IRS Form 3520: The Complete Guide to Reporting Foreign Trusts and Foreign Gifts

Did you know that receiving a generous gift from a relative living abroad could trigger a federal reporting obligation—even if you don't owe a single dollar in taxes on it? Millions of Americans with international family connections or foreign financial interests are required to file IRS Form 3520 each year, yet many have never heard of it. Failing to file can result in penalties starting at $10,000 or up to 35% of the unreported amount.

Whether you inherited money from a foreign grandparent, received a gift from overseas relatives, or have dealings with a foreign trust, this guide will walk you through everything you need to know about Form 3520—who files it, when it's due, and how to avoid costly mistakes.

What Is IRS Form 3520?

IRS Form 3520, officially titled Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, is an informational return. This is an important distinction: you are not paying taxes when you file this form. Instead, you are disclosing certain financial relationships and transactions with foreign entities to the IRS.

Think of it as transparency paperwork. The IRS uses these disclosures to track money flowing into the United States from foreign sources and to ensure that U.S. taxpayers aren't hiding assets offshore. The form covers three broad categories of reportable events:

1. Transactions with foreign trusts (transfers to or from)
2. Ownership or control of a foreign trust
3. Receipt of large gifts or inheritances from foreign persons or entities

Even though no tax is owed on the Form 3520 itself, the IRS treats it with the same seriousness as a tax return. Failing to file—or filing inaccurately—can trigger steep penalties.

Who Must File Form 3520?

You are required to file Form 3520 if any of the following apply to you during the tax year:

Receiving Large Foreign Gifts or Inheritances

The most common trigger for everyday Americans is receiving a substantial gift or inheritance from abroad. Specifically, you must file if you received:

• More than $100,000 from a nonresident alien individual or foreign estate (this threshold covers aggregate gifts from all related foreign persons)
• More than $20,573 (2026 inflation-adjusted figure) from foreign corporations or foreign partnerships

Keep in mind, this threshold applies to the combined total from related foreign parties over the course of the year—not just a single transaction. If your aunt in Germany sent you $60,000 and your uncle in Germany sent you $50,000 in the same year, you've crossed the $100,000 threshold even though neither gift alone did.

Transactions with a Foreign Trust

You must also file if you:

• Transferred money or property to a foreign trust (unless an exception applies)
• Received a distribution from a foreign trust, regardless of the amount
• Are treated as the owner of any portion of a foreign trust under the grantor trust rules

Creating or Inheriting a Foreign Trust

If you created a foreign trust, had a foreign trust transfer assets to you, or received a distribution from a foreign trust as a beneficiary, a filing obligation likely exists.

What About Form 3520-A?

If you are a U.S. person treated as the owner of a foreign grantor trust, a separate but related form—Form 3520-A—must also be filed. This is the Annual Information Return of Foreign Trust With a U.S. Owner.

Think of Form 3520 as your personal reporting obligation and Form 3520-A as the trust's reporting obligation. Both may be required for the same trust arrangement. Form 3520-A has a different due date (March 15 for calendar year filers), so it's important not to confuse the two.

Form 3520 Filing Deadline

For most U.S. taxpayers with a calendar tax year, Form 3520 is due on April 15—the same day as your regular federal income tax return.

There are a few exceptions:

• U.S. citizens living abroad: The deadline is automatically extended to June 15
• Extension filers: If you file Form 4868 to extend your income tax return, your Form 3520 deadline is automatically extended to October 15

One critical rule: you cannot extend Form 3520 beyond the 15th day of the 10th month following the end of your tax year. For calendar year filers, that means October 15 is the absolute final deadline—no further extensions are available.

Unlike your income tax return, Form 3520 is filed separately. Do not attach it to your Form 1040. Mail it to:

Internal Revenue Service Center
P.O. Box 409101
Ogden, UT 84409

What Information Do You Need to Report?

The information you'll need depends on the type of transaction. Here's a general overview:

For Foreign Gifts and Inheritances

• The total amount received
• The name and address of the foreign donor (if known)
• A description of the gift or bequest

You are not required to identify the donor if you don't know who they are, but you must report the amount and the general nature of the gift.

For Foreign Trust Transactions

• Trust name, address, and country of formation
• Employer identification number (EIN) or foreign equivalent
• A description of the transaction (transfer, distribution, etc.)
• The fair market value of assets transferred or received
• Any applicable trust documents or agreements

For Trust Ownership

If you are treated as the owner of a foreign trust, you'll need to report the trust's income, assets, and structure. This is where working with a qualified tax professional becomes especially important.

