Substituted 3520-A
Published on May 22, 2024
by Aya Takriti, EA
Aya Takriti, an IRS Enrolled Agent with 10 years of expat tax experience, specializes in US tax preparation, tax planning and tax advice for US citizens and Green Card holders living and working in the Middle East.
Table of Contents
What is a Substituted Form 3520-A?
A Substituted Form 3520-A provides an alternative filing option for US taxpayers with foreign trusts, aligning the filing deadline with the individual tax return due date. This adjustment means the substituted form can be filed by April 15, automatically extended to June 15 for US expatriates, with a further extension available to October 15 upon request.
This change simplifies the compliance process by synchronizing deadlines and helps avoid the substantial penalties associated with late submissions of the standard Form 3520-A.
What does Form 3520-A entail?
Form 3520-A is required for US persons who are treated as owners of any part of a foreign trust. The form provides the IRS with details about the trust, its US beneficiaries, and the trust’s financial activities.
It’s an essential compliance document for managing foreign trusts, including pension plans from countries like the UK, ensuring that all relevant activities are transparently reported to US tax authorities.
How should US owners of foreign trusts, like UK pensions, manage their Form 3520-A filing obligations?
The form is due by March 15 annually, but an extension until September 15 can be requested using Form 7004. Consider filing a Substituted Form 3520-A alongside your Form 1040 to ease the process.
This adjustment allows for a unified April 15 deadline, extendable to October 15, simplifying management and ensuring compliance. Given the complexity and potential penalties for errors, consulting a tax professional specialized in foreign trusts is advisable.
I want to know more about US taxes abroad
How do I obtain an EIN for my UK pension?
Securing an Employer Identification Number (EIN) for your UK pension involves several steps:
- Prepare: Gather your annual pension statement, which provides essential details about your pension.
- Call the IRS: Contact their international phone line at +1 267 941 1099 between 6 AM and 11 PM EST.
- Provide Trust Information: You must name your trust uniquely; for instance, using your pension provider’s name and initials.
- Verification: Answer verification questions about your trust during the call.
Registration: Follow the IRS representative’s instructions to register and receive your EIN immediately during the call. - Duration: Expect the call to take around 30 minutes.
Can I complete Form 3520-A on my own?
While it’s possible to fill out Form 3520-A independently, it involves details that must adhere to IRS regulations for foreign trusts. Here’s how to approach it if you decide to DIY:
- Download the Form: Access the latest version of Form 3520-A from the IRS website to ensure compliance with current tax laws.
- Collect Necessary Details: You’ll need comprehensive information about the trust, such as its name, address, and tax identification number, along with the trust’s financial statements including income and distributions.
- Complete the Trustee’s Section: Ensure the sections regarding the trust’s financial activities are accurately filled out, whether by you or the trustee.
- Fill Out Your Information: As the US owner, input your personal details and your relationship with the trust correctly on the form.
- Attach Supporting Documents: Include all required statements that detail the trust’s financial activities, distributions, and beneficiaries.
- Review and Sign: Double-check your entries for any errors, and sign, and date the form.
- Submission: Follow the IRS instructions for submission deadlines and addresses.
Is it possible to extend the deadline for filing Form 3520-A?
Yes, an extension is possible. You can apply for a six-month extension by filing Form 7004 by the 15th day of the 3rd month after the end of the trust’s tax year, using the trust’s EIN.
What are the consequences of errors on Form 3520-A?
Mistakes on Form 3520-A can lead to:
- Penalties: Errors may trigger penalties from the IRS, potentially significant depending on the mistake.
- Audits: Inaccuracies can also prompt IRS audits, leading to more extensive scrutiny of your tax affairs.
- Corrective Measures: If you spot an error post-submission, promptly file an amended form with a detailed explanation of the error and its rectification.
Should I consult a professional for help with Form 3520-A?
Definitely. Due to the complexities involved with foreign trusts, it’s advisable to seek guidance from a tax professional who specializes in international tax law. They can ensure your filings are accurate, compliant, and strategically sound to mitigate any potential liabilities. Their expertise is crucial in navigating the intricate requirements of IRS forms and international tax obligations effectively.
