IRS to Stop Automatic Penalties on Late Forms 3520

Published: Oct 28, 2024

The IRS will no longer automatically penalize late-filed Forms 3520 for foreign gifts. Instead, reasonable cause statements will be reviewed before penalties are issued—a change long advocated by TAS and TXCPA.

 

John M Kelleher, CPA-Fort Worth 

On Oct. 24, 2024, IRS Commissioner Danny Werfel announced that effective immediately the IRS will no longer automatically issue penalty notices for late filed Forms 3520 related to foreign gifts, Part IV of the form. The Commissioner, speaking at a conference at UCLA, also indicated that the IRS will begin to review the reasonable cause statements provided with the late filed forms before any penalties are issued. Prior to the policy change, the IRS would automatically issue penalties for the greater of $10,000 or 25% of the gift for late filed forms. Many taxpayers were not even aware of the requirement to file the form.  

There has been a strong push from the National Taxpayer Advocate as well as other bodies such as the TXCPA Federal Tax Policy Committee for the IRS to change its policy in this area.  

 

 

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