Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax

Is not knowing you need to file a form 3520 for foreign

Customer Question
gifts enough to establish reasonable...
Is not knowing you need to file a form 3520 for foreign gifts enough to establish reasonable cause? Plan to voluntarily disclose after finding out the requirement. I did my taxes myself on Turbo Tax, and it was my first time I ever filed taxes -- I don't think it asked me anything about receiving foreign gifts?) but not sure. I received 500K from overseas. However, I did not disclose an information form. I did not intentionally leave this part out. Had I knew about it, I would have filed immediately. Not willfully neglectful or trying to evade anything -- just simply did not know about it. Worried I would have to pay 5% penalty per month late, which is a significant amount of money.
Submitted: 7 months ago.Category: Tax
Show More
Show Less
Ask Your Own Tax Question
Customer reply replied 7 months ago
Just unsure what exactly it would take to establish this reasonable cause to not have to pay penalties. And what the likelihood is for me to get out of this without having to pay up money I don't have.
Answered in 4 minutes by:
7/1/2017
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 7 months ago
Mark Taylor
Mark Taylor, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2,395
Experience: Certified Public Accountant
Verified

Hi, my name is Mark. I will be happy to help you with your questions. How did you become aware of the filing requirement.

Ask Your Own Tax Question
Customer reply replied 7 months ago
Bank closed my accounts and I was trying to think back why it could be closed. Upon research, it turns out it could be because there were people sending large amounts of money and banks are usually risk adverse. Large sum of money = could look like criminal activity (which it was not..) anyway. So I decided to research about the only one thing I could think of - the gifts I received. I didn't think there would be any filing requirement bc I read that such gifts were not taxable. I did not know they had to be reported. I was thinking since they didn't need to be taxed, they probably didn't need to be filed or anything. But upon further research after taxes deadline, I found out that there was a filing requirement on the money inflow. However, this is a separate issue from my bank accounts being closed.
Customer reply replied 7 months ago
to answer your question, I did more research after I found out my bank accounts were closed thinking it could be linked to the money I received. Because there would be no other reason the bank closed my account, having been a member with them for 5 years.
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 7 months ago

I apologize I had to step away from the computer. Any deposit that is greater than $10,000 is reported to the government. This is exactly as you mentioned to track illegal activity. When did you receive the money? Did you receive more than $100,000 from a foreign individual?

Ask Your Own Tax Question
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 7 months ago

Did you speak with any financial professionals? Do you have any background or education in business, accounting, or finance.

Ask Your Own Tax Question
Customer reply replied 7 months ago
I received money from foreign individual. The bank is not the issue I am asking about-- the money is all legal. It is from my wife's parents. Anyway -- the question I'm trying to ask is whether or not - not knowing about a filing requirement is enough to establish reasonable cause for not filing form 3520. Considering it is the first time I have ever filed a tax return, and having relied on turbo tax to do my taxes?
Customer reply replied 7 months ago
All 500K was from foreign individual. I received it during the 2016 tax year, in June. I was supposed to file form 3520 in April 15, but I'm late already. So I need to fill out the form now, but it will be late. Penalizable unless I can establish reasonable cause. Do I have reasonable cause?
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 7 months ago

I did not mean to give you the wrong impression. I was not questioning the legality, It was just an FYI that the banks are required to report individual transactions of greater than $10,000.

Ask Your Own Tax Question
Customer reply replied 7 months ago
In terms of tax law though, do I have enough to justify reasonable cause? I'm not sure how much is required to establish this so I don't have to pay the penalty. I intend to file the form late voluntarily.
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 7 months ago

Let me see what I can find. Usually reasonable cause would involve more. Please give me a few moments.

Ask Your Own Tax Question
Customer reply replied 7 months ago
I just feel like considering it is my first tax return, having filed through turbo tax, I didn't know better. I would have filed if I knew about it.
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 7 months ago

I would tend to agree with you. For reasonable cause for a delinquency penalty you need to show that you exercised ordinary business care and prudence and was nevertheless unable” to file the return or pay the tax, the taxpayer has reasonable cause and the penalty will not be assessed. The most important factor being is the extent of the taxpayer’s effort to assess the proper filing requirement.

The Internal Revenue Manual (IRM) discusses reasonable cause relief for failure to file international information returns and provides an overall standard as follows:

Reasonable cause applies to most, but not all, of the penalties. However, taxpayers who conduct business or transactions offshore or in foreign countries have a responsibility to exercise ordinary business care and prudence in determining their filing obligations and other requirements. It is not reasonable or prudent for taxpayers to have no knowledge of, or to solely rely on others for, the tax treatment of international transactions [IRM 20.1.9.1.1 (4) (October 24, 2013)].

This language sets a strict standard: business care and prudence is required, and a taxpayer cannot claim either lack of knowledge or exclusive reliance on professional advisers. This is close to the standard for filing income tax returns that the Supreme Court explained in Boyle v. U.S. [469 U.S. 241 (1985)]: “[O]ne does not have to be a tax expert to know that tax returns have fixed filing dates and that taxes must be paid when they are due.” The IRM therefore appears to take the position that U.S. taxpayers who conduct international business or transactions are expected to have the same knowledge of filing international information returns as of filing Form 1040.

http://www.kflaw.com/reasonable_cause_for_international_information_return_penalties_what_is_the_standard

Ask Your Own Tax Question
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 7 months ago

Yes, you can claim lack of knowledge as a reasonable cause defense. You need to show the steps you took to find out the filing requirements and once you found out that you had a filing requirement you took the steps necessary to become compliant. They was no intent to not-file or avoid your filing requirement after all this is the first time you dealt with this current situation.

