The Form 3520 Penalty Debacle: Podcast And Discussion With CPA Gary Carter

November 8, 2021 …

I just got off the phone with another person who was assessed a $10,000 penalty in relation to a Canadian TFSA (which is probably not even a trust for US purposes, which means it can’t be a foreign trust). Predictably her response is to simply renounce US citizenship.

The conversation reminded me of a podcast that I did (last January with CPA Gary Carter) about the 3520/A IRS penalty problem. As I result, I am posting this podcast.

This podcast features a discussion with CPA Gary Carter that includes:

1. What exactly is required for something to qualify as a trust under the Internal Revenue Code?

2. Assuming you have a trust, what does the Internal Revenue Code 6048 say about the reporting requirements (ultimately found in Form 3520 and Form 3520A)?

3. What exactly is a “substitute” Form 3520A and when is it due?

4. How and why did the IRS issue thousands of Form 3520A penalties in 2019?

5. How did the work of Gary and others lead to the IRS issuing Rev Proc 2017 (exempting certain foreign trusts from the 3520 and 3520A requirements)?

6. What about reasonable cause as a defense to the IRS penalties?

7. How can you get the penalties abated with a single phone call? (Answer: Call 267 941 – 1000 and select option 3. Tell them that you timely filed a Form 3520 and you filed a substitute Form 3520A with/attached to the Form 3520. Good luck!)


At a bare minimum US citizens deserve a tax system where the requirements to comply can be understood. Unfortunately the US tax system is the opposite. Not only does the US impose worldwide taxation on Americans abroad, but the US imposes a more punitive form of worldwide taxation than what resident Americans are subjected to.

In this post I discuss the IRS definition of a trust, the reason for the number of Form 3520/A penalties and the origins of Rev Pro 20-17 which provides limited relief from reporting requirements.

One more reason why:

“All Roads Lead To Renunciation!”

John Richardson – Follow me on Twitter @Expatriationlaw

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