Form 3520 Filing Requirements: Who Must File, Thresholds, and Deadlines

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.

In today’s globalized world, receiving a foreign gift, inheriting overseas assets, or participating in a foreign trust can create U.S. information-reporting obligations that are not always obvious. Form 3520 is an information return, not an income tax return. It is used to report certain transactions with foreign trusts and the receipt of certain large gifts or bequests from foreign persons.

Understanding the Form 3520 filing requirements is essential for U.S. citizens, green card holders, dual nationals, U.S. expatriates, trust beneficiaries, foreign trust owners, estates, and certain domestic entities. A transaction may require reporting even when no income tax is due.

This guide explains who must file Form 3520, when to file Form 3520, the applicable foreign-gift thresholds, and when Form 3520-A may also be required. The discussion is based on the current IRS Form 3520 instructions, Form 3520-A instructions, and relevant IRS international-penalty guidance.

What Form 3520 Reports and Why the Filing Requirements Are Frequently Misunderstood

Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, generally reports:

• The creation of a foreign trust by a U.S. person.
• Certain transfers of money or property to a foreign trust.
• Ownership of a foreign trust under the grantor trust rules.
• Distributions received from a foreign trust.
• Certain loans received from a foreign trust.
• Uncompensated use of foreign trust property.
• Gifts or bequests received from certain foreign persons, estates, corporations, or partnerships.

Form 3520 is filed separately with the IRS and is not simply attached to your individual income tax return. A separate Form 3520 may be required for each foreign trust involved in reportable transactions.

The form is informational. That does not mean it is optional. The IRS uses international information returns to identify cross-border transactions and determine whether additional tax consequences may apply.

Who Must File Form 3520 Under the Current Foreign Trust and Foreign Gift Rules

You may have a Form 3520 filing requirement if you are a U.S. person and one or more of the following situations applies.

You created or transferred property to a foreign trust. A U.S. person generally must report the creation of a foreign trust or a direct or indirect transfer of money or other property to a foreign trust. A transfer by reason of death may also be reportable. The rules can apply even when the transfer is not treated as a gift for gift-tax purposes.

Certain fair-market-value transfers may be excepted, but exceptions are technical. Transfers involving related foreign trusts, obligations, appreciated property, or non-arm’s-length arrangements require careful review.

You are treated as the owner of a foreign trust. If you are treated as owning any portion of a foreign trust under Internal Revenue Code sections 671 through 679, you generally must complete Part II of Form 3520. This requirement may apply even if you had no distributions or other transactions during the year.

You received a distribution from a foreign trust. A distribution generally must be reported whether or not it is taxable income. The term can include money, property, trust corpus, indirect distributions, certain credit-card payments, loans, and the uncompensated use of trust property.

You received certain large foreign gifts or bequests. A gift or inheritance may be reportable even when it is not taxable income. The source and aggregate amount determine whether Part IV is required.

Two further situations are commonly missed. First, if a U.S. person who is treated as the owner of a foreign trust dies, the reporting obligations relating to that trust may pass to the decedent's executor or administrator for the year of death. Second, transfers made to a foreign trust in exchange for an outstanding qualified obligation — a written obligation of a related foreign trust that meets specific conditions — are not treated as reportable transfers, but the exclusion applies only while the obligation remains qualified and only for a limited period. Once it ceases to qualify, reporting obligations can arise. Both situations require a facts-specific analysis rather than a general rule.

The Form 3520 instructions identify U.S. persons to include U.S. citizens and residents, domestic partnerships, domestic corporations, U.S. estates, and qualifying domestic trusts. Estates, partnerships, corporations, and certain exempt organizations should not assume that Form 3520 applies only to individuals. The entity’s structure, tax status, and transaction must be reviewed. Some specific retirement, charitable, and tax-favored trust exceptions may apply, but those exceptions do not automatically eliminate other reporting obligations.

Finally, a gift or bequest from a covered expatriate can trigger reporting and tax consequences under a separate regime: section 2801, reported on Form 708. Form 708 obligations are not part of the Form 3520 filing requirement, but they frequently arise in the same cross-border inheritance and gift situations and should be assessed at the same time.

Foreign Gift and Inheritance Thresholds for Form 3520 Filing Requirements

The foreign-gift rules contain separate thresholds depending on the identity of the donor.

Gifts from a nonresident alien or foreign estate

You generally must file Form 3520 if you receive more than $100,000 during the tax year from:

• A nonresident alien individual;
• A foreign estate; or
• Related foreign persons whose gifts must be aggregated when you know, or have reason to know, that they are related.

This is an annual aggregate test. Once the $100,000 threshold is exceeded, each individual gift or bequest over $5,000 generally must be separately identified on the form. If the threshold is exceeded but no individual gift or bequest is greater than $5,000, the instructions provide a specific reporting method.

Gifts from foreign corporations or partnerships

The threshold for gifts treated as received from foreign corporations or foreign partnerships is adjusted for inflation. For 2026, the threshold is $20,573. Gifts from related foreign persons and entities may need to be aggregated.

This threshold is a reporting threshold, not a tax-free exclusion. In addition, the IRS may recharacterize a purported gift from a foreign corporation or partnership as another type of transaction. The source of the payment and the relationship between the parties therefore matter.

