Form 3520 Filing Requirements: Foreign Trusts, Gifts, and Penalties

You must file IRS Form 3520 if you are a U.S. person who, during the tax year, created or transferred money or property to a foreign trust, were treated as the owner of a foreign trust, received a distribution from one, or received a large gift or bequest from a foreign person. For the 2026 tax year, gifts from a foreign individual or estate must be reported once they exceed $100,000 from one source, and gifts from a foreign corporation or partnership must be reported once they exceed $20,573 in aggregate. The Form 3520 filing requirements are backed by penalties that start at $10,000, and skipping the form keeps the statute of limitations on your entire tax return open until you file.

Who Has to File

The obligation falls on “U.S. persons,” which the tax code defines as U.S. citizens, resident aliens, domestic corporations, domestic partnerships, and any estate or trust that qualifies as domestic under federal tax rules.¹ Green card holders and people who meet the substantial presence test are resident aliens for this purpose, even if they consider another country home. Executors can inherit a filing obligation too, when a deceased U.S. person had reportable foreign trust transactions at death.²

Form 3520 has two independent triggers: foreign trust activity, and large gifts from foreign persons. You can hit one, both, or neither in a given year. Each is covered below.

Trigger One: Foreign Trust Transactions

Before any trust-related obligation kicks in, the trust must actually be foreign. A trust is domestic only if it passes both the court test and the control test. Fail either one, and the IRS treats it as foreign.³

Court test: a U.S. court must be able to exercise primary supervision over the trust’s administration.
Control test: one or more U.S. persons must have the authority to control all substantial decisions of the trust.

A family trust set up under foreign law and run by a foreign trustee almost always fails, even if every beneficiary is American. Once a trust is classified as foreign, three different relationships can each generate a Form 3520 filing. The authorizing statute is IRC Section 6048.⁴

If You Transferred Property to the Trust

Any U.S. person who directly or indirectly transfers money or property to a foreign trust must report the transaction on Part I of Form 3520.⁵ There is no dollar floor. Creating a new trust, adding property to an existing one, and funneling contributions through intermediaries all count.

Under IRC Section 679, transferring property to a foreign trust that has any U.S. beneficiary makes you the owner, for tax purposes, of the portion of the trust attributable to your transfer. The IRS presumes a U.S. beneficiary exists unless you can prove otherwise.⁶ That presumption is why a single transfer usually creates both the one-time transferor filing and an ongoing owner filing in future years.

A transfer at fair market value escapes the owner treatment under Section 679 but still has to be reported, with documentation showing you received full value in return. A loan to a foreign trust that does not meet the “qualified obligation” rules is also treated as a transfer.⁷

If You Are Treated as the Owner

If you are treated as the owner of any portion of a foreign trust under the grantor trust rules, you have an annual Form 3520 filing obligation for every year that ownership continues, reported on Part II. This commonly applies when you funded the trust while keeping powers such as the ability to revoke it, redirect income, or control distributions.²

You are also responsible for making sure the trust itself files Form 3520-A, a separate annual information return. The trust must provide you with a Foreign Grantor Trust Owner Statement, which you attach to your Form 3520, and any other U.S. beneficiaries must receive their own statements.⁸

If the foreign trust does not file 3520-A on its own, you can avoid the related penalty by completing and attaching a substitute Form 3520-A to your Form 3520 by the Form 3520 due date, signed by you.⁹

If You Received a Distribution

Any distribution from a foreign trust during the year goes on Part III, whether the money is income or a return of principal.⁴ To classify the distribution correctly, you need a Foreign Non-Grantor Trust Beneficiary Statement from the trustee. Without that statement, the entire amount defaults to accumulated income taxed at the highest rate plus an interest charge under the throwback rule. Missing documentation does not excuse the filing.

