Form 3520 Filing Requirements for Foreign Gifts, Inheritances & Trusts
Receiving a large gift or inheritance from abroad, transferring property to a foreign trust, owning part of a foreign trust, or receiving a foreign-trust distribution can create a Form 3520 reporting requirement for a U.S. person.
Egan Tax helps U.S. taxpayers determine whether Form 3520 applies, identify the correct reporting section, coordinate related Form 3520-A requirements, and address prior-year or late-filing issues.
Who Needs to File Form 3520?
Form 3520 is used by U.S. persons to report certain transactions with foreign trusts, ownership of foreign trusts, and the receipt of certain large gifts or bequests from foreign persons. A filing requirement can arise even when the underlying transfer is not taxable income. An executor may also need to file Form 3520 on behalf of a decedent who was treated as the owner of a foreign trust or who received a reportable transfer, gift, or bequest in the year of death.
You Transfer Property to a Foreign Trust
A U.S. person may need to report certain transfers of money or other property to a foreign trust in Part I of Form 3520. This can include creating or funding a foreign trust and certain direct or indirect transfers to an existing foreign trust.
You Are Treated as the Owner of a Foreign Trust
If you are treated as the owner of any portion of a foreign trust under the U.S. grantor trust rules, Part II reporting may be required. This reporting can apply even if there were no transactions involving the trust during the year.
You Receive a Distribution From a Foreign Trust
A U.S. person who receives a direct or indirect distribution from a foreign trust may need to complete Part III. Certain loans from a foreign trust, extensions of credit, or uncompensated use of trust property can also be treated as reportable distributions under the Form 3520 rules.
You Receive Certain Foreign Gifts or Bequests
A U.S. person who receives certain large gifts or bequests from a foreign individual, foreign estate, foreign corporation, or foreign partnership may need to report them in Part IV when the applicable reporting threshold is exceeded. Foreign trust distributions are generally reported under Part III instead of being treated as ordinary foreign gifts under Part IV.
The correct Form 3520 analysis starts with what actually happened: who transferred the money or property, whether a foreign trust was involved, whether you are treated as an owner or beneficiary, and the amount and nature of what you received.
Foreign Gifts and Inheritances: When Does Form 3520 Apply?
Receiving money or property from someone outside the United States does not automatically create U.S. income tax, but a large foreign gift or inheritance can create a Form 3520 reporting requirement. The applicable threshold depends on who made the gift or bequest.
Gifts or Bequests From Foreign Individuals or Foreign Estates
For 2026, a U.S. person generally must report gifts or bequests received from a nonresident alien individual or foreign estate when the aggregate amount exceeds $100,000 during the tax year.
Gifts from related foreign persons may need to be combined when determining whether the $100,000 threshold has been exceeded. Once the threshold is exceeded, gifts or bequests above $5,000 generally must be separately identified on Form 3520.
Gifts From Foreign Corporations or Partnerships
A different and much lower reporting threshold applies to purported gifts from foreign corporations or foreign partnerships.
For tax years beginning in 2026, the reporting threshold is $20,573. This amount is adjusted annually for inflation. Gifts from related foreign corporations, partnerships, or other related foreign persons may need to be aggregated when applying the threshold.
The IRS may also examine whether a payment described as a gift from a foreign corporation or partnership should actually be treated differently for U.S. tax purposes.
Foreign Trust Distributions Are Different
A distribution from a foreign trust is generally reported under Part III of Form 3520 rather than treated as a foreign gift under Part IV. Correctly identifying the source of the payment is therefore important before applying the foreign-gift thresholds.
Exceptions To Form 3520 Reporting
Not every foreign trust arrangement requires Form 3520. Under Rev. Proc. 2020-17, many tax-favored foreign retirement plans and certain tax-favored foreign savings accounts are exempt from Form 3520 and Form 3520-A reporting when the plan meets the requirements of that guidance. Canadian RRSPs and RRIFs are separately covered by Rev. Proc. 2014-55. Transfers to a foreign trust for fair market value are also generally excepted. These exceptions have specific conditions, so a foreign pension or savings plan should be reviewed against the applicable guidance before concluding that no filing is required.
Gifts or Bequests From Covered Expatriates
Certain gifts or bequests received from a covered expatriate may be subject to a separate tax reported on Form 708 by the recipient. This applies in addition to any Form 3520 reporting, not instead of it. These transfers should be reviewed separately rather than treated as ordinary foreign-gift reporting under Form 3520.
