to worry.


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## Bevdeforges

sammygirl12 said:


> Sorry is there a tax payer adovacate in Australia?


No, but there is a taxpayer advocate for "international" taxpayers located in Puerto Rico. contact info: 


> City View Plaza
> 48 Carr 165, 5th Floor
> Guaynabo, 00968
> Phone: Spanish: (787) 522-8600, English: (787) 522-8601
> Fax: (304) 707-9793


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## sammygirl12

Can I just call the tax advocate in the states? It will be as expensive as calling Puerto rico. How can I represent myself from halfway across the world. I am flabbergasted as I am a law abiding tax paying citizen ...A citizen of Australia... I have not lived in the states for over 25 years! I haven't done anything wrong! I hired an accountant and paid 2K a year to have my taxes done for personal benefit! And now I am being fined!


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## Moulard

sammygirl12 said:


> Sorry is there a tax payer adovacate in Australia?


No. Its a part of the IRS.

https://taxpayeradvocate.irs.gov/


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## underation

sammygirl12 said:


> Can I just call the tax advocate in the states? It will be as expensive as calling Puerto rico.


Could you perhaps use the Puerto Rico fax number to send a letter? There may be a copy shop or similar which offers a fax service?

Edit: This article lists online fax services:
https://au.pcmag.com/cloud-services-1/46504/the-best-online-fax-services


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## sammygirl12

Thank you! this is very worrying.


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## underation

sammygirl12 said:


> Thank you! this is very worrying.


Try not to worry. Easy to say but not so easy to do, I know...

Once you’ve raised it with the TA, you can just wait and see what happens. (Something like “reasonable cause” mitigation, maybe)


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## Nononymous

sammygirl12 said:


> I am not ever going to live in the States or apply for my social security. I was just trying to do the legal right thing and be compliant. I signed a paper allowing the US accountant to file any pleas on my behalf. I just feel like everything is out of my control. We NEVER owe anything ever and I am just an ordinary Australian dual citizen. I cannot pay 10K US...who has that kind of money? I am extremely stressed about this and feel I don't have adequate legal representation. I am wondering if I need a lawyer?


You probably don't want to hear this, but it's time for strong words.

Hiring a lawyer is throwing good money after bad. You had no business filing to begin with and for no good reason have been handing over $2k every year to a crap accountant who called your pension a foreign trust. (Good business model though, it's a lot of expensive work to fill out those 3520 forms.)

Accept the fact that you might be in the IRS bad books for a while, but there's nothing you can do about that now, and most importantly, nothing they can do to you. Relax, if possible.

File a complaint with the TAS, have your accountant send a letter of protest - at no charge since he or she caused this mess, after all - and presumably one day the penalty might be waived because it's clearly a systematic mistake. Do not under any circumstances consider paying the IRS so much as one cent.

After that, save yourself $2k every year, and potential future grief, by ceasing to file. You don't need to. There is no benefit to doing so. Nothing good will come of it.


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## sammygirl12

but it says everywhere including in the US passport that it is the law to file?


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## Nononymous

sammygirl12 said:


> but it says everywhere including in the US passport that it is the law to file?


So what? 

This law is unenforceable if there are no US assets or income sources to mess with. Australia will not help the US government collect penalties from one of its own citizens.

Among the 6-9 million US persons (citizens and green card holders) living outside the US, the estimated compliance rate is below 15 percent. 

Do you think the IRS particularly cares whether you file or not? (Apart from the current penalty.)


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## underation

sammygirl12 said:


> but it says everywhere including in the US passport that it is the law to file?


It’s US law, but it’s not the law in other countries. You’re entitled to decide whether you want to keep filing, or stop filing, or renounce US citizenship altogether. 

I left the US long ago, and never filed again. It never caused me any problems, in fact I never heard of America’s weird tax habits until FATCA came along. (At which point I renounced.)

Something to consider, perhaps, once this current problem has been resolved.


