In March, the IRS issued Revenue Procedure 2020-17 (Rev. Proc.) which provides an exemption to the informational reporting under IRC Section 6048 for certain tax-favored retirement trusts and other nonretirement savings trusts. This reporting has been done through the filing of Form 3520 and Form 3520-A. The Rev. Proc. also provides guidance for obtaining relief of penalties previously assessed under Section 6677 on trusts that would now be exempt from the informational reporting requirement. Prior to this Rev. Proc., Canadian Registered Retirement Savings Plans had been exempted from the reporting requirement. This has remained unchanged.

The Rev. Proc. is effective as of March 2, 2020 and applies to all prior open tax years.

The Treasury Department and the IRS have determined that because applicable tax-favored foreign trusts are generally subject to written restrictions (such as contribution limitations, conditions for withdrawal, and information reporting) which are imposed under the laws of the country in which the trust is established, and because U.S. individuals with an interest in these trusts may be required under section 6038D to separately report information about their interests in accounts held by, or through, these trusts, it would be appropriate to exempt U.S. individuals from the requirement to provide information about these trusts under section 6048. Trusts exempted under the Rev. Proc. are still subject to the reporting requirements for Foreign Bank Account Reporting and FATCA (Form 8938) reporting.

An individual is eligible to rely on this Revenue Procedure if they are a U.S. citizen or resident and they are compliant (or will come into compliance) with all requirements for filing U.S. federal income tax returns. Additionally, to the extent required by law, the individual would have had to report the income from contributions, earnings, and distributions relating to the tax-favored foreign trust.

DGC’s Private Client Group has significant experience advising clients on all matters relating to foreign trust reporting requirements. Please contact a member of your DGC client service team or James Downing, CPA, MST at 781-937-5136 / jdowning@dgccpa.com if you have any questions regarding Revenue Procedure 2020-17.

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