Victoria was raised by her grandparents in France in an affluent household. Her parents had separated when she was just a baby and neither remained present in life. It wasn’t easy growing up this way, but Victoria always knew that she was loved by her grand-père and grand-mère. Victoria’s grandmother was her rock, sharing love for French art, literature, couture, and cuisine.
After nearly two decades of neglect from her birth parents, Victoria celebrated her 18th birthday with a visit to the United States with her grandmother for a girls trip in Los Angeles. It was there that Victoria dreamt of moving to California in hopes of becoming an independent French-American young woman. With the support and encouragement of her grandparents, she embarked on her dreams and ambitions of becoming a U.S. citizen.
Many years later, Victoria woke up one morning from a nightmare. She reached for her phone to call her grandmother. Her grandmother revealed a secret: she hadn’t told Victoria about her serious health challenges and her doctor wasn’t optimistic about timelines. Victoria’s stomach sank to the ground. Her beloved grandmother asked her not to worry and added that she would be sending Victoria a gift in preparation of what may come.
When the gift arrived, Victoria was shocked. It was an inheritance, who had always reassured Victoria that she would be by her granddaughter’s side, even if it was in spirit. Victoria broke down in tears, realizing the gravity of the situation.
Victoria booked the first flight to Paris and started packing. On the way to the airport, she wondered if there was something she had to do about the gift. Did she have to report the gift as a foreign inheritance? Was a foreign gift taxable by the IRS? What was the deadline, and what would happen if she missed the date? She discovered that a United States taxpayer must file Form 3520 if they contribute to or receive funds from a foreign trust, or if they receive gifts or inheritances that exceed $100,000 in aggregate in a single tax year from a nonresident alien or foreign estate. Those who fail to report will be assessed for form 3520 penalties, which can be as high as 25% of the total value.
But filling out complicated tax forms was the last thing on her mind. Even with the deadline looming, Victoria was consumed by anticipatory grief about what could happen to her grandmother at any moment. She would need an international tax lawyer to help her request penalty relief.
The case of Victoria illustrates the challenges that people in the U.S. encounter when receiving money from abroad. The IRS says “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.”
It can be challenging to meet filing requirements on time while navigating personal emergencies or extenuating circumstances. If you have received or are about to receive a significant sum of money from a foreign friend or family member, hiring an attorney that specializes in form 3520 can help you reduce costly late-filing penalties. International tax lawyers at Hone Maxwell LLP help clients get penalty relief by proving reasonable cause for late filing to the IRS.
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