Loans from a foreign trust to a U.S. beneficiary count as distributions unless they qualify as a “qualified obligation.” That requires a written loan with a term of five years or less, all payments in U.S. dollars, and additional requirements on yield to maturity and ongoing reporting of the obligation on Form 3520 while it is outstanding. The same rule applies to uncompensated use of trust property.⁷

Trigger Two: Large Gifts and Bequests From Foreign Persons

The second filing trigger has nothing to do with trusts. Large gifts or bequests from foreign persons go on Part IV. The reporting is informational, and it does not make the gift taxable income to you.¹⁰

The threshold depends on the donor:

Foreign individual or foreign estate: report if gifts and bequests from a single source exceed $100,000 during the tax year.¹⁰
Foreign corporation or foreign partnership: for 2026, report if the aggregate from all such sources exceeds $20,573.¹¹

The corporate and partnership threshold adjusts annually for inflation. The $100,000 figure for individuals and estates is also inflation-adjusted under the statute, though the IRS instructions have long kept it at the round number.¹² Over the threshold, you identify the donor and provide a description and fair market value of what you received.

You decide at the outset whether something you received is a gift. If the IRS later determines the transfer was really compensation or payment for services, it gets reclassified as taxable income on your regular return instead. Amounts already reported on Form 1042-S are excluded, and payments made directly to an educational institution for tuition or to a medical provider for medical expenses generally are not treated as gifts. Transfers from U.S. persons are not reportable here even if the money originates abroad.

Foreign Retirement Plans: Usually Exempt

Many U.S. persons with foreign employer pensions or personal retirement accounts assume they owe a 3520 filing because such plans are often structured as trusts. The IRS has carved out two exemptions.

Revenue Procedure 2020-17 exempts eligible individuals from both Form 3520 and Form 3520-A for “applicable tax-favored foreign trusts” used for pension, retirement, medical, disability, or educational benefits. The plan must be tax-favored under its home country’s laws, subject to information reporting there, limited to contributions from earned income, capped at $50,000 annually or $1,000,000 over a lifetime, and restrict withdrawals until retirement age, disability, or death, with penalties for early withdrawal.¹³

Revenue Procedure 2014-55 separately exempts Canadian RRSPs and RRIFs from both forms, for beneficiaries and annuitants, regardless of whether the broader exemption would otherwise apply.¹⁴

Even when the 3520 exemption applies, you still report income from these plans on Form 1040 and may need to file an FBAR or Form 8938 if the account meets those thresholds.

When and How to File

Form 3520 is filed separately from your income tax return. It cannot be e-filed through standard systems and must be mailed on paper to the IRS Center in Ogden, Utah.² The address is:

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

All monetary amounts must be converted to U.S. dollars using the exchange rate in effect at the time of each transaction.

For calendar-year individual filers, Form 3520 is due April 15 after the close of the tax year. U.S. persons living and working abroad get an automatic extension to June 15. If you extend your income tax return (Form 4868 for individuals, Form 7004 for entities), your Form 3520 deadline moves to October 15.² An extension of time to file is not an extension of time to pay. Mailing Form 3520 to the wrong address, or failing to mail it separately from your Form 1040, counts as a failure to file even if the 1040 itself was timely.

Form 3520-A has its own deadline: the 15th day of the third month after the end of the foreign trust’s tax year, which is March 15 for calendar-year trusts. A substitute Form 3520-A attached to your Form 3520 follows the Form 3520 due date instead.⁹

Penalties and the Open Statute of Limitations

Form 3520 penalties are among the harshest in international reporting, and the IRS assesses them automatically when it identifies a missing or incomplete return.

For failing to report the creation of or a transfer to a foreign trust, the penalty is the greater of $10,000 or 35% of the gross value of the property transferred. The same structure applies to an unreported distribution: the greater of $10,000 or 35% of the amount received.¹⁵ For a missed Form 3520-A, the U.S. owner faces the greater of $10,000 or 5% of the gross value of the trust assets treated as owned by that person, with additional penalties if noncompliance continues more than 90 days after the IRS mails a notice.⁹ A single person who is both grantor and beneficiary can be penalized for all three failures in the same year.