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## Jca1

It seems the 35% penalties are being issued as well. See this comment on Gary Carter's blog:



> I just received my “Notice of Penalty” letter today stating that “you have been charged a penalty under Section 6677 of the Internal Revenue Code for Failure to File Form 3520-A” even though my accountant did file along with my other forms in a timely matter within the extension time granted but this particular form is not included in that extension as is pointed out in . the article. But the real kicker and . the thing that freaks me out the most…the penalty charge is $246,000.05 and no that is not a typo, almost a quarter of a million dollars for turning in a paper a couple of months late (according to them). My accountant is now trying to deal with several of these but mine is by far the worst. I feel sick to my stomach at the thought that they might not grant penalty relief because “we should have known” even though accountants all over the place also didn’t know. Devious Scammers would be the nicest term, I could think of a few others…


On other sites I've also seen reports of penalties for the forms being submitted supposedly incomplete, sometimes in rather confusing ways (e.g. part 4 is submitted, but no transfer of funds is documented).

At this point I'd sooner submit form 8854 (expatriation) than 3520 and 3520-a.


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## sammygirl12

Would that be to give up your citizenship? (form 8854)?


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## Jca1

sammygirl12 said:


> Would that be to give up your citizenship? (form 8854)?


yes, i mean i'd rather do that than get assessed penalties i could never pay, and then possibly get assessed the same penalties the next year, and so on.


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## Nononymous

Options, in order of increasing cost:

1. File nothing further, don't pay the penalty, and don't answer any mail from the IRS (they can't touch you in Australia).

2. Renounce, and file nothing further, don't pay the penalty.

3. Renounce and attempt the 8854 exit tax procedure (while fighting the 3520 penalty).

You could also keep filing but without 3520s - either call the Super a savings account or don't report it at all - but this probably doesn't make much sense given that you already have a penalty to sort out. And really what's the point of filing? (There never was a point.)

The important thing is, don't think in terms of what "US law" may or may not require, because it cannot touch you. Think about what's cheapest and easiest and least stressful.


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## Bevdeforges

underation said:


> It’s US law, but it’s not the law in other countries. You’re entitled to decide whether you want to keep filing, or stop filing, or renounce US citizenship altogether.


As has been said a number of times here, this is not entirely true. US citizens still are subject to certain portions of US law even when overseas. While "enforcement" of these sorts of laws may be a question, the law is what it is.

In this situation, renunciation isn't a "fix" in any sense at all. The fine has been levied - very probably incorrectly - and at this point the OP has to select a response and see it through. Options include the Taxpayer Advocate, pursuing the matter through their accountant and/or an attorney, or ignoring the whole thing (and accepting the consequences of that approach). But whatever approach one takes, there is a cost to it, whether it's paying up to be done with the matter, or ignoring the whole thing and hoping it will eventually blow away.

The other thing to consider is that any response to this will take time - lots of it. There really aren't any "quick fixes" to these sorts of international tax issues. Is it unfair? Yes, definitely. Even in this age of the Internet it's not exactly easy for a lay person to keep up to date on all the subtleties of US tax law that "might" affect even a fairly simple return, especially while living outside the US with minimal ties back to the Old Country.

Best we can do is point out some of the options. Then it's up to you to decide which set of consequences you're willing to live with.


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## underation

Bevdeforges said:


> As has been said a number of times here, this is not entirely true. US citizens still are subject to certain portions of US law even when overseas.


That’s not the case in the UK. Is it the case in France? Do French courts enforce US law? Can you give a reference?



> While "enforcement" of these sorts of laws may be a question, the law is what it is.


Which sort of laws? French laws which reflect US laws? Or US laws? 

If you’re referring to US laws, in what way are French residents “subject” to these US laws, if as you say they’re not enforced by France?




> In this situation, renunciation isn't a "fix" in any sense at all. The fine has been levied - very probably incorrectly - and at this point the OP has to select a response and see it through.


Unfortunately it seems not to be an error. A gotcha, maybe. The fact that it’s incredibly unfair doesn’t mean it’s a mistake. It’s incredibly unfair that US tax law deems all US citizens to be always resident in America, but it isn’t a mistake. Do you really want it to be law in France? Applicable only to US citizens living in France?

The 3520-3520A fines seem to be the result of

a) the current compliance campaign;
b) which led various “tax professional” (!) publications to sagely advise their avid readers to file “protective filings” of these forms, even for non-US retirement funds for which they probably weren’t required;
c) and said “tax professionals” did so, and topped it off by telling their unfortunate clients to file this non-applicable 3520-A form by the wrong deadline.

