The Complete Guide to Form 3520: Who Files, When, and What Happens If You Don't

The Complete Guide to Form 3520: Who Files, When, and What Happens If You Don’t

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If you are a U.S. person with a foreign trust, a large foreign gift, or an inheritance from outside the United States, IRS Form 3520 can turn a private family or estate matter into a high-stakes reporting issue. The form does not usually calculate tax. Instead, it tells the IRS about certain transactions with foreign trusts and certain large gifts or bequests from foreign persons.

That distinction matters. Many taxpayers assume that if no tax is due, no form is due. With Form 3520, that assumption can be expensive. A missed or incomplete filing can lead to penalties that start at the greater of $10,000 or a percentage of the foreign trust transaction, and foreign gift penalties can reach 25% of the unreported gift.

At Segal, Cohen & Landis, P.C., we regularly help taxpayers who discover Form 3520 after the deadline has already passed. Some received a wire from parents overseas. Others became beneficiaries of a foreign trust, inherited assets from a non-U.S. relative, transferred assets into a trust outside the United States, or learned that a foreign retirement arrangement may be treated as a trust for U.S. tax purposes.

This guide explains who must file Form 3520, the key 2025 thresholds, when the form is due, how to file it, common exemptions, and what to do if you missed a filing.

Important: This article is general information, not legal advice. Form 3520 issues are fact-specific, especially when foreign trusts, penalties, or late filings are involved. If you are unsure whether you need to file, consult a tax attorney before the deadline passes.

What Is IRS Form 3520?

IRS Form 3520 is officially titled Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. It is an information return used by U.S. persons to report several categories of cross-border activity.

Form 3520 is separate from your federal income tax return. You do not file it as a normal attachment to Form 1040. The IRS instructions require the form to be mailed separately to the IRS Center in Ogden, Utah. That separate filing requirement is one reason the form is commonly missed even by taxpayers who otherwise file their income tax returns on time.

The form generally covers four major reporting triggers:

Creating or transferring money or property to a foreign trust.
Owning, or being treated as the U.S. owner of, a foreign trust.
Receiving a distribution, loan, or certain use of property from a foreign trust.
Receiving certain large gifts or bequests from foreign persons.

The form is closely related to Form 3520-A, which is the annual information return for a foreign trust with a U.S. owner. In many foreign trust situations, the forms must be analyzed together. If you need trust-specific help, see SCL’s Foreign Trust Reporting Attorney for Forms 3520 and 3520-A page.

Who Must File Form 3520?

The first question is whether you are a “U.S. person.” For Form 3520 purposes, that generally includes U.S. citizens, U.S. residents, domestic partnerships, domestic corporations, domestic estates, and certain trusts. Green card holders and many resident aliens can be U.S. persons even when the money or property involved is entirely outside the United States.

If you are a U.S. person, you may need to file Form 3520 when any of the following applies.

1. You Created a Foreign Trust or Transferred Property to One

A Form 3520 filing may be required when a U.S. person creates a foreign trust or transfers money or property to a foreign trust. This can include direct transfers, indirect transfers, and certain loans or obligations involving the trust.

Foreign trust rules are broad. A taxpayer may not even think of an arrangement as a “trust” in the U.S. sense. The foreign jurisdiction may call it a foundation, retirement plan, family settlement, estate planning vehicle, or investment arrangement. Whether it is treated as a foreign trust for U.S. purposes depends on U.S. tax law, not just the label used in the other country.

Transfers to foreign trusts are especially sensitive because the IRS wants visibility into assets that may otherwise move outside the normal U.S. reporting system. If appreciated property is transferred, separate income tax consequences may also apply. Do not assume that a transfer is harmless because it was made for estate planning or family reasons.

2. You Are Treated as the U.S. Owner of a Foreign Trust

A U.S. person who is treated as the owner of a foreign trust under the grantor trust rules may have Form 3520 obligations. The foreign trust may also have Form 3520-A obligations.