The $100,000 and $20,573 amounts are reporting thresholds. Exceeding a threshold does not by itself mean the entire gift or inheritance is taxable income.
Form 3520 and Foreign Trust Reporting
Form 3520 can apply when a U.S. person transfers property to a foreign trust, is treated as the owner of part of a foreign trust, or receives a distribution or other benefit from one. The reporting depends on the taxpayer’s relationship with the trust and the type of transaction involved.
Transfers to a Foreign Trust
A U.S. person responsible for certain reportable events involving a foreign trust may need to complete Part I of Form 3520. This can include creating a foreign trust, transferring money or other property to one, or certain transactions involving a related foreign trust.
The analysis is not limited to obvious cash contributions. The character of the transaction, the parties involved, and whether an obligation or other arrangement exists can affect the reporting requirement.
U.S. Ownership of a Foreign Trust
A U.S. person who is treated as the owner of any portion of a foreign trust under Sections 671 through 679 generally reports that ownership in Part II of Form 3520.
Part II may be required even when no transfers or distributions occurred during the year. A U.S. owner is also responsible for ensuring that the foreign trust satisfies applicable Form 3520-A reporting requirements.
Distributions From a Foreign Trust
A U.S. person who receives a direct or indirect distribution from a foreign trust generally reports it in Part III of Form 3520.
Foreign-trust distributions are not limited to ordinary cash payments. Depending on the facts, certain loans, extensions of credit, indirect transfers, or use of trust property can also create reporting consequences.
Trust documentation can be especially important because the tax treatment of a distribution may depend on whether the beneficiary receives the information required from the foreign trust.
Why the Trust Relationship Matters
The same foreign trust can create different reporting obligations for different U.S. persons. A transferor, owner, and beneficiary may each have different Form 3520 responsibilities.
Before preparing the form, it is therefore important to determine:
who created or funded the trust
whether a U.S. person is treated as an owner
what distributions or benefits were received
whether Form 3520-A was filed
what trust statements and supporting records are available
Form 3520 vs. Form 3520-A: What’s the Difference?
Form 3520 and Form 3520-A are related but serve different purposes.
Form 3520
Form 3520 is generally filed by a U.S. person to report certain:
transfers to a foreign trust
ownership of a foreign trust
distributions from a foreign trust
large foreign gifts or bequests
Form 3520-A
Form 3520-A is generally the annual information return for a foreign trust with a U.S. owner. It reports information about the trust, its activities, and its U.S. owners and beneficiaries.
A U.S. owner is generally responsible for ensuring that the foreign trust files Form 3520-A. If the trust does not file it, the U.S. owner may need to attach a substitute Form 3520-A to Form 3520.
Form 3520-A Has a Different Deadline
For a calendar-year foreign trust, Form 3520-A is generally due March 15. An extension may generally be requested using Form 7004.
This deadline is separate from the normal Form 3520 filing timetable, so taxpayers with U.S.-owned foreign trusts should review both requirements.
Common Situations That Can Trigger Form 3520
Form 3520 questions often begin with a real-world event rather than a tax form. These situations commonly require a closer look at the source of the money or property and whether a foreign trust was involved.
Parents Abroad Send You a Large Gift
You receive more than $100,000 during the year from a nonresident alien parent or related foreign individuals.
The transfer may be a genuine gift rather than taxable income, but Part IV reporting may still be required.
Gift From A Nonresident Alien Spouse
The $100,000 threshold applies to gifts from a nonresident alien spouse. There is no marital exception for Part IV reporting, so a large transfer from a non-U.S. spouse can create a filing requirement even though no gift tax applies.
You Receive an Inheritance From a Foreign Estate
You inherit cash, investments, real estate, or other property from a foreign estate.
A sufficiently large foreign bequest can create Form 3520 reporting even though receiving the inheritance does not automatically make it taxable income.
A Foreign Trust Gives You Money, a Loan, or Use of Property
You receive cash or property from a foreign trust, borrow from the trust, or use trust-owned property without paying fair market value.
Depending on the facts, these benefits can create Part III reporting as foreign trust distributions.
You Had a Foreign Trust Before Becoming Subject to U.S. Reporting
You created, funded, owned, or benefited from a foreign trust before becoming a U.S. taxpayer.
The trust’s history may need to be reviewed to determine whether current Form 3520, Form 3520-A, or prior-year reporting obligations exist.
