IRS sends letters to taxpayers as it tries to close out inventory of Form 3520 processing issues

BY EILEEN REICHENBERG SHERR, CPA, M.TAX.

The IRS has recently notified the AICPA’s Foreign Trust Task Force that the IRS plans over the next few months to send out letters to taxpayers who filed Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, or Form 3520-A, Annual Information Return of Foreign Trust with a U.S. Owner, as it attempts to close out outstanding inquiries/correspondence involving Form 3520 prior processing issues.

Most of these new IRS form letters will be going to Form 3520/3520-A taxpayers who already received earlier IRS correspondence, possibly previously mentioning that potential penalties may be assessed.

These new IRS letters will be sent from the Philadelphia campus accounts management group. The letters say, “Dear Taxpayer: We are pleased to tell you that your information return(s) has been processed. No action is needed on your part.” 

It appears that the intent of the new IRS letters is to inform taxpayers that the IRS’s Form 3520 processing issues are now resolved and these filings have now been accepted. AICPA members have started receiving such letters related to 2011 Forms 3520 and 3520-A. The AICPA Foreign Trust Task Force remains in monthly dialogue with the IRS regarding Form 3520 processing issues relating to prior IRS Form 3520 letters. The task force wants to make sure members and their foreign trust and foreign gift taxpayers are aware that these new IRS Form 3520 letters are being sent to close out these Form 3520 filings.

Eileen Reichenberg Sherr ( esherr@aicpa.org ) is a senior technical manager–taxation at the AICPA.

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