Persons With Respect to Certain Foreign Corporations); (2) whether the corporation received a distribution from, or it was the grantor of, or transferor to, a foreign trust (Form 3520
, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts); (3) whether the corporation has foreign bank accounts that require filing FinCEN Form 114 and/or Form 8938, Statement of Specified Foreign Financial Assets; and (4) whether the corporation is claiming the extraterritorial exclusion (Form 8873, Extraterritorial Income Exclusion).
The FTB will replace its current version of Form 3520
, Power of Attorney Declaration, with two new POA forms and adding a new POA revocation form:
Whether a taxpayer is required to file IRS Form 3520
, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, is frequently unclear, yet penalties for a failure to file can be severe.
The due date for Form 3520
, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, will be April 15 for calendar-year filers, with a maximum six-month extension.
pertains to any distributions from foreign trusts and Form 5471 pertains to informational reporting of a controlled foreign corporation.
Taxpayers, as well as to see 35% volume increase in delinquent tax and informational filings such as Form 3520
: Annual Return to Report Transactions with Foreign Trusts and Receipt of certain foreign Gifts, Form 5471: Information Return of U.S.
From 1990 through 2006, the number of Form 3520
returns filed reporting foreign "grantor" and "nongrantor" trust transactions and certain foreign gifts rose from 133 to 7,956 (almost 5,900 percent), while the number of Form 3520-A foreign "grantor" trust returns filed rose from 291 to 3,819 (over 1,200 percent) (Figure A).
rust (other than a transfer in exchange for consideration equal to the full value of the transferred property) is required to report the creation or transfer on Form 3520
.(49) Form 3520
is due at the same time as her income tax return is due for the year in which such creation or transfer took place, so Failure to file may subject a transferor to a penalty equal to thirty-five percent of the amount transferred.(51)
Many IIRs must be filed with the IRS, such as Form 3520
, Form 5471, Form 926, Return by a U.S.
Currently, no official IRS form exists for a foreign nongrantor trust beneficiary statement; however, Notice 97-34 and the IRS Instructions to Form 3520
, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, provide clarification of the information needed for the trustee to correctly report the tax information for the U.S.
In the case of multiple trusts, a separate Form 3520
must be filed to report transactions with each, though all foreign gifts can be reported on one form.
The relevant information must be reported to the IRS annually on Form 3520
. The filing deadline is the due date for the recipient's U.S.