Efile with form 3520

[onemoment]

I can eFile with 3520 copy set to 1 with Turbo Tax in 2021 ( and mail out 3520 form manually).  Turbo Tax should fix this BUG!

[taxuserabc123]

This makes the software pretty much useless without efile, and worse still it won't let me efile state either without federal efile. This was working last year. Please please please fix it or I will be seeking a full refund.

To clear up confusion, I know we can't file 3520/3520a online. I am going to mail that but I was able to efile the actual tax return last year even with an 8938. I will not allow this now. There is no reason this can't be allowed. 3520 is mailed to a completely separate address. Please fix regression in functionality.

[RobSI]

I agree with others on this thread. This functionality worked in Turbotax last year. Intuit appear to have found a way to take away the eFile feature which has a value we all paid for. I think we are owed a refund from the vendor. I've now invested too much time to back out of TT for this year but this should have been warned way before  doing the error check and  investing so much time.

Separately, I can't quite understand from above answers by @SusanY1  if listing 'zero' or blank 3520 forms on the 8938 form would make an eFile 8938 form out of compliance  when submitting a different number of 3520 paper forms to Ogden by mail. I'm pretty well resigned to paper filing and cross checking responses in all the different forms manually - very tedious

[TAD-SAT]

Well folks, I've spent the weekend going through all the IRS documents, forms and instructions.  Warning!  I am not a CPA tax consultant or advisor. Just a normal tax paying American citizen trying to complete my 2023 income tax return.

For my specific situation, which is an inheritance from a foreign country, I have to complete Form 3520, including documents from the Non-USA entity, and MAIL the 3520 to Ogden, UT.  As far as I can tell the ability to eFile Form 3520 has never existed, because the IRS instructions specifically state Form 3520 must be snail-mailed in paper form.

On my individual Form 1040 for 2023 tax year, which I will be eFiling, on Schedule B, Part III, Foreign Accounts and Trusts, I have to check "Yes" 3 times, boxes for Para's 7a,7b,8.  This tells the IRS to expect a completed Form 3520 documenting my inheritance, and also expect a FinCEN Form 114 sent to the U.S. Treasury Department, because I'll have >$150,000 in foreign financial accounts.  For my situation, submission of the Form 3520 and Form 114 are one-time deals.  In 2024 tax years and beyond, I only have to complete Form 8938 which is attached & submitted electronically with Form 1040 to the IRS.  The prior commenter @RobSI  mentioned Form 8930, which I'm not familiar with and doesn't show up in my TurboTax 2023 list of Forms for my tax return.

I elected to keep most of my inheritance in the foreign country because the $USD is so strong right now against most other currencies.  There's also the uncertainty of the US Presidential elections this November.  I thought it was a good idea to have one foot out of the USA, from a financial risk mitigation perspective.  Hoping this helps out other US Citizens in my situation.  TAD-SAT

[SusanY1]

When indicating on 8938 that you have filed X numbers of 3520s you are indicating that you are omitting certain information on 8938 because it is, instead, on Form 3520.    

There should be no issue with not indicating that an asset is on Form 3520 as long as it is duplicated on Form 8938.

If overly concerned about omitting the indicator on 8938 for Form 3520, the only option with TurboTax at this time is to file the return by mail.  


@RobSI 

[RobSI]

Sorry my typo its Form 8398 - still bad enough with 3 separate forms to submit per account each year.

FYI converted an inheritance over to $ last year exactly because of high exchange rate

[SusanY1]

Keep in mind that unless you have a trust, the 3520 is only required in the year that you inherit the asset.  That makes for just two forms in subsequent years - not that it is a whole lot better, but sometimes any little thing helps!

