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The IRS’s Assessment Of Penalties On Substitute Forms 3520-A

By Megan L. Brackney
Tax Notes International, Volume 102 Issue 3
Tax Notes Federal, Volume 171 Issue 3
April 19, 2021

In recent months, we have seen several clients being heavily penalized for purportedly late filing Form 3520-A, “Annual Information Return of Foreign Trust With a U.S. Owner,” when they had filed a timely substitute Form 3520-A. The IRS’s practice of assessing these penalties contradicts its own published guidance.

We have succeeded in getting these penalties reversed after filing protests and requests for collection due process with the Independent Office of Appeals. Rather than placing the burden on the taxpayer to challenge an improperly assessed penalty, the IRS should stop automatically imposing these penalties and instead should review the taxpayer’s submission and apply its own guidance.


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