The OP has done nothing wrong and has done nothing illegal. There are no “consequences” that s/he “must” live with, other than the stress and suffering caused by being treated like **** - under US law. Lucky she doesn’t live in the country where such spiteful fines are the law of the law.


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## underation

underation said:


> The 3520-3520A fines seem to be the result of
> a) the current compliance campaign;
> b) which led various “tax professional” (!) publications to sagely advisr their avid readers to file “protective filings” of these forms, even for non-US retirement funds for which they probably weren’t required;
> c) and said “tax professionals” did so, and topped it off by telling their unfortunate clients to file this non-applicable 3520-A form by the wrong deadline.
> .


An article in Newsmax describing a case in which the tax adviser _didn’t_ file these forms.


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## underation

Jca1 said:


> yes, i mean i'd rather do that than get assessed penalties i could never pay, and then possibly get assessed the same penalties the next year, and so on.


Unfortunately, renouncing doesn’t cancel an outstanding assessed tax debt.

If I were in the OP’s shoes I’d want to raise it with the Tax Advocate and let them deal with it; and then when it’s resolved, consider whether to renounce. And while waiting, I’d contact my MP (mentioning FATCA), and explain the situation. 

Contacting the TA puts on record in the US the OP’s position that the penalty has been unfairly issued; contacting the MP puts it on record in Australia. Take hold of the narrative, in both countries - even though the MP may not be able to do anything other than express concern.


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## underation

Link to the Newsmax article:

https://www.newsmax.com/t/finance/a...onth=11&date=12&id=890286&oref=www.google.com


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## NickZ

underation said:


> That’s not the case in the UK. Is it the case in France? Do French courts enforce US law? Can you give a reference?
> 
> 
> 
> Which sort of laws? French laws which reflect US laws? Or US laws?
> 
> I.


UK courts extradite people to the US. 

Google 

uk banker extradite to the us

You'll find a few of the more famous cases.

Not suggesting the US will bother over a small tax case but the UK courts will ship you off if they feel like it.


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## underation

NickZ said:


> UK courts extradite people to the US.
> 
> Google
> 
> uk banker extradite to the us


Yep, I remember. He was breaking both UK law and US law.



> Not suggesting the US will bother over a small tax case


The OP hasn’t broken any laws either in Australia or in the US.


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## sammygirl12

I have given my accountant the right to contact the IRS on my behalf, and he has already sent a letter. Should I also contact the TA


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## underation

sammygirl12 said:


> I just received the penalty today which is the end of the 30 days I am allowed to ask for an appeal.


If you do decide to contact the TA, I suggest emphasising this point.

By failing to notify you of the penalty in time for you to ask for an appeal, the IRS made it impossible for you to exercise your right to appeal.


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## sammygirl12

Thankyou so much! I am at a loss with all of this and value all the advice I can


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## underation

sammygirl12 said:


> I have given my accountant the right to contact the IRS on my behalf, and he has already sent a letter.


That’s great! 



> Should I also contact the TA


I’d suggest waiting to see what response the accountant receives. Perhaps you won’t need the TA.


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## sammygirl12

He said he had another case and the IRS took a year to get back to him!


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## underation

sammygirl12 said:


> He said he had another case and the IRS took a year to get back to him!


Typical! They’ll presumably have to consider the accountant’s letter, though, before taking any further action. You can wait to see what they say, even if it does take a long time.

They may be getting quite a few of these letters from accountants.


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## Bevdeforges

Assuming your accountant wrote a letter to the IRS, I would also contact the TA - if for no other reason than simply to get their advise on the situation and to get your case on record with the TA office. I believe they may also have the power to suspend any assessment of interest charges or penalties while they try to resolve the situation.

If nothing else, contacting them ASAP is a show of "good faith" that you are trying to resolve the situation. And, if they have dozens (or hundreds or thousands) of similar cases, it gives them far more ammunition to prove the point regarding the issue.