Penalties for Not Filing Form 3520

The penalties for failing to file Form 3520 are substantial and have historically been applied automatically. Here's how they break down:

Foreign Gift Penalties

If you fail to report a large foreign gift or inheritance:

• 5% of the unreported amount per month, up to a maximum of 25% of the total gift value

Foreign Trust Penalties

For trust-related failures:

• The greater of $10,000 or 35% of the gross reportable amount for failure to report transfers to foreign trusts
• The greater of $10,000 or 5% of the gross value of the trust assets you are treated as owning

Recent Policy Change: No More Automatic Penalties

In a significant policy shift announced in late 2024, the IRS ended its practice of automatically assessing penalties for late-filed Forms 3520 and 3520-A. Before assessing a penalty, the IRS will now review any reasonable cause statement attached to the late filing.

This is important: if you missed the deadline but have a legitimate reason (you didn't know the obligation existed, relied on incorrect advice, etc.), you now have a formal opportunity to explain your circumstances before a penalty is assessed. This doesn't eliminate penalties, but it provides meaningful relief for good-faith mistakes.

How to Avoid Form 3520 Mistakes

Common Mistakes to Avoid

1. Not knowing the filing obligation exists Many taxpayers simply don't know they have a Form 3520 obligation until they receive an IRS notice. If you have family abroad or foreign financial connections, proactively check whether you have a reporting requirement.

2. Missing the separate mailing requirement Form 3520 is easy to overlook because it isn't filed with your regular tax return. Set a separate reminder for it.

3. Underestimating the gift threshold The $100,000 threshold applies to the aggregate from all related foreign persons. A series of smaller gifts from related family members can easily add up.

4. Confusing Form 3520 with Form 3520-A If you own a foreign trust, both forms may be required—and they have different deadlines.

5. Not filing because "it was just a gift" The obligation to file Form 3520 for foreign gifts is purely informational. You don't owe tax on the gift itself (the U.S. gift tax is paid by the donor, not the recipient), but you still must report it if it exceeds the threshold.

Best Practices

• Keep records: Maintain documentation of any large foreign gifts, including wire transfer records, letters, and donor information.
• Track cumulative totals: Keep a running tally of all gifts from related foreign parties throughout the year.
• File on time: Even if you need to amend later, a timely initial filing protects you from the harshest penalties.
• Attach a reasonable cause statement if filing late: With the IRS's new review policy, a well-reasoned explanation can prevent automatic penalties.
• Consult a tax professional: Foreign trust reporting is complex. A tax professional with international experience can help you navigate the requirements.

What Happens If You Receive a Foreign Trust Distribution?

Distributions from foreign trusts—money the trust pays out to you as a beneficiary—must be reported on Form 3520 regardless of the amount. Even a small distribution triggers the filing requirement.

If you receive a distribution from a foreign trust that doesn't provide you with the required documentation (a Foreign Grantor Trust Beneficiary Statement or Foreign Non-Grantor Trust Beneficiary Statement), you may be required to use IRS default rules to calculate the taxable amount, which can be less favorable.

Form 3520 vs. FBAR and FATCA

It's worth understanding how Form 3520 fits alongside other international reporting requirements:

• FBAR (FinCEN Form 114): Required if you have a financial interest in or signature authority over foreign bank accounts totaling more than $10,000 at any point during the year. This is separate from Form 3520.
• FATCA (Form 8938): Required for U.S. taxpayers with significant foreign financial assets. Threshold varies by filing status and residency.
• Form 3520: Covers foreign trust transactions and large foreign gifts specifically.

These forms can overlap—a foreign trust you own may trigger obligations under all three regimes. This complexity is one reason international tax compliance requires careful attention.

Penalty Relief and What to Do If You're Behind

If you discover that you should have filed Form 3520 in prior years but didn't, you have options:

Delinquent International Information Return Submission Procedures

The IRS has procedures for taxpayers who haven't filed required international information returns and who are not under examination. If you have reasonable cause for your failure to file, you may be able to submit delinquent returns with a reasonable cause statement and avoid penalties.

Streamlined Filing Compliance Procedures

If your failure to file was non-willful—you genuinely didn't know about the requirement—the IRS Streamlined Filing Compliance Procedures may allow you to get into compliance with reduced or no penalties. There are separate procedures for U.S. residents and those living abroad.

Amended Returns

If you filed but made errors on a prior Form 3520, you can file a corrected version. The sooner you correct mistakes, the better—the IRS is generally more lenient with proactive corrections than with errors discovered during an audit.

Keep Your International Finances Organized

Navigating Form 3520 is much easier when your financial records are well-organized. Knowing exactly what you received, from whom, and when is essential both for completing the form accurately and for responding to any IRS inquiries.

Beancount.io provides plain-text accounting that keeps your financial data transparent, version-controlled, and easy to review at tax time—no black boxes or proprietary formats. Whether you're tracking foreign gifts, trust distributions, or cross-border business income, having clear records makes every international tax filing simpler. Get started for free and see why developers and finance professionals choose plain-text accounting for complete financial visibility.