Is there any penalty for an amendment?

briggitte — Thu, 07 Jan 2021 18:54:47 GMT

Hello,

I received a gift from my dad who is a citizen of a foreign country in 2019. I did a quick search back then and I realized I don't have to pay tax on it. Now I was told that I should have disclosed the gift even though it was not taxable. And when I disclose it in my 2020 taxes (as an amendment for my 2019) there will be a penalty.

Is that true? and if yes, how much will be the penalty?

Thank you so much for your professional help!

Re: Is there any penalty for an amendment?

Mike9241 — Tue, 26 Jan 2021 20:40:26 GMT

Reporting Requirements
You are required to report the receipt of foreign gifts or bequests only if the applicable thresholds apply. For purposes of determining the reporting thresholds, you must aggregate gifts received from related parties. See the instructions to Part IV of Form 3520 for more information; see also Section VI of Notice 97-34 PDF.

For gifts or bequests from a nonresident alien or foreign estate, you are required to report the receipt of such gifts or bequests only if the aggregate amount received from that nonresident alien or foreign estate exceeds $100,000 during the taxable year. If the gifts or bequests exceed $100,000, you must separately identify each gift in excess of $5,000.

gifts from foreign persons do not get reported on other forms. TT does do the form because it is not filed with your return. besides if you do need to file the only part that would seem to be applicable would be part IV. there is no tax.

When and Where To File
In general, a U.S. person's Form 3520 is due on the 15th day of
the 4th month following the end of such person's tax year for
income tax purposes, which, for individuals, is April 15. If,
however, on the due date of your income tax return, you are a
U.S. citizen or resident who qualifies for one of the following
conditions, then your Form 3520 is due on the 15th day of the
6th month (June 15) following the end of your tax year for
income tax purposes. You must include a statement on the Form
3520 showing that you are a U.S. citizen or resident who meets
one of these conditions.
• You live outside of the United States and Puerto Rico and
your place of business or post of duty is outside the United
States and Puerto Rico.
• You are in the military or naval service on duty outside the
United States and Puerto Rico.
In the case of a Form 3520 filed with respect to a U.S.
decedent, the due date to file a Form 3520 is the 15th day of the
4th month following the end of the decedent's last tax year for
income tax purposes (April 15). If the U.S. person's estate is also
required to file a Form 3520, the estate will have to file by the
15th day of the 4th month following the end of the estate's tax
year for income tax purposes, just like any other U.S. person.
If the due date falls on a Saturday, Sunday, or legal holiday,
file by the next day that is not a Saturday, Sunday, or legal
holiday.
Note. If a U.S. person is granted an extension of time to file an
income tax return, the due date for filing Form 3520 is the 15th
day of the 10th month (October 15) following the end of the U.S.
person’s tax year.
Send Form 3520 to the following address.
Internal Revenue Service Center
P.O. Box 409101
Ogden, UT 84409

The penalty for failure to file a Form 3520 reporting a foreign gift or bequest, or for filing an incorrect or incomplete form with respect to a gift or bequest, is 5% of the gift or bequest for each month during which the failure continues, up to a maximum of 25% [IRC section 6039F(c)(1)(B)].

Reasonable Cause
Under IRC sections 6677(d) and 6039F(c)(2), no penalties will be imposed if a taxpayer can demonstrate that failure to file a required Form 3520, or filing of an inaccurate or incomplete return, was due to reasonable cause and not willful neglect. It is difficult to have any tax penalty abated for reasonable cause. A taxpayer’s reliance on a professional for the “ministerial” act of filing a return is not reasonable cause [Boyle v. U.S., 469 U.S. 241, 252 (1985)]. But a few cases have held that a taxpayer may rely, after full disclosure, on a professional’s advice that a particular tax filing is not required [e.g., McMahon v. Comm’r, 114 F.3d 366, 369 (2d Cir. 1997); Estate of La Meres v. Comm’r, 98 T.C. 294, 316-17 (1992)].

Re: Is there any penalty for an amendment?

Opus 17 — Tue, 26 Jan 2021 20:46:16 GMT

It's not an amendment, you just need to file form 3520 and it will be late (if the gift was more than $100,000).

The IRS can impose a penalty but may not, and if they do, you can request a waiver if this is your first time owing a penalty, and for other reasons. If the proposed penalty is substantial, you can retain professional representation. Don't assume there will be a penalty, wait and see if you are sent a bill.

https://www.irs.gov/businesses/small-businesses-self-employed/penalty-relief

Re: Is there any penalty for an amendment?

briggitte — Wed, 27 Jan 2021 00:28:18 GMT

@Mike9241 I have a lot of appreciation in my heart for your time and your courtesy. Thank you so much for the complete and detailed explanation.

Re: Is there any penalty for an amendment?

briggitte — Wed, 27 Jan 2021 00:32:30 GMT

@Opus 17 Thank you so much for correcting me. I thought it is considered an amendment. And thank you for the details!

Re: Is there any penalty for an amendment?

Mike9241 — Wed, 27 Jan 2021 08:04:26 GMT

your welcome

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