IRS Form 3520: Filing Requirements and Instructions

IRS Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, is a disclosure document required by the Internal Revenue Service. U.S. individuals and certain domestic entities use this form to inform the IRS about transactions with foreign trusts and the receipt of significant gifts or bequests from foreign sources.

This form is informational, meaning that its submission does not, by itself, create a tax liability. The requirement to file is triggered by the nature and value of the transaction, not by whether the underlying assets are subject to U.S. tax. The purpose is to ensure the IRS has visibility into cross-border financial activities that could have tax implications, which are assessed separately.

Who is Required to File Form 3520

A Form 3520 filing obligation is triggered for any “U.S. person” who engages in specific transactions. The term “U.S. person” includes U.S. citizens, resident aliens, domestic partnerships, domestic corporations, and domestic estates and trusts. The requirements are categorized by two types of activities: receiving large gifts from foreign sources and engaging in transactions with foreign trusts.

A common trigger for individuals involves the receipt of gifts or bequests from foreign persons. A filing requirement exists if a U.S. person receives more than $100,000 from a nonresident alien individual or a foreign estate during a tax year. This threshold is based on the aggregate value of all gifts received from that single foreign source within the year.

A different threshold applies to gifts from foreign corporations or partnerships. A U.S. person must file Form 3520 if they receive gifts from these entities that, in total, exceed an annually adjusted amount. For the 2025 tax year, this threshold is $19,570, and all gifts from all foreign corporations and partnerships must be aggregated to determine if this reporting requirement is met.

Beyond gifts, interactions with foreign trusts create a separate set of filing obligations. A U.S. person must file Form 3520 if they are the beneficiary of a foreign trust and receive any distribution, regardless of the amount. The act of receiving assets or cash from the trust triggers the reporting requirement.

Furthermore, a U.S. person who creates a foreign trust or transfers money or property to an existing foreign trust must report the event. This applies whether the transfer is a gift, a sale, or an exchange. Any transfer of assets to a foreign trust, regardless of value, must be reported.

Finally, a U.S. person who is treated as the owner of any portion of a foreign trust under the grantor trust rules is required to file Form 3520. This ensures that the U.S. owner reports the trust’s information annually. This requirement is based on the level of control or interest the U.S. person retains over the trust.

Information and Documentation Required for Form 3520

Completing Form 3520 requires gathering specific information that corresponds to the form’s four main parts. Filers should use the most current version of Form 3520 and its instructions from the IRS website, as thresholds and rules can change. Each part of the form addresses a different reportable event.

Part I is for U.S. persons who create a foreign trust or transfer property to one. This section requires identifying information for the trust, the trustee, and any other person with the power to make distributions. You must also provide a list of all property transferred to the trust during the tax year, including a description and its fair market value.

Part II pertains to U.S. persons treated as the owners of a foreign trust. Filers must report the name of the foreign trust, its mailing address, and its Employer Identification Number (EIN), if it has one. The form also requires the name and contact information of the foreign trustee and the specific Internal Revenue Code section that establishes the filer as the owner.

Part III is for U.S. beneficiaries who have received a distribution from a foreign trust. You must report the gross amount of the distribution, detailing the cash amount and the fair market value of any property received. If the trust provides a “Foreign Grantor Trust Beneficiary Statement” or a “Foreign Nongrantor Trust Beneficiary Statement,” this document helps determine the tax treatment of the distribution.

Part IV is for U.S. persons who received certain foreign gifts or bequests. For each gift from a nonresident alien or foreign estate exceeding $100,000, you must provide the date, a description of the property, and its fair market value. You must also include the full name and address of the foreign donor or the executor of the foreign estate. If the total gifts exceed the threshold, you must separately identify each gift valued at more than $5,000.

Step-by-Step Filing Instructions

After Form 3520 has been completed, the final steps involve proper submission to the IRS. The process is distinct from a standard income tax return, and attention to deadlines and mailing instructions is necessary. The form is not filed electronically and must be submitted as a paper document.

The due date for filing Form 3520 for most individuals is April 15, the same deadline as the U.S. individual income tax return. If you file an extension for your income tax return to October 15, that extension automatically applies to Form 3520. For U.S. citizens or residents living outside the United States, the initial due date is June 15, which can also be extended.

Form 3520 must be mailed separately from your Form 1040. Sending it in the same envelope as your personal income tax return can lead to it being processed incorrectly. The correct mailing address for Form 3520 is: Internal Revenue Service Center, P.O. Box 409101, Ogden, UT 84409.

After mailing the form, it is a best practice to use a mail service that provides proof of delivery, such as USPS Certified Mail. This documentation serves as evidence that you filed the form on time, which can be valuable if the IRS questions your submission. The IRS does not send an acknowledgment that your Form 3520 has been received, so this receipt is your proof of filing.

Penalties for Non-Compliance

The consequences for failing to file Form 3520, or for filing a form that is late, incomplete, or inaccurate, are substantial. The IRS enforces these penalties to encourage timely and accurate reporting of foreign financial activities. The penalty amounts vary depending on the type of transaction that was not reported.

For the failure to report foreign gifts or bequests, the penalty is 5% of the gross value of the unreported gift. This penalty accrues for each month that the failure to report continues, with a maximum penalty capped at 25% of the total value of the gift. For example, failing to report a $200,000 foreign gift could result in a penalty of up to $50,000.

Penalties related to transactions with foreign trusts are more severe. If a U.S. person fails to report a transfer of property to a foreign trust or a distribution received from one, the penalty is 35% of the gross reportable amount. In cases where a U.S. person fails to report their status as the owner of a foreign trust, the penalty is the greater of $10,000 or 5% of the gross value of the trust’s assets treated as owned by the U.S. person.

These penalties can also be assessed if the information on a filed Form 3520 is incomplete or inaccurate. The IRS expects the form to be substantially complete to be considered a valid filing. Submitting a form with missing details, such as the value of a transfer or the identity of a donor, may not be sufficient to avoid penalties.

A provision for penalty relief exists if the filer can demonstrate that the failure to file was due to reasonable cause and not willful neglect. Proving reasonable cause involves showing that you exercised ordinary business care and prudence but were unable to file the form on time. This is a high standard to meet, and the IRS evaluates such claims on a case-by-case basis.