The key question is not simply whether money came from another country. It is who transferred it, why it was transferred, and whether a foreign trust was involved.
When, How and Where Is Form 3520 Filed?
Form 3520 has its own filing rules. It is generally sent separately to the IRS rather than attached to the taxpayer’s income tax return, so the due date, extension rules, and filing address should be checked carefully.
When Is Form 3520 Due?
For a calendar-year individual, Form 3520 is generally due on April 15.
A U.S. citizen or resident who qualifies for the automatic two-month extension because they live and work outside the United States, or are serving outside the United States in the military or naval service, generally has until June 15.
If the taxpayer receives an extension of time to file the income tax return, Form 3520 is generally extended as well, but no later than October 15 for a calendar-year taxpayer. The Form 3520 deadline cannot be extended beyond the 15th day of the tenth month following the end of the tax year.
Is Form 3520 Filed With the Tax Return?
No. Form 3520 is filed separately from the taxpayer’s income tax return.
However, an income tax return extension can affect the Form 3520 due date, so the filer should indicate the applicable extension information on Form 3520 when required.
Where Do You Mail Form 3520?
Under the current IRS instructions, Form 3520 should be sent to:
Internal Revenue Service Center
P.O. Box 409101
Ogden, UT 84409
The IRS can update filing addresses, so taxpayers should confirm the current Form 3520 instructions before mailing.
A Complete Filing Matters
The IRS states that Form 3520 is considered complete only when all required information and attachments are included.
For taxpayers reporting foreign trusts, this can include supporting trust statements or a substitute Form 3520-A where applicable. An incomplete filing can create issues even when a Form 3520 was submitted by the deadline.
A Missing Complete Form Can Affect the IRS Assessment Period
If a complete Form 3520 is not filed by the due date, including extensions, the IRS instructions state that the period for assessing tax related to an event or period for which information was required in Parts I through III generally will not expire before three years after the required information is reported. This extended assessment period under Section 6501(c)(8) applies to the foreign trust reporting in Parts I through III. Part IV foreign gift reporting has a separate consequence described in the penalty section below.
This assessment-period rule is separate from the Form 3520 penalty rules and is another reason complete and timely reporting matters.
What Happens If Form 3520 Is Late, Incomplete, or Not Filed?
There is no single Form 3520 penalty. The potential amount depends on which reporting obligation was missed and the value of the unreported transfer, trust assets, distribution, gift, or bequest.
Transfers to a Foreign Trust
For certain failures to report a required transfer to a foreign trust, the initial penalty can generally be the greater of:
- $10,000, or
- 35% of the value of the unreported transfer.
Foreign Trust Ownership
For certain failures involving a U.S. owner’s foreign trust reporting, the initial penalty can generally be the greater of:
- $10,000, or
- 5% of the gross value of the portion of the trust’s assets treated as owned by the U.S. person.
Related penalties can also arise when a required Form 3520-A or substitute Form 3520-A is not properly filed.
Foreign Trust Distributions
For certain failures to report a foreign trust distribution, the initial penalty can generally be the greater of:
- $10,000, or
- 35% of the value of the unreported distribution.
Foreign Gifts and Bequests
For certain failures to timely report a foreign gift or bequest, the penalty can generally equal 5% of the unreported amount for each month, or part of a month, that the failure continues, up to 25%.
In addition, if a foreign gift or bequest is not reported, the IRS may determine the income tax consequences of the receipt, which can include treating the amount as taxable income rather than a gift.
Continued Failure After IRS Notice
For certain trust-reporting failures, additional penalties can apply if the required information is not provided within 90 days after the IRS sends a notice. An additional $10,000 penalty can apply for each 30 day period, or part of one, that the failure continues after the 90 day notice window, up to the gross reportable amount.
Because Form 3520 penalties differ significantly depending on what was not reported, a late or incomplete filing should be reviewed based on the specific reporting failure rather than assuming a standard penalty applies.
Can Reasonable Cause Help With a Form 3520 Penalty?
A Form 3520 penalty is not necessarily automatic in every late or incomplete filing situation. The IRS instructions state that penalties will not be imposed when the taxpayer can demonstrate that the failure was due to reasonable cause and not willful neglect.
Reasonable Cause Depends on the Facts
There is no single statement that guarantees penalty relief. The analysis generally depends on why the filing was missed, what the taxpayer knew about the reporting requirement, what steps were taken to comply, and how quickly the problem was corrected after it was discovered.
