Foreign Gift Reporting: Form 3520, Thresholds, Penalties

If you are a U.S. person who received a large gift or inheritance from someone outside the country, foreign gift reporting is handled on IRS Form 3520. You owe no federal income tax on the gift itself, but you must file the form when the transfer crosses a dollar threshold that depends on who sent it: more than $100,000 from a foreign individual or estate, or a lower inflation-adjusted amount (about $19,570 for 2024) from a foreign corporation or partnership. The form is informational, but skipping it can cost up to 25% of the gift’s value in penalties.¹

Who Has To File

The obligation sits with the U.S. person receiving the money or property, not the foreign donor. A U.S. person includes citizens, residents (green card holders qualify automatically), and domestic corporations, partnerships, estates, and trusts.² The foreign person on the other side of the transfer, whether an individual, estate, corporation, or partnership, has no U.S. filing duty tied to the gift.³

How Much Triggers Reporting

The threshold that applies depends entirely on the type of foreign donor, and the two rules work differently.

Gifts From Foreign Individuals or Estates

You must file if you receive more than $100,000 in total gifts or bequests from a single foreign individual or foreign estate during the tax year.³ The $100,000 is per donor. $80,000 from one foreign friend and $90,000 from an unrelated foreign friend in the same year does not trigger reporting.

Related donors are aggregated. If you know or have reason to know that two foreign donors are related, or that one is acting as a nominee for the other, you combine their gifts against the $100,000 threshold.⁴ So $60,000 from your foreign father and $50,000 from your foreign mother in the same year totals $110,000 and requires filing.

When the total is reportable, you list each individual gift over $5,000 separately on the form. If no single gift exceeds $5,000, you note that on the form instead.³

Gifts From Foreign Corporations or Partnerships

The threshold here is much lower and works differently. For 2024, reporting was triggered once total gifts from all foreign corporations and partnerships combined exceeded $19,570.³ The figure adjusts annually for inflation; the IRS publishes the current-year amount in the revenue procedure referenced under Section 6039F on IRS.gov/InflationAdjustment.⁵

Unlike the individual threshold, this one is aggregate across all foreign business entities, plus any foreign persons you know to be related to them. $12,000 from one foreign corporation and $8,000 from an unrelated foreign partnership in the same year would cross the line together.

Expect closer scrutiny on these transfers. The IRS can recharacterize a purported gift from a foreign corporation as a distribution, or from a foreign partnership as ordinary income to you.⁶ The lower threshold reflects that these transfers are more likely to be disguised business payments than genuine gifts.

What Counts as a Reportable Gift

A foreign gift is any amount you receive from a foreign person that you treat as a gift or bequest and exclude from gross income.¹ Both lifetime gifts and inheritances count. A $150,000 wire from a foreign aunt and a $200,000 inheritance from a foreign relative’s estate are treated the same way.

Two categories are carved out. Payments a foreign person makes directly to an educational institution for your tuition, or directly to a medical provider for your care, are not foreign gifts.⁵ Distributions from a foreign trust are also not foreign gifts; they follow separate rules discussed below.

Valuation counts. Cash is easy. For property such as real estate, jewelry, or business interests, you need fair market value as of the date of transfer, and a professional appraisal is the safest documentation for high-value items.

How and When To File Form 3520

Foreign gifts are reported in Part IV of Form 3520, “Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts.”⁷ For each reportable gift from a foreign individual or estate, you provide the donor’s name and address, the date received, a description of the gift, and its fair market value. Gifts from foreign corporations or partnerships require additional details, including the donor’s taxpayer identification number (if any) and whether anyone acted as a nominee or intermediary.⁴

The form is due the 15th day of the fourth month after your tax year ends, which is April 15 for calendar-year filers. An extension of your personal income tax return automatically extends Form 3520 to October 15.⁸ No separate 3520 extension is needed.

Form 3520 cannot be e-filed. Print it, sign it, and mail it separately from your Form 1040 to:⁹

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

Penalties for Not Filing

Two things happen when you fail to file on time or file with incomplete information.¹

The IRS gains authority to determine the tax consequences of the transfer itself. It can treat the money as taxable income rather than a non-taxable gift, and you have to prove otherwise.

You also owe a penalty of 5% of the gift’s value for each month the failure continues, capped at 25%. On a $200,000 gift, that reaches $10,000 after one month and $50,000 after five. The penalty accrues automatically, and a filer who never knew the requirement existed is hit the same way as one who ignored it.

If You Already Missed the Filing

The statute provides a reasonable cause exception. If the failure was due to reasonable cause and not willful neglect, the penalties do not apply.¹ The IRS decides case by case, considering whether you acted responsibly before and after, tried to correct the failure promptly, and had mitigating circumstances such as being a first-time filer or receiving bad professional advice.¹⁰

If the IRS has not yet contacted you about the missed year, you can use the delinquent international information return submission procedures: file the late Form 3520 following the normal instructions and attach a reasonable cause statement. A late return will not automatically trigger an audit, though it can still be selected through normal audit processes.¹¹ Penalties can be assessed during processing before the reasonable cause statement is reviewed, so expect that you may need to respond to follow-up correspondence to get the penalty removed.

If a penalty has already been assessed, you can request relief by calling the number on your IRS notice or by submitting Form 843 (Claim for Refund and Request for Abatement) in writing.¹⁰

Foreign Trust Distributions Are Not Foreign Gifts

Money received from a foreign trust uses the same form but a different section. Trust distributions go in Part III, not Part IV. If a transfer could be classified as both a trust distribution and a gift, it goes on Part III only.⁵ The distinction matters because foreign trust distributions can be taxable income, and the trust itself may also have to file Form 3520-A.⁷

One less obvious situation runs the other way. A distribution from a domestic trust that is treated as owned by a foreign person is reported as a foreign gift in Part IV, not as a trust distribution in Part III.⁵ Reporting in the wrong section can generate notices or penalties even when the underlying transfer was disclosed honestly, so the classification is worth checking before you mail the form.

1
Office of the Law Revision Counsel. 26 USC 6039F – Notice of Large Gifts Received from Foreign Persons
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Internal Revenue Service. Classification of Taxpayers for U.S. Tax Purposes
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Internal Revenue Service. Gifts from Foreign Person
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Internal Revenue Service. Instructions for Form 3520 – PDF
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Internal Revenue Service. Instructions for Form 3520
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eCFR. 26 CFR 1.672(f)-4 – Recharacterization of Purported Gifts
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Internal Revenue Service. About Form 3520
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Internal Revenue Service. Reminder to U.S. Owners of a Foreign Trust
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Internal Revenue Service. Where to File – Forms Beginning with the Number 3
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Internal Revenue Service. Penalty Relief for Reasonable Cause
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Internal Revenue Service. Delinquent International Information Return Submission Procedures