Do I need to report gift tax from a foreign person when I was F1 visa at that time

[wendydn]

Hi,

I just read about tax gifts online and I am now freaking out.

In 2018, I received a sum of money for immigration application (>100k) from my parents from a foreign country

My parent are neither US citizen or a green card holder. I, at that time, hadn't passed the substantial presence test, and was under F1 visa. I believe I am classified as "NON-US person"

My questions: 

- Do I have to report this to the IRS via form 3520? Since I am Not a US person at that time, does this form apply to me? 

- I accidentally filled form 1040 instead of 1040 NR for 2018. Can I  and should I amend it now, if it does help remove my responsibility in filing 3520? I don't want to get fined

[DaveF1006]

The IRS states in the opening paragraph in this publication, that if you are a U.S. person (other than an organization described in section 501(c) and exempt from tax under section 501(a)) who received large gifts or bequests from a foreign person, you may need to complete Part IV of Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign G..., and file the form by the 15th day of the fourth month following the end of your income tax year (generally, April 15th for individuals), subject to any extension of time to file that may apply". 

According to this IRS link, unless you are a citizen or resident of the US in 2018, you are a non-US person thus the gift does not need to be reported. 

You should prepare an amended return for 2018 since you did file as a resident and  shouldn't have. By filing as a resident in 2018, the 3520 should have been reported and could face scrutiny from the IRS at a later date. 

I advise you seek the counsel of a tax professional and rely on their advice for the 2018 tax year because there are caveats within this issue that may cause issues. I would suggest when you amend your return, you include a detailed statement with the return on:

• why you are amending
• and that you do not have a 3520 filing responsibility for that year because you were a non-US person.

Keep in mind, in general: F and J student visa holders are considered non-resident aliens during their first five calendar years in the U.S so be sure you met the requirement in 2018.

[wendydn]

@DaveF1006 Thank you so much for your advice. I am planning to hire a cpa to look into this. Do you know if Turbotax has a personal tax professional service?

Since I filed 2018 tax as a resident, do you think I still have to face penalty for not filing 3520, even if I amend it now.

And yes you are right, as an F1 student, I was considered as non-resident alien for the first 5 years. I came to the US in August 2014, so in 2018, it was only 4 years for me. Below is what IRS on the website

Do not count days for which you are an exempt individual. 

• A student temporarily present in the U.S. under an "F," "J," "M," or "Q" visa, who substantially complies with the requirements of the visa.
• You will not be an exempt individual as a student if you have been exempt as a teacher, trainee, student, Exchange Visitor, or Cultural Exchange Visitor on an "F, " "J, " "M, " or "Q " visa for any part of more than 5 calendar years, unless you establish to the satisfaction of the IRS that you do not intend to reside permanently in the United States, and you have substantially complied with the requirements of your nonimmigrant status.

[DaveF1006 · Accepted solution]

@wendydn To prepare your 2018 return as a non-resident, you would need to contact sprintax, which is our affiliate for preparing a non-resident return. Please contact them for the best course of action in preparing this type of return, specifically how to deal with the implications of amending a return from a 1040 resident return to a 1040 NR return. 

Meanwhile, here is some recommended steps that LinaJ218 has mentioned in her Turbo Tax post on how to prepare the amendment.

• Download Form 1040-X from the IRS website ( see below).  On the front page of Form 1040-X, enter your name, current address, and social security number (SSN) or IRS individual taxpayer identification number (ITIN)
• Do not enter any other information on page 1.  
• Do not complete Parts I or II on page 2 of Form 1040X.
• Enter in Part III the reason why you are filing Form 1040X.
• Complete a new or corrected form 1040-NR by using Sprintax, see above.
• Across the top of the 1040-NR, write “Amended”
• Attach form 1040-X to the back of Form 1040X

For more information, see:

https://www.irs.gov/pub/irs-pdf/f1040x.pdf  - form

https://www.irs.gov/pub/irs-pdf/i1040x.pdf  - instructions

page 5 under Residents and Nonresidents

[ Edited 02/24/22| 12:50 PMPST]

[wendydn]

Thank you. I will contact sprintax for their service

[wendydn]

Hi @DaveF1006 ,

I contacted Sprintax and are now waiting for them to get back to me. I am hoping to use a similar service like Turbotax live help.

If I amend my 2018 tax, will I get penalty for filing under wrong status? I did claim benefit under standard deductions and education credit, which are not available for NR I believe

Thank you!!

[fanfare]

don't worry about a gift from your parents.

Gifts are not taxable and are not reported on your tax return.

the gift was long ago.

[wendydn]

Hi @fanfare  I wish that is the case.

As @DaveF1006 mentioned above, as US resident I have to report foreign gift on form 3520. However, I was not a resident under tax purpose in 2018, just mistakenly filed as one. So I was thinking of amending the 2018 tax, and never have to worry about the penalty from not filing form 3520 anymore.

Do you know if I will get any penalty if I amend the 2018 tax now? I am fine with paying back the tax refund I got for 2018, just worried about the penalty in particular

[LoganathanB]

As DaveF1006 said you file an amendment and explain in part III of the amended tax return(1040-X) the reasons for filing the amendment.

IRS may waive the penalty based on the facts of the case.

Click on the link for more information

Amended Tax Return