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## Nononymous

sammygirl12 said:


> Thankyou so much! I am at a loss with all of this and value all the advice I can


So here's my advice: 

The accountant has sent the letter. File a complaint with the TAS as soon as is convenient. Obtain a copy of the accountant's letter and forward it to the TAS along with your personal commentary (particularly that bit about not having time to appeal). Do this by regular post, no need to call or fax, as it's probably going to take years to sort this out.

That's all you can do about the current $10k fine, which one way or another you shall never pay.

Then on to next year. The best course of action: DO NOT FILE ANYTHING and don't pay the accountant another cent. It's the tax industry wot created this mess, frankly.

If you do feel compelled to continue filing, find another accountant who will treat your Super like a regular savings account, or not report it all. No more 3520 nonsense.

Then contemplate whether it makes sense to renounce. If you're spending $2k a year for an accountant to pointlessly inform the US government that you owe it nothing - except for when the IRS decides to randomly assess penalties for having a normal retirement savings account - then the $2350 renunciation fee looks like a very good investment.

The only thing that would negatively impact your ability to visit family in the US is if you ignored the $10k penalty long enough for it to balloon over $51k, at which point you could potentially lose your US passport. You could still travel to the US on your Australian passport of course, but you would then expect to receive a lecture upon arrival (supposedly one must enter with a US passport if one is a US citizen blah blah, but there is no defined penalty for breaking this law) and in the most extreme case your contact details while visiting might be taken and referred to the IRS. (The debt is however still not collectible if you have no US assets or income sources.) You would not be arrested, charges would not be brought for such a small amount.

Overall, this illustrates rather well the point that the only people who need to consider renouncing are those who either live in countries where the FATCA-inspired banking restrictions on US citizens are so bad that a normal life is very difficult (i.e. Switzerland) or who attempted to become compliant and suffered the consequences (i.e. you). Unfortunately you would be in much better shape today if you had never begun filing.


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## sammygirl12

We are still extremely stressed about this and going forward to future filings. The question being should an Australian superfund which is a mandatory retirement fund need to be filed under a 3520-A and going forward what happens if you file but not that form? Do we need legal advice? Under the reciprocal agreement of RRSP and RRIF like Canada, should these be excluded from further tax as they are already being taxed in Australia? What happens when we want to visit family in the states?


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## Moulard

Sammygirl..

What type of Superfund are we talking about here? If it is an industry or employer fund (or perhaps a master trust), then I would be arguing that it is an employees trust under s.402(b).

I assume tho, you are talking about a SMSF.


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## sammygirl12

yes it is a self managed


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## perryf

Hi Sammygirl, this is a fabulous forum. However, you may also find the Australian based group Fix the Tax Treaty a useful point of connection and information too.


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## sammygirl12

Thank you I will look at that! I am still so distressed and trying to consider all my options. I feel despondent and I am unsure how to handle it all. I feel like I may need some sort of legal advice.


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## sammygirl12

Does anyone have any good news or anything positive that has happened to them?? All I have been reading is extremely distressing situations!


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## Nononymous

sammygirl12 said:


> Does anyone have any good news or anything positive that has happened to them?? All I have been reading is extremely distressing situations!


Here are your good news points:

85+ percent of overseas US persons do not file US tax returns, and nothing bad happens to them. (FATCA causes banking problems, in some countries, for anyone with a US birthplace. But this is not an IRS or tax problem.)

The IRS has no ability whatsoever to collect penalties from an Australian citizen living in Australia with no US assets or income sources.

Personally, I would appeal the 3520 fine so that future passport renewals are not at risk, then fire your accountant and cease filing. Chances are you will suffer no ill effects.


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## perryf

Hi Sammygirl, I have yet to hear back on my appeal. I understand it may take 9 plus months to hear back from the IRS. I did read online about someone who did get their penalty waved but I expect it may come down to the particulars of any one case. Again, you might want to join the Change the Tax Treaty group on Facebook. Hopefully someone on this forum, or there, will provide an update if they receive some good news.


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## Bevdeforges

sammygirl12 said:


> Does anyone have any good news or anything positive that has happened to them?? All I have been reading is extremely distressing situations!


I suspect that those who are active on various forums about tax issues are those who have had problems. And potentially somewhat serious problems. 

