Every year, millions of people come to the US to study or work. It is pretty common that ones’ family or friend bless them with cash to help alleviate their financial hardship or provide financial support for their life in the US. We have clients especially those who are immigrants reaching out to us every few weeks saying they received a letter from the IRS for failure to report the gift from the foreign persons. They were not ware that there is a disclosure requirement if they receive a gift from a foreigner and they were panic about the amount of penalty imposed on the IRS letter.
You, as a US resident, are supposed to file a form 3520 if you receive a foreign gift over $100,000 from foreign persons. The penalty for failing to file the form 3520 is a civil penalty and will be hard to be abated. The amount of the penalty is 5% of the gift for each month during with the failure continues, up to a maximum of 25% of the gift. The IRS will send you a notice CP15 for failure to report the foreign gift. If you don’t resolve the issue or respond to the notice on time, you will later receive another notice CP504. The longer you respond to the notice, the more difficult it will be to resolve the issue. In the end, you may have to go to the tax court for a hearing.
Dimov Tax Associates have expertise built up on this issue and have a streamline process to respond to the IRS notice. We have Enrolled Agents who can represent you in the tax court. Contact us now if you need help with it.