This is a common trap. A taxpayer may believe the foreign trust is the trustee’s responsibility, or that the foreign institution will handle all reporting. The IRS may still expect the U.S. owner to ensure the required information is filed. If the foreign trust does not file Form 3520-A, the U.S. owner may need to attach a substitute Form 3520-A to a timely filed Form 3520.

Because Form 3520 and Form 3520-A penalties can be severe, foreign trust ownership questions should be reviewed before filing season whenever possible.

3. You Received a Distribution From a Foreign Trust

A U.S. person who receives a distribution from a foreign trust generally must report that distribution on Form 3520. A distribution can include more than a simple cash payment. Depending on the facts, loans from a foreign trust and uncompensated use of trust property may also create reporting issues.

Beneficiaries are often surprised by this rule. They may receive money from a family trust abroad and assume the trustee or family adviser has already handled the tax paperwork. From the IRS’s perspective, the U.S. recipient may still have a separate reporting obligation.

If the distribution is not properly documented, the IRS may also apply default rules that can produce harsh income tax and interest consequences. For foreign trust beneficiaries, the best practice is to gather trust statements, beneficiary statements, trustee communications, and any foreign tax documents before preparing the U.S. filing.

4. You Received a Large Gift or Bequest From a Foreign Person

Form 3520 is also used to report certain large gifts and bequests from foreign persons. This is one of the most common Form 3520 issues for individuals and families.

For 2025, the major thresholds are:

| Source of Gift or Bequest | 2025 Reporting Threshold | Key Rule |

|—|—|—|

| Nonresident alien individual or foreign estate | More than $100,000 in aggregate during the tax year | Aggregate gifts from related foreign persons. Once the threshold is exceeded, separately identify each gift over $5,000. |

| Foreign corporation or foreign partnership | More than $20,116 in aggregate for 2025 | Aggregate gifts from foreign entities and related persons. The IRS may recharacterize purported entity gifts. |

For a deeper annual threshold breakdown, see SCL’s Form 3520 Threshold 2025 guide.

The foreign gift rules often affect immigrants, green card holders, dual citizens, expats, and U.S. residents with family outside the United States. A parent’s wire transfer for a home purchase, tuition, business funding, or general support can create a U.S. reporting duty even if the transfer is not taxable as income. See also SCL’s guide for green card holders and the foreign gift tax trap.

Do I Need to File Form 3520? A Practical Decision Tree

Use this decision tree as a starting point. It does not replace legal advice, but it can help you spot the situations that deserve immediate review.

Are you a U.S. person? If no, Form 3520 may not apply to you directly. If yes, continue.

Did you create a foreign trust or transfer money or property to one? If yes, review Form 3520 Part I.

Are you treated as the U.S. owner of a foreign trust? If yes, review Form 3520 Part II and whether Form 3520-A is also required.

Did you receive a distribution, loan, or uncompensated use of property from a foreign trust? If yes, review Form 3520 Part III.

Did you receive gifts or bequests from foreign individuals or a foreign estate totaling more than $100,000? If yes, review Form 3520 Part IV.

Did you receive more than $20,116 in 2025 from foreign corporations or partnerships? If yes, review Form 3520 Part IV and consider whether the IRS could recharacterize the transfer.

Does an exception apply? Certain Canadian retirement plans, qualifying tax-favored foreign retirement or savings trusts, some employer arrangements, and certain exempt charitable trust transactions may be excluded. Confirm before relying on an exception.

Are you already late? If yes, do not file casually without a strategy. Late Form 3520 filings can trigger automated penalty assessments, and a reasonable cause submission may be needed.

If you answered “yes” to any trust or foreign gift question, it is safer to get professional advice before the filing deadline. A short review can be far less costly than trying to unwind an IRS penalty notice later.

When Is Form 3520 Due?

For calendar-year taxpayers, Form 3520 is generally due April 15. Technically, the rule is the 15th day of the fourth month after the end of the taxpayer’s tax year.