For many of us, we deal with our tax situation as we see fit and generally stick to the notion that "no news is good news." There is an element of risk in any approach you take - from non-compliance through "selective compliance" to turning it all over to a tax preparer to do for you in the hope of achieving "perfect compliance." The US tax regulations are subject to interpretation, especially when it comes to foreign stuff - investment accounts, salary categories, taxable and non-taxable items. 

And, the IRS will not make a definitive declaration regarding foreign financial items - like is this or that investment vehicle a PFIC or not. Best bet for some "happy news" is to take a look at the Taxpayer Advocate's website for some of the cases they have successfully resolved.


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## Jca1

underation said:


> If Australians hit by this could co-ordinate protests to their MPs and the Australian tax agency, maybe this issue could be raised at governmental level?
> 
> And similarly co-ordinated protests in each affected country might draw international attention to what really sounds like a deliberate “fundraising campaign” by the IRS.
> 
> Another article raising the issue - this time in Canada:
> https://www.newsmax.com/t/finance/a...onth=11&date=12&id=890286&oref=www.google.com
> 
> And Law360 seems to have a piece about the IRS requesting feedback about trust-related forms?
> Behind a paywall. Not sure if it’s talking about this form.
> https://www.law360.com/tax-authorit...eedback-on-burden-of-foreign-trust-gift-forms


I can't access the Law360 article either, but it seems to be referring to this item in the Federal Register:

https://www.federalregister.gov/doc...ion-comment-request-for-forms-3520-and-3520-a



> SUMMARY:
> The Internal Revenue Service, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995. The IRS is soliciting comments concerning annual return to report transactions with foreign trusts and receipt of certain foreign gifts and for annual information return of a foreign trust with a U.S. owner.
> 
> DATES:
> Written comments should be received on or before October 21, 2019 to be assured of consideration.
> 
> ADDRESSES:
> Direct all written comments to Laurie Brimmer, Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington, DC 20224.
> FOR FURTHER INFORMATION CONTACT:
> Requests for additional information or copies of the form should be directed to Christina Leeper, at (737) 800-7737 or Internal Revenue Service, Room 6526, 1111 Constitution Avenue NW, Washington, DC 20224, or through the internet, at [email protected].
> 
> SUPPLEMENTARY INFORMATION:
> Titles: Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts and Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner.


The IRS appears to be seeking info from the public about problems caused by these forms. It would probably be helpful for anyone who feels comfortable to explain to them what's happening.


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## Jca1

Thought it worth mentioning that some people on the Serbinski Accounting forum have been able to get this penalty abated over the phone for Canadian TFSAs (another tax-deferred account sometimes reported as a grantor trust), though others have tried this and failed.


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## cirrus

sammygirl12 said:


> Does anyone have any good news or anything positive that has happened to them?? All I have been reading is extremely distressing situations!


Good news, well I had a dual status tax issue some years ago, the IRS actually referred it to the Taxpayers Advocate 
The main problem I had was keeping in touch with the situation. I was in France and they could not call overseas would you believe, so talking to their voicemail was pretty frustrating.
TA eventually sorted it out some 5 months later and I was reimbursed.

Good luck


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## jbr439

Jca1 said:


> Thought it worth mentioning that some people on the Serbinski Accounting forum have been able to get this penalty abated over the phone for Canadian TFSAs (another tax-deferred account sometimes reported as a grantor trust), though others have tried this and failed.


It's bizarre that TFSAs should be considered trusts. The beneficiary and trustee (to use trust terms) of the TFSA are one and the same, the account holder, who must pay US taxes on the account (it's not considered tax-deferred by the IRS). I.e. from the IRS' point of view it should be little different from any other regular financial account. Yet, the notion of it being a trust has taken hold (likely fuelled by tax "professionals" taking a CYA approach) and now we have the current crappy situation.


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## Jca1

jbr439 said:


> It's bizarre that TFSAs should be considered trusts. The beneficiary and trustee (to use trust terms) of the TFSA are one and the same, the account holder, who must pay US taxes on the account (it's not considered tax-deferred by the IRS). I.e. from the IRS' point of view it should be little different from any other regular financial account. Yet, the notion of it being a trust has taken hold (likely fuelled by tax "professionals" taking a CYA approach) and now we have the current crappy situation.