For an unreported foreign gift, the penalty is 5% of the gift amount per month, capped at 25%. On a $200,000 gift, that reaches $50,000. The IRS also gains authority to determine the tax consequences of the gift, which can mean reclassifying it as taxable income.¹²

Beyond dollars, there is a timing consequence. Under IRC Section 6501(c)(8), the three-year assessment window does not start running until the required international information return is filed.¹⁶ Skipping Form 3520 leaves your entire tax return for that year open to examination indefinitely, not just the foreign items. If the failure is later shown to be due to reasonable cause rather than willful neglect, the open period narrows to items directly related to the missing information.

Fixing a Missed Filing

The penalties are not absolute. The statutes contain an exception when failure is due to reasonable cause and not willful neglect.¹² The burden sits with you, through a written statement signed under penalties of perjury explaining the specific facts.¹⁷ Simply saying you relied on a tax professional is not enough; you have to show you gave the advisor complete information and that the advisor’s guidance caused the failure. The IRS also states that a foreign country’s penalties for disclosing the required information do not amount to reasonable cause.

If you missed Form 3520 in prior years but reported all related income correctly on your tax returns, the IRS’s Delinquent International Information Return Submission Procedures let you file the late forms according to their normal instructions, not attached to an amended return. You may include a reasonable cause statement, though the IRS warns that penalties may be assessed during processing before that statement is reviewed.¹⁸ You are eligible only if you are not under civil examination or criminal investigation and the IRS has not already contacted you about the missing returns.

If related income also went unreported, the Streamlined Filing Compliance Procedures offer a path for individuals who can certify that their failures were non-willful: the result of negligence, inadvertence, mistake, or a good-faith misunderstanding of the law.¹⁹ Submissions are processed like regular returns, with no closing agreement and continued audit exposure. For willful failures, the IRS directs taxpayers to consult a legal adviser about IRS Criminal Investigation’s voluntary disclosure practice.

Other Forms That May Apply at the Same Time

Form 3520 does not replace other international disclosures. Depending on your assets, you may also owe:

FBAR (FinCEN Form 114), when combined foreign financial accounts exceed $10,000 at any point in the year. Filed electronically with FinCEN, due April 15 with an automatic extension to October 15.²⁰
Form 8938 (FATCA), for specified foreign financial assets above $50,000 on the last day of the tax year or $75,000 at any point during the year, for unmarried taxpayers living in the U.S. Higher thresholds apply for joint filers and taxpayers abroad. Filed with your income tax return.²⁰

A single foreign trust account can trigger all three in the same year, and meeting one requirement does not excuse the others.

1
Internal Revenue Service. Classification of Taxpayers for U.S. Tax Purposes
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Internal Revenue Service. Instructions for Form 3520
3
Electronic Code of Federal Regulations. 26 CFR 301.7701-7 – Trusts, Domestic and Foreign
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Office of the Law Revision Counsel. 26 USC 6048 – Information With Respect to Certain Foreign Trusts
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Internal Revenue Service. Form 3520 – Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts
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Office of the Law Revision Counsel. 26 USC 679 – Foreign Trusts Having One or More United States Beneficiaries
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Internal Revenue Service. Instructions for Form 3520
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Internal Revenue Service. Foreign Trust Reporting Requirements and Tax Consequences
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Internal Revenue Service. Instructions for Form 3520-A
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Internal Revenue Service. Gifts from Foreign Person
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Internal Revenue Service. Rev. Proc. 2025-32
12
Office of the Law Revision Counsel. 26 USC 6039F – Notice of Large Gifts Received From Foreign Persons
13
Internal Revenue Service. Rev. Proc. 2020-17
14
Internal Revenue Service. Rev. Proc. 2014-55
15
Office of the Law Revision Counsel. 26 USC 6677 – Failure to File Information With Respect to Certain Foreign Trusts
16
Office of the Law Revision Counsel. 26 USC 6501 – Limitations on Assessment and Collection
17
Internal Revenue Service. Failure to File the Form 3520/3520-A Penalties
18
Internal Revenue Service. Delinquent International Information Return Submission Procedures
19
Internal Revenue Service. Streamlined Filing Compliance Procedures
20
Internal Revenue Service. Comparison of Form 8938 and FBAR Requirements