Do I Need to File Form 3520?

Form 3520: gifts, inheritances and foreign trusts

A U.S. person generally reports gifts or bequests totaling more than $100,000 during a tax year from a nonresident alien individual or foreign estate on Form 3520. Gifts from related donors must be aggregated where required. Purported gifts from foreign corporations or partnerships have a separate, annually adjusted threshold; check the IRS amount for the year received. Gifts and inheritances are generally excluded from income, but exceptions and separate reporting obligations can apply, including rules for covered expatriates and foreign trusts.

Different transactions have different penalties

For unreported foreign gifts, IRC §6039F generally provides a penalty of 5% per month, up to 25% of the gift. Foreign trust reporting follows different rules under IRC §6677: initial penalties generally equal the greater of $10,000 or 35% of an unreported transfer or distribution; certain ownership-reporting failures use 5% of the relevant trust assets. Additional penalties and statutory limits may apply. The maximum penalty is not an inevitable outcome in every case.

Review your filing position

We review the filing obligation, transaction type, notice, deadlines and supporting records before recommending a response. Reasonable-cause relief may be available, but ignorance of the requirement or reliance on a preparer does not automatically qualify. We assess the evidence and available administrative or court procedures; no reduction or particular result is guaranteed.

Foreign trust ownership can create separate Form 3520-A responsibilities. Filing exceptions, extensions and substitute-return rules require review of the particular trust and tax year.

See the IRS Form 3520 instructions and annual inflation adjustments, or learn about Segal, Cohen & Landis (SCL) representation.