Yes it seems like they're mostly copying each other, probably because the IRS won't issue rulings on whether something is a 'foreign grantor trust' and it's a complex topic CPAs aren't equipped to deal with. I'm still waiting to hear of a case where the IRS penalized someone for _not_ reporting a non-US pension or other government-recognized tax-deferred account on forms 3520/3520A, as opposed to the numerous cases of penalties where the form was submitted supposedly late or incomplete.


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## Nononymous

Reminder that many of the registered accounts in Canada (RRSP, RESP, TFSA etc.) and similar accounts in other countries are not actually reported under FATCA, per the terms of each country's IGA.

This means that someone who is comfortable with non-compliance or partial compliance may simply choose to not report them at all, let alone risk the 3520 mess.


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## Jca1

Nononymous said:


> Reminder that many of the registered accounts in Canada (RRSP, RESP, TFSA etc.) and similar accounts in other countries are not actually reported under FATCA, per the terms of each country's IGA.
> 
> This means that someone who is comfortable with non-compliance or partial compliance may simply choose to not report them at all, let alone risk the 3520 mess.


The same is true of UK SIPPs and ISAs, thought I don't know if it's possible that HMRC actually reports them in practice.


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## Nononymous

Jca1 said:


> The same is true of UK SIPPs and ISAs, thought I don't know if it's possible that HMRC actually reports them in practice.


Yes, since HMRC takes the view that it's not required to provide any information to the public!

Best way to eliminate this risk, if possible, is to not report US person status to the bank, and avoid all FATCA reporting.


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## Jca1

It looks like there was a similar wave of inaccurate penalty assessments for forms 3520/3520-A in 2012:

Federal Tax Crimes: AICPA Complains to IRS About Form 3520 Administration Issues (8/29/12)

AICPA complained, but it doesn't seem to have helped.


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## byline

jbr439 said:


> It's bizarre that TFSAs should be considered trusts. The beneficiary and trustee (to use trust terms) of the TFSA are one and the same, the account holder, who must pay US taxes on the account (it's not considered tax-deferred by the IRS). I.e. from the IRS' point of view it should be little different from any other regular financial account. Yet, the notion of it being a trust has taken hold (likely fuelled by tax "professionals" taking a CYA approach) and now we have the current crappy situation.


Yup, I had this come up back in 2012. The tax preparer I had at the time insisted I was required to file Form 3520 for my tax-free savings account (TFSA), and also that I needed an employer identification number (EIN) in order to file that form. Her advice about the EIN has always puzzled me. And then the weird thing was, I thought she would be the one to fill out Form 3520. She didn't; she left that up to me. What fun! I managed to fill out that monstrosity, only to have it generate Form 3520-A ... which was even worse. After filling out that pile of paperwork, for an account that had about $5,000 and generated $90 in interest, and for which I ended up owing zero tax, I decided to move the TFSA money into a regular savings account and avoid the headaches. Thankfully, the worst outcome of the whole thing, for me, was a ton of frustration over the stack of forms.


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## perryf

Sammygirl and others hit with this penalty might want to share their stories here:

https://www.taxconnections.com/taxb...ictims-of-form-3520-and-3520-a/#comment-17952


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## Steelersfan

*New Zealand info*

Pursuant to its treaty w/the US, New Zealand's kiwi saver scheme also is NOT reported pursuant to FACTA.


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## Nononymous

Steelersfan said:


> Pursuant to its treaty w/the US, New Zealand's kiwi saver scheme also is NOT reported pursuant to FACTA.


Though still reportable by the taxpayer. But with no FATCA reporting, a person filing US tax returns from New Zealand could choose to omit them from the return, to save paperwork grief and/or taxes owed, because the IRS won't have any information about them.

It's the same situation as RRSP/RESP/TFSA accounts in Canada.


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## perryf

Some possible good news on the 3520 penalty fiasco:

https://www.taxconnections.com/taxb...that-effects-thousands-of-taxpayers/#comments


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## perryf

Just an update that my 3520a penalty was waved and apparently a letter was sent with an apology. I never received it. So probably worth following up directly with the IRS if you’re still waiting.


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