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In the video under discussion, Anthony E. Parent, Esq., 20-year international tax attorney and host of the IRSMedic podcast, engages in an insightful conversation with John Richardson about his 2017 presentation on Australian Superannuations. Joining John and Anthony is Keith Redmond, advocate to and consulate to the American Overseas.

The core issue at hand is the classification of Australian superannuations under US law.

If these superannuations are classified as social security, then life for US individuals with Australian superannuations isn't particularly challenging.

However, if the law doesn't classify these superannuations as social security, a number of complexities arise. These may include a series of reporting forms that carry hefty penalties for non-compliance, aggressive double taxation, and extremely high US tax preparation bills.

Yet, there is little clarity from the IRS. And fact, this Superannuation issue was brought to the attention of the Internal Revenue Service over 10 years ago. Thanks to a Freedom of Information Act request by Dennis Brager, Esq., it was revealed that even the experts at the IRS are deeply confused about this issue.

Despite the revelation resulting from the FOIA request, the IRS has not provided any guidance on the appropriate tax treatment of Australian superannuations. There exists a Revenue Procedure that might be applicable, but this remains uncertain. It appears that the claimed best minds at the IRS put their hands up and determined that they couldn't determine anything.

The puzzling silence from the IRS leaves taxpayers striving for compliance in the dark.

Many tax professionals have adopted a wait-and-see approach, observing how the IRS will handle the taxation and penalties associated with Australian superannuations. In fact, this is exactly the policy of Anthony's firm Parent & Parent LLP, a leader in streamlined disclosures.

But how long should one wait? The IRS had over 10 years to clarify a position that taxpayers and tax professionals have been begging them to define. if the IRS won't define a superannuations as a foreign trust, then why shouldn't a taxpayer define a superannuation as part of the Australian Social Security System, which it is.

Yet if you attempt to search for "superannuation" on the IRS website, you'll be met with zero results. This lack of clarity is particularly concerning, given that the penalties for non-compliance with Form 3520 or Form 3520-A can be severe.

If you go to a 2023 presentation the IRS gave on Revenue Procedure 2020-17, "Foreign Gift and Trust Reporting on
Forms 3520 and 3520-A" you will find that there is zero discussion on Australian superannuations and in fact tit appears as if Rev Proc 2020-17 doesn't apply to Superannuations.

In 2017, John Richardson developed a presentation for understanding these issues, titled "The Superannuation: The Decision To Renounce U.S. Citizenship," which can be accessed here: http://citizenshipsolutions.ca/wp-con.... This guide was intended to address the ambiguity and propose that the tax industry was misinterpreting the law on superannuation.

Further adding to the perplexity, the IRS practice unit on Form 3520 and Form 3520A penalties is significantly redacted, for reasons unknown: https://www.irs.gov/pub/irs-utl/taxat....


Additional sources:


https://htj.tax/2021/07/us-taxation-o...

https://en.wikipedia.org/wiki/Social_...

https://www.law.cornell.edu/uscode/te...

https://www.irs.gov/pub/int_practice_...

https://www.irs.gov/irb/2020-12_IRB#R...

https://www.irs.gov/pub/irs-utl/2023n....