IRS Exempts Many U.K. SIPPs from Form 3520, Form 3520-A Information-Reporting Re

http://personalfinancialcounsel.com/irs-exempts-many-u-k-sipps-from-form-3520-form-3520-a-filing-requirement/

Am I missing something or does this finally put to rest these discussions we have had here for years?

It looks like if you have been penalized in the past for not reporting this you can make a claim against these penalties:

https://www.irs.gov/pub/irs-drop/rp-20-17.pdf

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Not so fast!!!
Frank Hirth describe this as "False Advertising" from the IRS when it comes to SIPPs: https://www.frankhirth.com/news/IRS-announces-relief-for-reporting-of-certain-foreign-trusts

USTAXFS also say Rev Proc 2020-17 does NOT apply to SIPPs: https://www.ustaxfs.com/revenue-procedure-2020-17-explained-forms-3520-3520a/

Others are "baffled": https://americanexpatfinance.com/tax/item/384-tax-experts-critical-of-irs-effort-to-exempt-some-foreign-trusts

No-one else I have read believes Rev Proc 2020-17 applies to SIPPs... very sadly!

What about this opinion that it clearly does apply to SIPPS?

http://personalfinancialcounsel.com/irs-exempts-many-u-k-sipps-from-form-3520-form-3520-a-filing-requirement/


Also, if any advisor on here has had clients previously penalized for not filing these forms will they apply for a rebate?

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This is a real shame there is nothing conclusive about SIPPs yet. As someone self-employed in the UK, I still have no idea how to invest in pension plans. One tax advisor I spoke to wants 1600 USD to file two 3250s (for myself and my spouse) each year - nearly wiping out any gains I would get in the investment anyways! I might as well just put it in a 0% savings account. Has anyone tried doing 3250 themselves? It seems strictly speaking, it is required. Is there an alternative to a SIPP for the self employed?

From TaxesforExpats:

"SIPP are not foreign trusts - beware of redundant forms

Because of the U.K.-U.S. treaty, SIPPs are considered IRS-qualified pension accounts. Therefore, there is no need to report them as foreign trusts. Income in SIPPs can be deferred just like income in a U.S. IRA accounts.

We are often asked this question (is my SIPP a foreign grantor trust), as other tax preparers (often in the U.K) are notorious for preparation of redundant forms to justify high fees they charge for US tax returns. Ironically, along with forms 3520-a they commonly file form 8833 explaining that US retirement plans are IRS-qualified, although it has been determined that this obvious fact does not need treaty-position disclosure."

There are other opinions RE this.

An old thread here but I just found this which to me indicates UK Pensions which meet these requirements do not need to file 3250. I don't file 3250 for mine but every time I see someone say I should I start doubting the advice I have been given!

https://www.goldinglawyers.com/reporting-foreign-trusts-to-the-irs-summary-of-rules-requirements/

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Interestingly, taxesforexpats released an analysis of 2020-17 that seems to contradict their own advice that SIPPs are not foreign trusts - https://www.taxesforexpats.com/articles/expat-tax-rules/relief-from-filing-forms-3520a-3520-for-certain-tax-favored-foreign-trusts.html.

As usual with foreign tax law there seems to be disagreement over the interpretation of 2020-17. My own CPA seems to think it makes SIPPs exempt from 3520 in general. https://www.newsmax.com/Finance/stephenjdunn/IRS-Exempts-Many-UK-SIPPs-From-Form-3520-Form-3520-A-Filing-Requirement/2020/03/05/id/957090/ also seems to agree with this.

Many firms will probably still recommend 3520/3520a "to be safe". A shame it costs nearly 1k/year to file both, negating almost all benefits of having a pension plan in the first place.

I saw that article from Stephen Dunn as well but I think he subsequently revised his position:

https://personalfinancialcounsel.com/illusory_rev_proc_2020-17/

I'm resurrecting this post just to see if anyone has any further updates?

I think I know some of the answers here to my questions, but just in case I'm being dumb, here goes:

I went through the streamlined process (successfully) in 2017 (filing 2014-2016 returns and 6 years of FBAR reporting) using UK Accountants who were also IRS appointed agents. Although I filed form 8833 and took the treaty based position on my pension contributions into my SIPP, I didn't file Forms 3520 or 3520-A.

I'm a Chartered Accountant myself and so in 2017 I prepared and filed my tax return on my own. At that time Rev.  Proc.  2020-17 didn't exist anyway but I didn't file 3520 or 3520A. My total contributions in that year were $50,775 so $775 over the $50k threshold subsequently established by Rev.  Proc.  2020-17.

My 2017 return hasn't been agreed yet (due to an unrelated CGT issue) and the IRS has not raised the issue of 3520 or 3520A - probably best to leave this alone now, unless someone has better advice about revisiting this return again (which would be my worst nightmare because of the on-going IRS questions on my CGT declaration on an employee share sale in that year).

Roll forward 3 years and I'm in the final throws of preparing my 2020 return and I already know that I have breached the $50k threshold established in Rev.  Proc.  2020-17 due to a contribution made in February 2020 (before Rev.  Proc.  2020-17 was published) - it now appears that I have to file both 3520 & 3520A.

Rev.  Proc.  2020-17 doesn't really appear to go into any detail about the $50k annual limit - I'm filing jointly with my spouse - I suppose it would be naïve of me to just double the limit to $100k and ignore the filing of both forms?

The really worry for me now is that the deadline for filing (with the 6 month extension) - Form 3520 is 15th October. (which is fine)  However a Foreign Trust is required to file From 3520A by September 15th (tomorrow!!). If the Foreign Trust does not file, then I can file a substitute 3520A and attach it to my 3520 and that will not be due until October 15th. I have to assume that my UK SIPP provider will not be filing a Form 3520A (I suspect that they barely know what one is  ) - and I don't want to ask them as that will just be another can of worms - I told them I was a USC and it didn't seem to worry them at the time.

Final pain for me is that I use TAXACT software and they don't even appear to have forms 3520 or 3520A - so I have to do the whole thing manually - and presumably file it by mail to a different IRS address.

My head has started spinning with all of this - does anyone have experience of filing these forms when they relate to a SIPP?

The silence if deafening!! 

Having spent much of the last few days reading and researching (thanks to the links provided by multiple posters), I came across a series of articles written by Stephen Dunn including this one:

https://personalfinancialcounsel.com/what-are-u-k-sipps-and-isas-and-how-are-they-reported-for-u-s-tax-purposes/

Of particular interest is this paragraph (the question of which often seems to be asked/debated on many of the blogs):

A threshold question is whether a SIPP or an ISA is a trust. A trust exists when a third party trustee holds property for the benefit of a beneficiary. A trust may exist where an employer establishes a SIPP for the benefit of an employee, and funds it. A trust is less likely to exist where an individual who controls a company establishes a SIPP through the company for his own benefit, or where an individual establishes an ISA for his own benefit.

On the basis that I established my own SIPP, and it was largely funded by myself and not my employer (s), I am not going to go the route of opening up a potential can of worms by filing 3520 or substitute 3520-A (which I wouldn't even know where to start with).

I am further of the opinion that if in the unlikely event, the IRS do choose to chase after me for a failure to file, I will explain that I have been entirely reasonable in my disclosures of my SIPP by including it within my FBAR filings as well as including it on forms 8938 as well as disclosing the annual contributions on form 8833 (Treaty Exemptions).

Watch this space.......

The silence if deafening!! 

I'm not ignoring you. 

It's just that I don't and never will own a SIPP.