Thinking of taking the IRS up on their offer of “simplified” compliance procedures for U.S. Persons abroad? Well if you have a “foreign” retirement or purpose savings account, you should be warned that the paperwork is so complicated that even the IRS doesn’t understand it — and thanks to how the U.S. taxes “foreign trusts”, you may end up classified as a “high risk” taxpayer simply for having a retirement account like every one of your neighbours, especially if the U.S. dollar has fallen against your country’s currency during the recent financial crisis.
From a blog post by Brian Dooley as well as a comment by badger, we learn of a recent letter by the American Institute of CPAs to the IRS complaining of grossly inappropriate automated penalty letters being sent out to multiple taxpayers, Canadians among them, in response to accurate, complete, and timely Form 3520 filings — filings which the IRS erroneously classified as incorrect, incomplete, or late because the taxpayers left some blank spots on the form for items which the instructions correctly told them not to fill out.
