The international tax experts at LSL CPAs provide an update on IRS Form 3520 and the filing requirements in this two-part blog. Part 1 focused on who is required to file IRS Form 3520. Part 2 will focus on who is NOT required to file IRS form 3520. If you have questions, please contact Yana Weaver, the LSL CPAs international tax expert, at 714.569.1000.

Who Is NOT Required to File IRS Form 3520?

Equally as important as knowing who is required to file IRS Form 3520 is knowing who is not required to file this form. You do not want to be filing any forms with the IRS that are not necessary, costing you time and money while possibly placing an IRS lens on your international business dealings.

If any of the following circumstances apply, you will NOT be required to file IRS Form 3520:

• Predefined Foreign Trust Transfers:  You are not required to file IRS Form 3520 if you transferred to certain foreign retirement plan trusts created by employers. To understand the definition of such a transfer, please get in touch with an international tax consultant at LSL CPAs.
• Fair Market Value Transfers: Most FMV (Fair Market value) transfers to a foreign trust do not have to be reported on IRS Form 3520. There are some exceptions to this rule, and LSL CPAs can help you navigate those exceptions to ensure that your filing requirements are covered.
• Compensation for Services:  If you received a distribution from a foreign trust as compensation for services provided, you will not be required to report this information on IRS Form 3520. Instead, such compensation should be reported as income on applicable federal and state income tax returns. The international tax consultants at LSL CPAs can help you with both IRS Form 3520 and IRS Form 1040.
• Tax Exempt Status: Transfers to foreign trusts recognized by the IRS as nonprofit organizations and distributions from foreign trusts to domestic nonprofit organizations are exempt from reporting on Form 3520. To know whether such an exemption applies to you, don’t hesitate to contact LSL CPAs.

Help With IRS Form 3520

This list can be pretty confusing to the non-tax professional, and it is not comprehensive. Although this content contains accurate information, it is inherently limited because of the length of the article and the complexity of the international tax issues at hand. As a result, it presents only a partial view of the subject matter. To learn more about how these issues might apply to your particular filing case or tax situation from a more three-dimensional perspective, please call LSL CPAs international tax expert Yana Weaver at 714.569.1000.