There are important extensions and special timing rules:

U.S.-based calendar-year individuals: generally April 15.

U.S. citizens or residents living and working outside the United States and Puerto Rico: generally June 15, if the conditions are met and the required statement is included.

Military or naval service outside the United States and Puerto Rico: generally June 15 when the rule applies.

Extended income tax return: if your income tax return filing deadline is extended, the Form 3520 deadline may be extended, but generally not beyond October 15 for a calendar-year individual.

Extensions give more time to file, not necessarily more time to deal with all related tax consequences. If your Form 3520 issue also involves income, foreign accounts, FBAR, Form 8938, PFICs, or trust distributions, the timing analysis may be broader than Form 3520 alone.

For expat timing issues, see SCL’s Expat Tax Deadline Survival Guide.

How Do You File Form 3520?

Form 3520 is not filed electronically with the normal federal income tax return. The IRS instructions direct taxpayers to mail Form 3520 separately to:

Internal Revenue Service Center

P.O. Box 409101

Ogden, UT 84409

Only a complete Form 3520 is considered timely filed. Required attachments and statements matter. Incomplete, inconsistent, or missing information can create the same type of risk as not filing at all.

Before mailing, keep a complete copy of the signed form and all attachments. Use a mailing method that creates proof of timely filing. The IRS’s international information return penalty process can be unforgiving, and proof of mailing may become important if a notice is later issued.

What Happens If You Don’t File Form 3520?

The penalty depends on the type of filing failure.

Foreign Trust Penalties

Under the Form 3520 instructions, the initial Section 6677 penalty is generally the greater of $10,000 or a percentage of the transaction or trust amount, depending on the issue. For example:

Transfer to a foreign trust: 35% of the gross value of property transferred for failure to report a creation of or transfer to a foreign trust.

Distribution from a foreign trust: 35% of the gross value of distributions received for failure to report the distribution.

Foreign trust ownership/Form 3520-A issue: 5% of the gross value of the portion of the foreign trust’s assets treated as owned by the U.S. person when the foreign trust fails to file Form 3520-A or provide required information.

These penalties can be disproportionate to the actual tax due. In some cases, there may be no tax due at all, yet the reporting penalty is still substantial.

Foreign Gift Penalties

For certain foreign gifts and bequests reported under Part IV, the penalty is different. If the taxpayer fails to timely report the foreign gift, or reports incomplete or incorrect information, the IRS may impose a penalty equal to 5% of the gift or bequest for each month the failure continues, up to 25% of the gift or bequest, unless the taxpayer shows reasonable cause.

The IRS may also determine the income tax consequences of the receipt. That can create additional disputes when documentation is weak, the donor is an entity, or the transfer could be characterized as compensation, income, loan proceeds, or something other than a true gift.

If you already received a penalty notice, do not ignore it. Notices involving international information returns may have short response windows and specialized abatement procedures. SCL’s CP215 notice guide explains one common penalty notice pathway.

Reasonable Cause: Can Form 3520 Penalties Be Removed?

Penalties may be avoided or abated when the taxpayer can demonstrate reasonable cause. Reasonable cause is not automatic, and “I did not know about the form” is rarely enough by itself.

A stronger reasonable cause presentation usually explains the facts, the taxpayer’s background, the steps taken to comply, the role of professional advisers, the complexity of the foreign law or trust arrangement, the timing of discovery, and the taxpayer’s corrective action once the issue was identified.

Documentation matters. Depending on the facts, useful support may include trust instruments, foreign legal opinions, bank records, gift letters, estate documents, professional adviser correspondence, prior returns, foreign tax filings, medical or personal hardship records, and evidence of timely income tax compliance.

Because the stakes can be high, taxpayers should be careful before sending a late Form 3520 with a short explanation. A rushed filing can create admissions, inconsistencies, or incomplete facts that make penalty defense harder later.