Ask Your Own Tax Question
Customer reply replied 7 months ago
What do you think is the chances that the IRS will in fact assess a penalty? or do you think my chances are pretty good considering the circumstances, that I will not be assessed a penalty?
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 7 months ago

Your cancer are pretty good that they would accept reasonable cause. You would just need to build your case. This was the first time that you received an international gift, you were not aware of your filing obligation at the time, once you became aware that you had a filing requirement you took the steps necessary to resolve the situation. The delay in filing was non-willful and due to lack of knowledge.

Ask Your Own Tax Question
Tax Professional: Mark Taylor, Certified Public Accountant (CPA) replied 7 months ago

chances are pretty good.

Ask Your Own Tax Question
Was this answer helpful?
Ask Mark Taylor Your Own Question
Mark Taylor
Mark Taylor
Mark Taylor, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2,395
2,395 Satisfied Customers
Experience: Certified Public Accountant

Mark Taylor is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,312 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,362 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

14,120 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,652 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
My ex husband and I NEVER filed a joint tax return in the 13
My ex husband and I NEVER filed a joint tax return in the 13 years we were married. He currently pays $500 in alimony per month. He just called to request my SSN so he can get the alimony deduction. Should I give it to him?" … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
14,120 satisfied customers
The address one uses on the first page of form 1040 is the
The address one uses on the first page of form 1040 is the mailing address or the address of residence?… read more
abci168
abci168
Principal
27 satisfied customers
Client wants to file a joint tax return; spouse is
client wants to file a joint tax return; spouse is incarcerated entire year; client has a Power of Attorney form 2848 dated 2/24/16; spouse was incarcerated all of 2016 & 2017, and still is; client ha… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Our tax accountant will not release our tax return because
Our tax accountant will not release our tax return because of a fee dispute. What are our rights ? … read more
abci168
abci168
Principal
27 satisfied customers
You had answered my last question about filling up Form 3520
Second opinion] Hi Barbara, you had answered my last question about filling up Form 3520 in case of transferring more than $100K to our son who is a student in USA. The follow up question is that the … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I need to verify that my tax return was filed by Turbo Tax.
I need to verify that my tax return was filed by Turbo Tax … read more
Barbara
Barbara
Enrolled Agent, Paralegal
4,115 satisfied customers
I submitted my 2017 federal income tax forms to Turbo Tax to
I submitted my 2017 federal income tax forms to Turbo Tax to be submitted to the government. Turbo Tax recognized an error to be corrected because I omitted completing one section. Since Turbo Tax did… read more
Barbara
Barbara
Enrolled Agent, Paralegal
4,115 satisfied customers
I'm filing my taxes on turbo tax .They were rejected. I
Hello, I'm filing my taxes on turbo tax .They were rejected. I payed to have them done in the past I asked my tax preparer for my AGI and was given the wrong number. how do I get a copy of my 2016 tax… read more
Barbara
Barbara
Enrolled Agent, Paralegal
4,115 satisfied customers
Cannot e file my tax return checked for update. Turbo tax
cannot e file my tax return checked for update JA: What device or product does this involve? Customer: turbo tax home and business JA: What Operating System (OS) are you running on your computer or de… read more
Fred Rook
Fred Rook
Corporate Controller
BSBA
100 satisfied customers
I am filing tax return for a deceased person. There is a
I am filing tax return for a deceased person. There is a personal representative and two people that are on the will and states any and all property be divided evenly between the two. Who gets income … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Is there a form to file with the IRS for tax periods that
Is there a form to file with the IRS for tax periods that have ran past the statute of limitations from the date of assessment … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Penalty for late filing of partnership LLC tax return, not
Penalty for late filing of partnership LLC tax return, not eligible for Rev Proc 84-35 relief because one of the partners is a foriegner… read more
Barbara
Barbara
Enrolled Agent, Paralegal
4,115 satisfied customers
FOR GUILLERMO: What line on the 1040 income tax return is
FOR GUILLERMO: What line on the 1040 income tax return is used to determine the sponsor's income for Form I-864? Is it line 22: TOTAL INCOME? Or, line 37, ADJUSTED GROSS INCOME?… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
W, is there a amend tax return there at IRS there for me? My
Hi, my name is ***** ***** Miller, is there a amend tax return there at IRS there for me? … read more
Fred Rook
Fred Rook
Corporate Controller
BSBA
100 satisfied customers
For the purpose of IRS form 3520 line 54 can an estate
For the purpose of IRS form 3520 line 54 can an estate account be a person 'related to' my brother? For example, if I received money from an estate account from my father in Canada as part of a will a… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
14,120 satisfied customers
Help with Form 3520. Form 3520 - Need to know what line
Form 3520 - Need to know what line items to fill for having received a cash gift from a foreign citizen … read more
Barbara
Barbara
Enrolled Agent, Paralegal
4,115 satisfied customers
Form 3520- Received a bequest from a foreign Estate. Besides
Form 3520- Received a bequest from a foreign Estate. Besides my personal info, what other info, if any, goes on page 1 … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
14,120 satisfied customers
I was unaware of requirement to file Form 3520. I received
Hello:I was unaware of requirement to file Form 3520. I received cash gifts from foreign persons (parents) in 2016. I have not been contacted by IRS; have no previous under or unreported tax liabiliti… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
14,120 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x