IRS sunsets foreign trust campaign

by | Oct 17, 2022 | Articles

The IRS has completed its four-year foreign trust campaign. The campaign, launched on May 21, 2018, was one of six campaigns initiated by the Large Business and International (LB & I) units of the IRS.

The crackdown on late foreign trust reporting to the IRS was unrelenting and brutal. No warning was given prior to taxpayers being issued a severe penalty under Section for failure to file either Form 3520 or 3520-a, or both. No leniency was issued, and no reasonable cause statement would remit the penalty. The IRS has been held to have deliberately understaffed the department dealing with the assessment of requests for abatement using the reasonable cause provisions contained in Code Section 6677.

Section 6677 states clearly that no penalty will be imposed for failure to file if there is reasonable cause and not wilful neglect.

Reasonable cause is an area that the IRS has not willingly spelled out the definition of and therefore remains a grey area.

Penalties were assessed automatically. Penalties were also removed by various methods in an inconsistent manner by the IRS in shambolic administration of the campaign.

Taxpayers with solid filing history were penalized for filing either Form 3520 or 3520-a even a day late. IRS staff who required managerial approval to automatically issue a penalty under the Internal Revenue Manual bypassed that requirement.

The campaign affected US citizens with foreign trusts worldwide.

US citizens in New Zealand were hit particularly hard due to the following micro and macro-economic factors.

  1. Widespread use of discretionary family trusts. The family trust quintessentially is a part of wealth management, estate planning and a legacy from days gone by when NZ tax benefits came attached.

The popularity of the family trust is noticeably more than in neighbouring country Australia.

  1. New Zealand’s fiscal year ends March 31 for the majority of individuals, businesses, and trusts.
  1. New Zealand’s financial reporting framework allows up to nine months to prepare financial statements and the Tax Administration Act provides that income tax returns are due no later than 12 months from the end of the fiscal year. The financial community therefore works within those time frames. It was common practice that the financial statements for trusts weren’t available within the timeframe for filing Form 3520-a.

The campaign targeted the 2016-2018 tax years.

Recent Posts

Archives

Safety ElectricalSafety Electrical
21:30 21 Aug 24
I came across this person by google search . First attempt could not get connected .she so good returned my call with 5 min . Asked her few question , would say very good on what she does .Also plus point , she follows you up again . I would say very help full person . Recommend to go with her , no second thoughts .
Maryanne GarryMaryanne Garry
09:09 21 May 24
Gina is exceedingly detailed and knowledgeable. Her expertise is like a lifeline for US expats.
Matt RollMatt Roll
04:09 21 May 24
I'm thankful for finding NZ US Tax Specialists because Gina is one of the few people I know with a working knowledge of the intersection of U.S. and NZ tax policies. Our tax return was accurately completed on time and without any issues. I'm planning to use their services for years to come.
Spencer SmithSpencer Smith
03:47 21 May 24
US tax is a complex beast. Gina and her team have been very helpful to me and my clients with US tax issues.
Chris LemonChris Lemon
22:46 20 May 24
Gina and the folks at NZ US Tax Specialists were very quick to answer a question I had on the NZ tax treatment of US Military pensions, a fairly obscure area of tax law. They're great to work with.
Danielle FaireyDanielle Fairey
20:00 15 Oct 23
Gina was such a great help in navigating my tax requirements after moving between the US and NZ. She was great to work with - always very responsive and helpful. I would definitely recommend and work with NZ US Tax Specialists again in the future.
NZ US Tax Specialists has been a lifesaver with regards to a family member’s move from the US to NZ. Gina and her team have been there to help us understand the complexities of dual tax status and have greatly assisted in getting everything filed on time. While taxes will never be fun, working with NZ US Tax Specialists has brought our stress levels down considerably.
James SteeleJames Steele
02:57 13 Apr 23
Gina helped us prepare our US tax returns after we moved to NZ during a very busy time. We had no idea what was required as US citizens living abroad, but Gina was extremely helpful, knowledgeable, and professional. The work was affordable and well done. We had a great experience and hope to use NZ US Tax Specialists again.
Marivee McMathMarivee McMath
06:35 13 Feb 23
I am very happy with the way NZ US Tax Specialists handled sorting out my US Taxes! It certainly put my mind at rest. Felt I was in safe 'hands' throughout the process.
Gareth RobinsGareth Robins
04:31 13 Feb 23
Gina quickly attended to my tax questions and was very helpful
Deborah MunroDeborah Munro
03:54 19 Oct 22
If you're a US expat and need to file a US tax return, then look no further! Gina and her team at NZ US Tax Specialists does outstanding, professional work. I had to amend my US tax return, as I didn't know I had to file a form. Gina got that done, but they also found I'd made an error, and they fixed that for me as well, keeping me in good standing with the IRS. I'm definitely returning next year to get their assistance again.
Karen SmithKaren Smith
23:32 02 Sep 22
I have been working with Gina since 2014, when I needed US Tax advice, being both a New Zealand and United States citizen. Over the eight years that we have been working together, I have found Gina to be extremely knowledgeable about the US tax system and the New Zealand IRD. She is quickly able to provide definitive answers to my US tax questions, via her extensive contacts in the US tax department.Gina is always prompt in responding to my email and phone conversation questions and her professionalism has inspired my confidence in her many times over.She has guided me through my annual tax return filing with integrity and honesty and I fully trust her to get the job done well each year.
js_loader

Level 7

2 Kitchener Street

Auckland 1010

New Zealand 

Phone No.: 09-5255931

Terms Of Trade

Disclaimer

Privacy Policy

NZ US Tax Specialists Limited is a registered trademark. All rights reserved.