August 22, 2011 - Phil Hodgen

FAQ 17, FAQ 18 deadline is August 31, 2011

I just spent the weekend in Form 3520 hell, cleaning up a situation with a client and a fideicomiso.  We did Form 3520’s and Form 3520-A’s for all of the years in question and will shoot them off to Ogden, Utah by August 31, 2011.

The IRS doesn’t really know what a fideicomiso is, and whether Form 3520 is really applicable.  Or not.  (I.e., is a fideicomiso REALLY a trust as defined in Treasury Regulations Section 301.7701-4(a)?).  Well, they might know or have an opinion on this point, but they ain’t a-tellin’ us what the rules are.

But who wants to get sideswiped by the ex post facto bus?  Not my clients.

So we (using the royal we) did Form 3520s for a bunch of open years, with a small book appended to the back of them explaining why this situation really doesn’t warrant Form 3520 filing, but we’re doing it anyway.

And of course the Mexican bank doesn’t generate Form 3520-A.  So we (again, the royal we) did a bunch of companion Form 3520-A forms per the instructions to Form 3520.

There have to be a small army of Americans with fideicomiso structures.  Buy Mexican real estate anywhere in Baja California and you have one of these things.  You have a compliance nightmare ahead of you, Bucky.  Did you see how the worm turned on you in FBAR land?  In the old days (pre-2009) cleaning up late FBARs would work and work well.  No penalties, and a taxpayer was fully within the system.  But now?  All of a sudden it’s “Off with their heads!” from the IRS and failure to file an FBAR.

So there is great comfort in getting your foot in the door before August 31 and fixing a Form 3520 problem guaranteed penalty-free.  (Well as much as a guarantee from an organization which reneged on FAQ #35 in the 2009 Voluntary Disclosure Program, and unreliable once probably means unreliable again.)  Even if the Form 3520 might or might not be required.

For all of you with ANY activity outside of the United States WHATSOEVER — check for late FBARs, check for late Form 5471, check for late Form 3520, etc.  Form 8858 is another one.  I’m just doing this off the top of my head.

Put together the paperwork and get it filed before August 31.

Look at FAQ #17 and FAQ #18 on the IRS website for the FAQ’s to the 2011 Offshore Voluntary Disclosure Initiative.  Work like your life depends on it to get this done if it conceivably applies to you.

Americans Living Abroad Voluntary Disclosure