Common Form 3520 Filing Mistakes

The most common Form 3520 problems usually start with reasonable assumptions that turn out to be wrong under U.S. tax rules.

Assuming no tax means no filing. Form 3520 is an information return. Reporting can be required even when the gift is not taxable income.

Missing the separate mailing requirement. Filing the income tax return on time does not automatically file Form 3520.

Overlooking related donors. Gifts from related foreign persons may need to be aggregated for the threshold.

Treating entity transfers as simple gifts. Purported gifts from foreign corporations or partnerships can be recharacterized by the IRS.

Confusing Form 3520 with FBAR or Form 8938. These forms overlap but do not replace each other. A foreign account may need FBAR reporting, Form 8938 reporting, and separate Form 3520 analysis if trusts or gifts are involved.

Ignoring foreign retirement and savings arrangements. Some are exempt, but others may be treated as foreign trusts or PFIC-heavy investment vehicles.

Filing late without a penalty strategy. Late international information returns should be handled carefully, especially if multiple years are involved.

For related offshore reporting issues, review SCL’s guides to FBAR filing requirements, PFIC tax reporting, and IRS voluntary disclosure for foreign account holders.

Key Form 3520 Exceptions and Exemptions

Not every foreign trust-related transaction requires Form 3520. The IRS instructions list several exceptions. The most relevant for many taxpayers include:

Canadian RRSPs and RRIFs. Revenue Procedure 2014-55 provides relief for certain Canadian registered retirement savings plans and registered retirement income funds.

Certain tax-favored foreign retirement and nonretirement savings trusts. Revenue Procedure 2020-17 and later guidance provide exemptions for qualifying arrangements, including certain pension, retirement, medical, disability, and educational benefit trusts, when the taxpayer is an eligible individual and the trust meets the requirements.

Certain employer arrangements. The instructions exclude certain transfers to funded nonqualified deferred compensation arrangements under Section 402(b), certain stock bonus, pension, or profit-sharing trusts, and amounts under qualified foreign plans described in Section 404A.

Certain tax-exempt charitable trust transactions. The instructions include exceptions for transfers to foreign trusts, and distributions to domestic trusts, that have current IRS determination letters recognizing Section 501(c)(3) tax-exempt status.

Some fair market value transfers. Many fair market value transfers are excluded, but there are important exceptions, including certain related-party transfers and transfers involving appreciated property.

Do not rely on an exception based on a short description alone. Foreign retirement plans and savings arrangements can differ substantially by country. A Canadian RRSP, a UK ISA, a Canadian TFSA, a foreign pension, and a foreign mutual fund account may each require a different U.S. tax analysis.

Form 3520 vs. FBAR vs. Form 8938

Form 3520 is not the only international reporting form. Taxpayers with foreign assets often need a broader review.

FBAR: reports foreign financial accounts to FinCEN when aggregate account values exceed $10,000 at any time during the year.

Form 8938: reports specified foreign financial assets with the income tax return when the applicable thresholds are met.

Form 3520: reports foreign trust transactions, foreign trust ownership, foreign trust distributions, and certain large foreign gifts or bequests.

Form 3520-A: reports annual information for a foreign trust with a U.S. owner.

One transaction can trigger more than one filing requirement. For example, a U.S. taxpayer who receives a distribution from a foreign trust that holds foreign bank accounts may need to consider Form 3520, Form 3520-A, FBAR, Form 8938, and income tax reporting for any taxable income.

That is why a narrow “Do I owe tax?” review is not enough. The better question is: “What U.S. reporting obligations are connected to this foreign asset, trust, gift, or account?”

What Should You Do If You Missed the Form 3520 Deadline?

If the deadline has passed, the right next step depends on the facts. A taxpayer who missed one foreign gift filing for a documented family gift may need a different approach than a taxpayer with multiple years of foreign trust distributions, unreported income, FBAR issues, or willful offshore noncompliance.

