Penalized by the IRS for Not Reporting an Overseas Gift (3520)?
Recently, this has become a major issue with clients contacting us for penalty abatement assistance.
The typical 3520 penalty situation: U.S. Person adult child resides in the U.S. The child is either in the U.S. for school or employment.
The foreign parents want to assist the child by transferring money from abroad in order to help the adult child:
- Repay school loans
- Purchase a home
- Set up money for a grandchild
- Provide some financial assistance.
Penalized by the IRS for Not Reporting an Overseas Gift
Many CPAs who practice tax have no background in International Tax. Therefore, they do not even ask their clients if the client received a “Gift from a Foreign Person.”
The Client Learns the Requirements After the Fact
The Client is conducting other research, speaking with friends or colleagues, and learns about the requirements to report a Foreign Gift (along with foreign accounts and assets, if applicable). He or she speaks with the CPA, who realizes a mistake was made in the tax filing(s).
The CPA Gives Bad Advice to the Client
Instead of properly filing the correct forms through IRS Offshore Disclosure/Amnesty to obtain a Penalty Abatement before the penalty is issued, the CPA recommends the client just file the form.
As a result, the Client never makes a proper abatement request, and then gets hit with monstrous penalties. The reason the penalties are so high, is because the penalties are based on the value of the gift — and oftentimes the value of the gift is “substantial.”
What Can You Do?
If you are out of compliance, do not just send the late form (3520, 8938, FBAR, etc.). Instead, speak with an experienced IRS Offshore Disclosure/Compliance Tax Attorney first, and learn the different options for compliance.
What Type of Attorney Should I Hire?
IRS Voluntary Disclosure is a specialized area of law. An IRS Voluntary Disclosure is a complex undertaking. It requires the coordination of several moving parts, including strategy development, Tax Preparation, Legal Analysis, Negotiation and more.
Golding & Golding, Board-Certified Tax Law Specialist Team
Golding & Golding represents clients worldwide in over 70-countries exclusively in Streamlined, Offshore and IRS Voluntary Disclosure matters. We have successfully completed more than 1,000 streamlined and voluntary disclosure submissions.
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Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver. He has also earned the prestigious IRS Enrolled Agent credential. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo, and various Law Journals nationwide.