A transfer from a foreign trust is generally reported as a foreign-trust distribution in Part III, not as a foreign gift in Part IV. Correctly identifying the source is an important part of determining the applicable Form 3520 filing requirements.

When to File Form 3520 and How Extensions Work for U.S. Taxpayers

For most calendar-year U.S. persons, Form 3520 is due by April 15 of the following year. The general rule is the 15th day of the fourth month after the end of the taxpayer’s tax year.

A qualifying U.S. citizen or resident who lives and works outside the United States and Puerto Rico, or who is serving in the military or naval service outside those locations, generally receives an automatic extension to June 15. The Form 3520 instructions require a statement explaining why the automatic extension applies.

If you receive an extension for your income tax return, the Form 3520 due date generally cannot be later than the 15th day of the tenth month after the end of your tax year. For a calendar-year individual, that is generally October 15.

The extension rules must be handled carefully. Form 3520 is a separate information return, and only a complete return with required attachments is considered timely filed. Keep proof of the extension and mailing or filing date with your records.

Form 3520-A Filing Requirements for a Foreign Trust With a U.S. Owner

Form 3520-A is a separate annual information return for a foreign trust with at least one U.S. owner. The foreign trust, generally through its trustee, files Form 3520-A by the 15th day of the third month after the end of the trust’s tax year. For a calendar-year foreign trust, the ordinary due date is March 15.

The U.S. owner is responsible for ensuring that the foreign trust files Form 3520-A and provides the required owner and beneficiary statements. A U.S. agent may be appointed to respond to IRS requests for records or testimony, but appointing a U.S. agent does not generally transfer the U.S. owner’s responsibility to ensure compliance.

The foreign trust may request an extension by filing Form 7004 using the trust’s EIN. An extension of the U.S. owner’s income tax return does not automatically extend Form 3520-A.

If the foreign trust does not file Form 3520-A, the U.S. owner may need to prepare and attach a substitute Form 3520-A to the owner’s Form 3520 by the Form 3520 due date. The required owner and beneficiary statements must also be prepared and provided as instructed.

Form 3520 Is Not Replaced by an FBAR or Form 8938

A foreign bank account filing does not cover the same ground as Form 3520. You may have separate obligations to file:

• FinCEN Form 114, FBAR, for qualifying foreign financial accounts;
• Form 8938, for specified foreign financial assets; and
• Form 3520 or Form 3520-A, for foreign trust transactions and certain foreign gifts.

One form does not automatically replace another. Even when information may be duplicated on Form 8938, the Form 3520 filing requirement must be analyzed independently.

What Happens If Form 3520 or Form 3520-A Is Filed Incorrectly or Late?

The consequences depend on the specific part of Form 3520 involved. Under the current Form 3520 instructions and IRM 20.1.9, the initial penalty for certain foreign-trust failures may be the greater of $10,000 or:

• 35% of property transferred to a foreign trust for an unreported transfer;
• 35% of a distribution received from a foreign trust for an unreported distribution; or
• 5% of the portion of foreign trust assets treated as owned by the U.S. person for certain Form 3520-A failures.

For Form 3520-A, additional penalties of $10,000 may apply for each 30-day period, or fraction of a period, during which the failure continues after the IRS mails notice of the failure. This continuation penalty is triggered only where the failure continues for more than 90 days after the notice is mailed. That 90-day threshold is important: correspondence alone does not start the continuing penalty, and the statutory maximums also apply.

Unreported foreign gifts and bequests — section 6039F. The penalties described above apply to foreign-trust transactions and Form 3520-A failures. Penalties relating to Part IV foreign gifts and bequests arise under a different provision, Internal Revenue Code section 6039F. Where a reportable foreign gift or bequest is not reported, the IRS may determine the penalty as 5% of the amount of the gift for each month the failure continues, up to a maximum of 25%. This is a separate penalty regime from section 6677 and is not subject to the same mechanics.

Reasonable cause may support penalty relief when the facts show that the failure resulted from reasonable cause and not willful neglect. Relief is not automatic, and reliance on a preparer, lack of awareness, or a foreign trustee’s reluctance to provide information may not be sufficient by itself.

The IRS’s delinquent international information return procedures explain how certain delinquent Forms 3520 and 3520-A may be submitted with a reasonable-cause statement for consideration before a penalty is assessed. This procedure does not guarantee relief.

For detailed penalty calculations, abatement standards, and appeal options, see the firm’s guidance on Form 3520 and Form 3520-A penalty appeals and abatement procedures.

A Practical Checklist for Reviewing Your 3520 Filing Requirements

Before concluding that no filing is required, gather:

1. The trust agreement and amendments.
2. Records of transfers, gifts, inheritances, loans, and distributions.
3. The donor’s or estate’s identity and country of residence.
4. The foreign trust’s EIN, financial statements, and owner or beneficiary statements.
5. The value and date of each relevant transaction.
6. Copies of prior Forms 3520, Forms 3520-A, FBARs, and Forms 8938.
7. Evidence supporting any claimed exception or reasonable-cause position.

When the facts involve multiple years, incomplete trust records, a foreign inheritance, or an IRS penalty notice, professional legal review is a matter of practical risk management. The correct form, threshold, deadline and penalty analysis depend on the exact transaction, and a review may conclude that no filing is required. Contact the Law Offices of Jason R. Kovan for a confidential assessment.