Start by gathering:

Copies of the foreign trust instrument, beneficiary statements, trustee letters, and distribution records.

Gift letters, inheritance documents, estate records, and bank transfer records.

Prior-year federal income tax returns and any previously filed FBARs, Forms 8938, Forms 3520, or Forms 3520-A.

Communications with tax preparers, attorneys, trustees, banks, or foreign advisers.

Any IRS notices, especially penalty assessments or requests for information.

Then speak with a tax attorney before filing. Late filings should be coordinated with a reasonable cause strategy, voluntary disclosure analysis, or other compliance pathway when appropriate. If unreported foreign income, undisclosed accounts, or willful conduct may be involved, the stakes can extend beyond a single information return.

SCL helps taxpayers evaluate late Form 3520 filings, IRS penalty notices, foreign trust reporting, offshore account compliance, and voluntary disclosure options. If you are already late, the safest time to get advice is before the IRS sends a notice.

Frequently Asked Questions About Form 3520

Is Form 3520 a tax return?

It is an information return. It usually does not calculate a tax by itself, but failing to file can trigger substantial penalties and may affect how the IRS evaluates the tax consequences of a transaction.

Do I file Form 3520 with my Form 1040?

No. Form 3520 is mailed separately to the IRS Center in Ogden, Utah, according to the IRS instructions. Keep proof of timely mailing.

Do foreign gifts count as taxable income?

A true gift or bequest from a foreign person is generally not taxable income to the recipient, but it may still need to be reported on Form 3520 if the threshold is exceeded. The IRS may scrutinize transfers from foreign corporations or partnerships more closely.

What is the Form 3520 threshold for 2025?

For 2025, the threshold is more than $100,000 from a nonresident alien individual or foreign estate, and more than $20,116 from foreign corporations or partnerships. Aggregation rules apply.

What if my parents overseas sent me money to buy a house?

If you are a U.S. person and the total foreign gift amount from your parents or related foreign persons exceeds the threshold, you may need to file Form 3520 even if the money is not taxable income.

Do Canadian RRSPs and RRIFs require Form 3520?

Certain Canadian RRSPs and RRIFs are exempt from Form 3520 and Form 3520-A foreign trust information reporting under Revenue Procedure 2014-55. Other Canadian or foreign accounts may require separate analysis.

Can the IRS remove Form 3520 penalties?

Penalties may be avoided or abated when the taxpayer demonstrates reasonable cause. The strength of the request depends on facts, documentation, compliance history, and how the late filing is handled.

Talk to a Tax Attorney Before You File Late or Respond to the IRS

Form 3520 looks like a disclosure form, but the consequences of getting it wrong can be severe. Foreign trust transactions, large family gifts, foreign inheritances, and offshore compliance issues should be reviewed before the IRS makes the first move.

If you received a foreign gift, inherited assets from abroad, are connected to a foreign trust, or missed a Form 3520 deadline, Segal, Cohen & Landis, P.C. can help you understand your filing obligations, evaluate penalty exposure, and build a practical compliance strategy.

Request a free consultation or call 866-545-4341 to speak with an experienced tax attorney.

Internal Link Plan

International Tax Services

Foreign Trust Reporting Attorney for Forms 3520 and 3520-A

Form 3520 Threshold 2025

Green Card Holders and the Foreign Gift Tax Trap

FBAR Filing Requirements for Expats

PFIC Tax Reporting

IRS Voluntary Disclosure Program for Foreign Account Holders

The Expat Tax Deadline Survival Guide

IRS CP215 Notice Guide

Add once live: Form 3520 vs. Form 3520-A, Form 3520 penalties and defense, foreign inheritance and U.S. tax, Form 3520 for Asian-American families, and any dedicated foreign gift/inheritance landing page.

External Source References Used

IRS Instructions for Form 3520

IRS: Gifts from Foreign Person

IRS: About Form 3520

IRS: Foreign Trust Reporting Requirements and Tax Consequences