A reasonable-cause submission should therefore be based on the taxpayer’s actual circumstances rather than a generic explanation.
Some Explanations Do Not Establish Reasonable Cause
For foreign trust reporting, the IRS specifically states that foreign-country disclosure restrictions, reluctance by a foreign fiduciary, or trust provisions preventing disclosure do not by themselves constitute reasonable cause.
Review the Filing Before Assuming the Outcome
If Form 3520 was filed late, filed incompletely, or never filed, the first step is to identify the specific reporting failure and the applicable penalty provision.
Depending on the facts, the taxpayer may need to file the missing or corrected form and provide a reasonable-cause explanation. Relief is fact-specific and should not be assumed simply because the taxpayer did not intend to miss the filing.
A late Form 3520 should be reviewed carefully before assuming either that a penalty definitely applies or that penalty relief will automatically be granted.
What If Form 3520 Was Missed in a Prior Year?
A missed Form 3520 should be reviewed before simply filing the form late. The correct approach depends on what was not reported, which years are affected, whether other international filings were also missed, and whether the IRS has already contacted the taxpayer.
Identify the Reporting Failure
First determine whether the missed requirement involved:
a transfer to a foreign trust
ownership of a foreign trust
a foreign trust distribution
a foreign gift or bequest
Also check whether Form 3520-A or another international information return was required for the same year.
Filing a Delinquent Form 3520
Taxpayers who need to file a delinquent Form 3520 and who are not under IRS civil examination or criminal investigation, and have not already been contacted about the delinquent return, generally file Form 3520 according to its normal filing instructions.
If reasonable cause is being asserted, a reasonable-cause statement may be attached. The IRS currently states that reasonable-cause statements attached to Forms 3520 and 3520-A are considered before a penalty is assessed.
When Streamlined Procedures May Be Relevant
If the missed Form 3520 is part of broader non-willful offshore compliance failures involving foreign income, assets, or other international reporting, the Streamlined Filing Compliance Procedures may need to be considered instead of treating the issue as an isolated late form.
IRS Contact Changes the Analysis
Correction options can change if the IRS has already begun an examination, criminal investigation, or contacted the taxpayer about the delinquent reporting.
For that reason, the filing history and any IRS correspondence should be reviewed before choosing a correction path.
A missed Form 3520 is best treated as a filing-history question, not simply a late-form question.
How Egan Tax Helps With Form 3520
Form 3520 issues often involve more than filling in a form. The key is identifying why the filing requirement exists, which part of Form 3520 applies, whether related international reporting is required, and whether any prior-year compliance issue needs to be addressed.
Filing Requirement Review
Egan Tax can review the underlying transaction or relationship to determine whether Form 3520 applies and which reporting section is relevant.
This can include:
foreign gifts or inheritances
transfers to foreign trusts
ownership of foreign trusts
foreign trust distributions
related Form 3520-A requirements
Foreign Gift and Inheritance Reporting
For taxpayers who receive significant gifts or bequests from foreign persons, Egan Tax can review the source of the transfer, the applicable reporting threshold, and the information required for Part IV reporting.
Foreign Trust Reporting
Egan Tax can help coordinate Form 3520 reporting for foreign trust transfers, ownership, distributions, and related Form 3520-A obligations.
Prior-Year and Late Filing Review
If Form 3520 was missed, filed late, or filed incompletely, Egan Tax can review the filing history, identify the specific reporting failure, and evaluate the available correction and reasonable-cause considerations.
International Reporting Coordination
Form 3520 issues can overlap with other U.S. international reporting requirements. Where applicable, Egan Tax can review related obligations such as Form 3520-A, Form 8938, FBAR, Form 5471, or Form 8621 so the filing is considered in the broader reporting context.
Direct CPA Guidance
Clients work directly with Bill Egan, CPA on U.S. international tax matters, including foreign gifts, inheritances, foreign trusts, and prior-year reporting issues.
What Records Help With a Form 3520 Review?
Form 3520 reporting often depends on details that are difficult to reconstruct later, especially when foreign gifts, inheritances, or trusts are involved. Keeping the underlying records together can make it much easier to determine what should be reported and how prior-year issues should be corrected.
