Segal, Cohen & Landis, P.C.
Form 3520 Compliance, Late Filing, and Penalty Defense
IRS tax attorneys — Beverly Hills, CA. National representation.
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.
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.
How We Help
Our Approach to Form 3520 Attorney
Form 3520 Preparation and Filing
We prepare Form 3520 for foreign gifts, bequests, and distributions from foreign trusts. Proper characterization of the transaction significantly affects reporting requirements and potential tax liability.
Delinquent Form 3520 Filing
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.
Form 3520 Penalty Abatement
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 Compliance (Form 3520-A)
A U.S. owner generally must ensure the foreign trust files Form 3520-A and required statements. A substitute return may be needed if the trust does not file. We review applicable exceptions and deadlines before preparing the filings.
How It Works
The Resolution Process
Transaction Analysis
We analyze the nature of the foreign transaction — gift, inheritance, trust distribution — and determine all applicable reporting requirements.
Return Preparation
We prepare Form 3520 with accurate characterization and all required disclosures.
Penalty Abatement (if delinquent)
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.
Ongoing Compliance
We advise on annual reporting obligations for recurring foreign trust distributions and gifts.
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Common Questions
Frequently Asked Questions
Is a foreign inheritance taxable in the US?+
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.
What is the penalty for late Form 3520?+
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.
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Beverly Hills · Los Angeles · National
Segal, Cohen & Landis, P.C.
9100 Wilshire Boulevard, 601 East Tower, Beverly Hills, CA 90212
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