Unable to e-file due to form 3520

[KBee1]

I filed form 3520 recently by mail. When I entered information in Turbo Tax to file my return, I ticked the 3520 checkbox to indicate I have the form in my return. So, it does not allow me to e-file even though the physical form is not in my Turbo tax filing.

I think this is a problem in Turbo tax that it assumes the presence of 3520 means you cannot e-file. Can I uncheck the 3520 box without problems since the form 3520 is independent of your tax return? Would it cause an issue if the IRS is not able to match the checked entry with the actual form that was sent separately?

[SusanY1 · Accepted solution]

TurboTax does prevent e-filing when you indicate that you have a Form 3520 (even though the unsupported form would not go with the tax return).  

Form 8938 provides an option to let the IRS know that you have reported certain assets on Form 3520 so that you do not have to duplicate your efforts on Form 8938, so it's an important indicator.  

If you prefer to e-file your return, my recommendation would be to list the account(s) that are on the 3520 again on the 8938 since you can't e-file with an indicator that the IRS should look to the other form for the data.  

[zxg3900]

I had the same issue. I had never been a problem in the prior years until a recent update to my desktop version. This is a Turbotax software bug - checking the box for 3520 doesn't mean 3520 will be e-filed together with 1040; it just indicates on 8938 that a 3520 form will be filed with the IRS (by post). 

Please fix this bug in your next version. Or I will have to switch software. 

[kaspen]

Does TurboTax 2024 prevent e-filing when you indicate that you have a Form 3520? Thanks!

[CatinaT1]

Yes. This form is not included with TurboTax.

IRS Forms not included in TurboTax

[kaspen]

Does TurboTax 2024 prevent e-filing when you indicate that you have a Form 3520? Thanks!

[RachelW33]

Yes, Turbo tax 2024 prevents e-filing when you indicate that you have a Form 3250.  

@kaspen 

[kaspen]

Thanks, RachelW33! Could TurboTax fix this please? Thanks! 

[BookloverinPA]

Yes, this is a problem. TurboTax should fix this immediately.

[MarilynG1 · Accepted solution]

Taxpayers who receive a gift or bequest (inheritance) from a nonresident alien or foreign estate may be required to file informational Form 3520. This form also reports transactions with and distributions from foreign trusts. 

Since this form is filed separately from your income tax return (and doesn’t result in any tax owed or refund due), it isn’t a supported form within TurboTax. 

If you need to report distributions from foreign accounts, use Form 8938 to report this in your tax return.

You need to file Form 8938 if any of the following are true:

• - You're living in the U.S. and are not married filing a joint return and the total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.
• - You're living in the U.S. and are married filing a joint return and the total value of your specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year.
• - You're living abroad and are not married filing a joint return and the total value of your specified foreign financial assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the tax year.
• - You're living abroad and are married filing a joint return and the total value of your specified foreign financial assets is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the tax year.

You can find this under Other Tax Situations > Miscellaneous Tax Forms > Prepare a Report on Foreign Financial Assets.

@BookloverinPA 

[NBriggs]

@MarilynG1 - that's not helpful.   We're not asking for TurboTax to *support* form 3520 - it can't be e-filed, and it is sent, on paper, to a completely separate address.  If you are required to submit such a paper 3520, and that 3520 represents a foreign bank account, you are also *required* to file an 8938, on which you must indicate that you have also filed one or more 3520 forms.   Just mentioning the 3520 on the 8938 causes Turbo Tax to refuse to e-file both federal and state returns.  This is clearly a bug - entering [1] in that field in a *supported* form 8938 should not disallow e-filing.

[zxg3900]

Yes, Turbotax should fix this bug.

[KBee1]

You should not check the box and file form 8938 instead repeating the information in form 3520 if relevant. Form 3520 can be filed independently as paper. 

[NBriggs]

If you read the instructions for 8938, it says:

----------
Duplicative Reporting

You do not have to report any asset on Form 8938 if you report it on one or more of the following forms that you timely file with the IRS for the same tax year.

• Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts (in the case of a specified person who is a beneficiary of a foreign trust, see Part III of Form 3520 and its instructions).

• Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations.

• Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund.

• Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships.

Instead, you must identify on Form 8938 the form(s) on which you report the specified foreign financial asset and how many of these forms you file. See Part IV. Excepted Specified Foreign Financial Assets, later.
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Their use of the word "must" suggests that it is NOT an option to just duplicate the information from the 3520 on the 8938 and not report that you've also filed a 3520.

[kaspen]

FYI:

A penalty applies if Form 3520 is not timely filed or if the information is incomplete or incorrect (see below for an exception if there is reasonable cause). Generally, the initial penalty is equal to the greater of $10,000 or the following (as applicable).

• 35% of the gross value of any property transferred to a foreign trust for failure by a U.S. transferor to report the creation of or transfer to a foreign trust in Part I.

• 35% of the gross value of the distributions received from a foreign trust for failure by a U.S. person to report receipt of the distribution in Part III.

• 5% of the gross value of the portion of the foreign trust's assets treated as owned by a U.S. person under the grantor trust rules (sections 671 through 679), if the foreign trust (a) fails to file a timely Form 3520-A and furnish the required annual statements to its U.S. owners and U.S. beneficiaries, or (b) does not furnish all of the information required by section 6048(b) or includes incorrect information...

Additional penalties will be imposed if the noncompliance continues for more than 90 days after the IRS mails a notice of failure to comply with the required reporting.

In the case of a failure to timely report foreign gifts described in section 6039F, the IRS may determine the income tax consequences of the receipt of such gift, and a penalty equal to 5% of the amount of such foreign gifts applies for each month for which the failure to report continues (not to exceed a total of 25%)...