Records for Foreign Gifts or Inheritances
- name, country, and relationship of the donor or estate
- dates and amounts received
- bank transfer or wire records
- gift letters or supporting correspondence
- probate, estate, or inheritance documents
- records showing whether multiple transfers came from related persons
- valuation records for non-cash property
Records for Foreign Trusts
- the trust deed or trust instrument
- trustee and fiduciary contact information
- records showing who created or funded the trust
- ownership or grantor information
- contribution and transfer history
- distribution records
- loan or credit arrangements involving the trust
- records of any use of trust property
- prior Forms 3520 and 3520-A
- Foreign Grantor Trust Owner Statements
- Foreign Grantor Trust Beneficiary Statements
- Foreign Nongrantor Trust Beneficiary Statements, where applicable
Prior U.S. Tax and Reporting Records
Why the Records Matter
The same transfer can be reported differently depending on whether it was a gift, inheritance, trust distribution, loan, or other transaction. Complete records help establish the source, timing, value, and legal nature of what occurred.
They also help determine whether the issue is limited to Form 3520 or whether another international reporting obligation needs to be reviewed at the same time.
Frequently Asked Questions About Form 3520
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Form 3520 is an IRS information return used by U.S. persons to report certain transactions with foreign trusts, ownership of foreign trusts, distributions from foreign trusts, and certain large gifts or bequests received from foreign persons. Different parts of the form apply depending on the underlying transaction.
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A filing requirement can arise when a U.S. person transfers property to a foreign trust, is treated as an owner of a foreign trust, receives a distribution or certain benefits from a foreign trust, or receives foreign gifts or bequests above the applicable reporting threshold.
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For 2026, gifts or bequests from a nonresident alien individual or foreign estate generally become reportable when aggregate receipts exceed $100,000 during the year. Gifts from related foreign persons may need to be combined when applying the threshold.
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A U.S. person who receives more than $100,000 in aggregate gifts or bequests from a nonresident alien individual or foreign estate during the year generally has a Part IV reporting requirement. The reporting obligation does not by itself mean the entire inheritance is taxable income.
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For tax years beginning in 2026, purported gifts from foreign corporations or foreign partnerships generally become reportable when the aggregate amount exceeds $20,573. This threshold is adjusted annually for inflation and is separate from the $100,000 rule for gifts from foreign individuals or estates.
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Form 3520 generally reports a U.S. person’s specified transactions or relationship with a foreign trust, along with certain foreign gifts and bequests. Form 3520-A is generally the annual information return for a foreign trust with a U.S. owner. Some U.S. owners can have responsibilities involving both forms.
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For a calendar-year individual, Form 3520 is generally due April 15. Certain U.S. citizens or residents living and working abroad generally have until June 15. If an applicable income tax return extension is granted, Form 3520 can generally be extended to October 15.
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Under the current IRS instructions, Form 3520 is mailed separately to:
Internal Revenue Service Center
P.O. Box 409101
Ogden, UT 84409Taxpayers should confirm the current IRS instructions before mailing because filing addresses can change.
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No. Form 3520 is filed separately from the taxpayer’s income tax return. However, an extension granted for the income tax return can also extend the Form 3520 deadline, subject to the Form 3520 maximum extension date.
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There is no single Form 3520 late-filing penalty. The potential penalty depends on whether the failure involves a foreign trust transfer, foreign trust ownership, a trust distribution, or a foreign gift or bequest, and can be based on the value of the amount or assets that were not properly reported.
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Potentially. The Form 3520 rules provide for reasonable-cause relief in qualifying circumstances. Whether relief applies depends on the facts surrounding the filing failure, so a taxpayer should not assume either that a penalty will automatically apply or that reasonable cause will automatically eliminate it.
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First determine what should have been reported, which years are affected, whether Form 3520-A or other international returns were also required, and whether the IRS has already contacted you. The appropriate correction path can differ depending on whether the issue is isolated or part of broader offshore noncompliance.
Form 3520 Reporting Reviewed By An Experienced CPA
Form 3520 can involve foreign gifts, inheritances, foreign trusts, ownership reporting, distributions, related Form 3520-A requirements, prior-year filings and substantial penalties. Professional review helps ensure the filing reflects the taxpayer’s actual relationship to the foreign person or trust and the correct reporting requirements. Clients work directly with Bill Egan, CPA, on Form 3520 and related U.S. international tax matters.
Reviewed by Bill Egan, CPA
AICPA U.S. International Tax Certificate
Last reviewed: September 2026