@RobSI  

[sean99]

Thank you Susan. It seems inevitable for me to do paper file because of the 1 I put indicates I have a 3520 to report for this year. I saw you mentioned "Form 3520 is sent in separately from your tax return, to the Odgen, UT office". When I send form 3520, do I need to attach a copy of 1040 and other supporting forms? Thanks

[RobSI]

True on the 3520 inheritance reporting being one year,  but as soon as you reinvest the inherited money in a foreign country, chances are you will be earning income on that money and, if not careful, you may have another account to start to report. Is there a min income threshold for 3520 filing?

[SusanY1]

You only file form 3520 for gifts and inheritances in excess of $100,000, not income.   Unless you have a foreign trust. 

For the income earned on the foreign investments, you will just report that on the same forms you report the same type of income earned in the US (Schedule B for interest/dividends, D for capital gains, etc.).   

You're ahead of the game in that you're already thinking about potential consequences. 

Remember if you're paying tax on any of that income in the other country (many countries deduct taxes right from the account for interest and dividends) that you are eligible to take a credit for those taxes on your US tax return.  

[TAD-SAT]

@SusanY1  @RobSI 

There are significant limitations getting credit from the IRS for foreign taxes paid.  Even CPA Tax professionals get confused completing IRS Form 1116. Limitations:
(1) Your foreign tax credit cannot exceed your total U.S. tax liability multiplied by a fraction. (2) The numerator of the fraction is your taxable income from sources outside the United States. (3) The denominator is your total taxable income from both U.S. and foreign sources. (4) There is also a limit on the amount of the credit you can claim. 

In my particular situation, I was limited to <$1,000/Year in foreign tax exceptions, versus >$10,000 in foreign taxes I had to pay.  It's a total SCAM job by the IRS, getting American taxpayers to believe that any foreign taxes paid will be credited against their US tax return, when that's absolutely not the case.  No wonder so many Americans cheat on their taxes!!  I'm not one of those Americans, but it cost me dearly, financially, and I now manage my foreign accounts very differently.

[Eric_SD]

Totally agree with you. 🙂

[RobSI]

FYI in case it helps anyone, rather than claiming foreign tax credit, I've had good success getting tax refunds from UK. UK Gov tax dept seems pretty streamlined, efficient and even friendly on the phone.

Also got them to not deduct UK tax at source for UK pensions - that took a bit more form filling and hoop jumping to prove I was a US taxpayer.

[TAD-SAT]

@SusanY1 @RobSI   I have a question specifically for SusanY1.  I tried electronically filing my Federal & State income tax return for 2023, but TurboTax won't let me.  TT says because I have one of the following forms, 3520 (which I've already mailed to the IRS, Ogden, UT), 3520-A, 5471, 8621, 8865; I have to MAIL both my Federal and State tax returns.  Forms 520-A, 5471, 8621, 8865 do not apply to me, only Form 3520.  Is this an error/bug in TurboTax?  No where in the Form 3520 instructions did it say I had to MAIL my Form 1040 (Federal) or State forms.  Please advise on my correct path forward.  Thank you, TAD-SAT.

[Tackaberry]

Facing the same dilemma as others, and very tempted to opt for a TT alternative, although I'm ready to file.

On Form 8938, Section IV, Item 15, should I leave it blank so as to enable e-file, or will this get flagged once my mailed-in Form 3520 (one each for me and spouse, so "2" is the correct entry, not blank) gets processed ?

I assert that in the simple case of somebody inheriting cash in a foreign country, it doesn't seem as if there's any duplication or overlap of information being reported.

Section V of Form 8938 is where the detailed information for all accounts gets reported: name/address of bank, account number, maximum balance. 

But for anybody who just needs to complete Part IV of Form 3520, none of this detailed bank account information needs to be reported. What gets reported is just the date and amount of the transaction (for example, a bank transfer from the estate account) with a description or explanation, e.g. "Inheritance from the foreign estate account of XYZ calculated using the exchange rate xyz. Relationship to US taxpayer: parent".

I'm thinking if the 3520 form(s) are accurate, timely, and complete, it's enough to keep me out of trouble,

and that in the simple case of a cash inheritance, Form 3520 Part IV need not list any bank account details.