CP15 Notice From the IRS: What It Means for Your Form 3520 Penalty

Form 3520 and Form 3520-A are forms that a person or entity may be required to submit under IRS requirements. If a required form is not submitted on time and there is no extension, a CP15 notice will be issued if the IRS catches the problem. The CP15 notice is what triggers the penalty assessment. Not every late filing results in a CP15 notice or a penalty.

Receiving a CP15 notice from the IRS is unsettling — but it is not the end of the road. A CP15 is the notice the IRS issues if it catches a required Form 3520 or Form 3520-A that was not submitted on time and there was no extension. The CP15 notice is what triggers the penalty assessment. Penalties like this are frequently defensible — our overview of Form 3520 and Form 3520-A tax penalties explains how these assessments arise and where relief is possible.

What a CP15 Notice Says and Why It Was Issued

A CP15 is titled "Notice of Penalty Charge." A CP15 is the notice the IRS issues when it catches a required Form 3520 or Form 3520-A that was not submitted on time and there was no extension. The CP15 notice triggers the penalty assessment. In Form 3520 matters, the penalty generally arises under Internal Revenue Code section 6677, which covers reporting failures involving foreign trusts.

The underlying issue may involve:

• A late or missing Form 3520;
• Incomplete or inaccurate information;
• An unreported transfer to, or distribution from, a foreign trust; or
• A Form 3520-A failure tied to a U.S. owner's reporting responsibility — see our Form 3520-A compliance guide for how the trustee–owner duty is shared.

Read the notice closely: the tax period, penalty reference, assessed amount, and response instructions all matter. An IRS error in your account or filing history may be relevant to your defense.

Initial Penalty vs. Continuation Penalty

A CP15 notice triggers the penalty assessment for the failure to submit a complete and accurate return on time. The amount depends on the type of failure and the gross reportable amount, as described in the Instructions for Form 3520.

A continuation penalty is a separate amount that may apply after the CP15 notice if the required information remains incomplete or unfiled. This matters because facts that support relief from the initial penalty may not automatically resolve a continuation penalty — address each assessment on its own.

IRS Relief for Taxpayers in Israel: What It Means If You Have a CP15 Notice

The IRS has postponed certain time-sensitive government acts for affected taxpayers in Israel until September 30, 2027, as confirmed in Notice 2026-63 and the IRS newsroom release IR-2026-116. The relief covers assessing tax, issuing notices or demands for payment, and collecting by levy or otherwise. It does not retroactively cure an already-late Form 3520 or Form 3520-A, and a CP15 notice and the penalty assessment it triggers still require a separate reasonable-cause abatement request or appeal.

POSTPONED TO SEPTEMBER 30, 2027
HOTLINES: 866-562-5227 OR 267-941-1000 (INTERNATIONAL)

What Letter 3804 Asks of You

Letter 3804 is an IRS opening letter in Form 3520 and Form 3520-A cases. It identifies the filing problem and explains that a CP15 notice may follow if the IRS catches the problem. The CP15 notice triggers the penalty assessment. It also identifies the proposed amount, warns that additional penalties may apply if the information remains incomplete or late, and describes a 90-day period for submitting the required returns. It also requests a written reasonable-cause statement if you believe the failure should be excused.

Once the CP15 arrives, follow the date and instructions printed on that notice.

Why the Reasonable-Cause Statement Must Be Written — and Under Penalties of Perjury

Section 6677 provides that no penalty applies when the failure was due to reasonable cause and not willful neglect. The IRS expects an affirmative, fact-based explanation — a phone call or a general "I didn't know about Form 3520" will not carry the weight of a documented statement.

Your written statement should explain what happened, why you could not timely provide complete and accurate information, what you did to comply, when you corrected the problem, and why the failure was not willful neglect. It must include a declaration under penalties of perjury. If a representative prepares it, Letter 3804 provides substitute declaration language and signature requirements.

One caution from the IRS guidance on Form 3520/3520-A penalties: foreign-country penalties, confidentiality rules, or a foreign trustee's reluctance generally do not establish reasonable cause.

Mistakes That Make Things Worse

Avoid incomplete filings or generic explanations that never connect your facts to the reporting failure. Also avoid:

• Ignoring other open Form 3520 or Form 3520-A years;
• Treating the CP15 like an ordinary income-tax adjustment;
• Assuming the foreign trustee alone was responsible; or
• Waiting while continuation penalties accumulate.

The IRS guidance recommends resolving open compliance issues before reasonable cause is considered. A cleaner filing record helps, though it never guarantees abatement.

Your First Week After Opening the Notice

1. Preserve every page of the CP15, Letter 3804, envelopes, and attachments.
2. Identify the tax year, penalty reference, amount, and deadline.
3. Gather prior Forms 3520 and 3520-A, returns, trust documents, and IRS correspondence.
4. Prepare a timeline: the transaction, how you learned of the obligation, and what you fixed.
5. Consult counsel before making factual admissions or signing a reasonable-cause declaration.

The Law Offices of Jason R. Kovan focuses exclusively on Form 3520 and Form 3520-A penalty defense and appeals. Everything you share with counsel is protected by attorney-client privilege once an engagement letter is signed. A confidential conversation helps you understand your options.

Sources

• IRS IRM 20.1.9: International Penalties
• IRS: Failure to File Form 3520/3520-A Penalties
• IRS Instructions for Form 3520