How to Report Foreign Inheritance to the IRS: Form 3520 and Deadlines

To report a foreign inheritance to the IRS, file Form 3520 if the total you received from a nonresident alien individual or a foreign estate exceeded $100,000 during the tax year. The inheritance itself is not taxable, but the reporting is mandatory, and missing it triggers a penalty of 5% of the inheritance’s value for each month you’re late, capped at 25%. Inherited foreign bank accounts and other foreign financial assets may also trigger separate filings on the FBAR and Form 8938.

The Inheritance Itself Is Not Taxed

Federal law excludes the value of property received by inheritance from gross income.¹ Cash, real estate, securities, personal property — none of it is income to you, and it doesn’t matter whether the person who left it to you lived in the United States or abroad.

What is taxable is anything the inherited property earns after you own it. Interest on an inherited foreign bank account, rent from inherited foreign real estate, dividends from inherited foreign stock — all of that goes on your Form 1040 as regular income. Form 3520 exists so the IRS knows the assets exist and can track those future income streams.

When You Have to File Form 3520

File Form 3520 if the total gifts or bequests you received from a nonresident alien individual or a foreign estate exceed $100,000 during a single tax year.² The threshold is the combined value of everything received from that source during the year, not each transfer. Two payments of $60,000 and $50,000 from the same foreign estate put you over the line.

You also have to combine gifts from different foreign persons if you know, or have reason to know, that they are related to each other or that one is acting as a nominee for another.³ So if you receive $75,000 from your late mother’s estate and $40,000 from her sister, both count toward the $100,000 test because the sources are related.

Gifts From Foreign Corporations or Partnerships

A lower threshold applies if the inheritance passes through a foreign corporation or foreign partnership rather than coming directly from an estate. For tax year 2025, that threshold is $20,116 in aggregate, adjusted annually for inflation.²

Foreign Trust Distributions Are Different

If a foreign trust distributes assets to you, that is not reported as a gift or bequest on Part IV. Foreign trust distributions go on Part III of Form 3520 and carry their own rules, including possible tax on the distributed amount and an interest charge for accumulation distributions.³ Treating a trust distribution as a straight bequest is a common and costly mistake, so if the deceased set up a foreign trust, get the classification right before you file.

Completing Form 3520

Form 3520 is “Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts.” For a straightforward foreign inheritance, you work with two sections.

Part I: Identifying Information

Part I asks for your name, address, Social Security number, and filing details. If you’ve extended your income tax return with Form 4868, check box 1k and enter “1040” on the line provided.³ That signals to the IRS that your Form 3520 deadline moves with your return.

Part IV: Reporting the Inheritance

Line 54 is where you indicate you received more than $100,000 from a nonresident alien individual or foreign estate. Check “Yes” and complete columns (a) through (c) for each gift or bequest: the date received, a description of the property, and its fair market value.³ If you received multiple gifts from related foreign persons and no single gift exceeds $5,000, you can skip the per-gift columns and just note on the first line that no individual gift or bequest exceeds $5,000.

Converting Foreign Currency

All figures on Form 3520 must be in U.S. dollars. Translate foreign currency amounts using the exchange rate in effect on the date you received the property.⁴ Rates from banks, U.S. Embassies, or the Treasury Department’s published rates on the Fiscal Data website all work.⁵ For non-cash property like real estate or jewelry, get an appraisal establishing fair market value as of the date you received it, then convert to dollars.

Deadline and Where to Send It

Form 3520 is due April 15 for calendar-year filers, the same day as your Form 1040. Filing Form 4868 to extend your income tax return automatically extends Form 3520 to October 15, and no separate extension request is needed.³

Form 3520 is paper only. Mail it to the Internal Revenue Service Center, P.O. Box 409101, Ogden, UT 84409.³ Do not attach it to your Form 1040; it’s processed separately. Use certified mail or a tracked delivery service and keep the receipt. With penalties reaching 25% of the inheritance, proof of timely filing is worth the postage.

Your Tax Basis in the Inherited Property

The inheritance is not taxed now, but the basis you receive determines how much gain you’ll report if you ever sell. Property acquired from a decedent generally takes a basis equal to its fair market value on the date of death.⁶ That stepped-up basis applies to foreign property the same way it applies to domestic property.

If you inherit a foreign apartment worth $300,000 at your relative’s death and later sell for $350,000, your taxable gain is $50,000, not $350,000. A reliable appraisal at the time of inheritance protects that basis figure. Keep the appraisal permanently with your tax records.

Inherited Foreign Accounts Trigger Separate Filings

Many people who file Form 3520 correctly still get caught because inherited foreign bank accounts and investment holdings have their own reporting rules that operate independently of Form 3520.

FBAR (FinCEN Form 114)

If the combined value of all your foreign financial accounts exceeds $10,000 at any point during the calendar year, file the Report of Foreign Bank and Financial Accounts.⁷ It asks for the bank’s name and address, the account number, and the highest balance during the year. The FBAR is filed electronically through the BSA E-Filing System; there is no paper option. It’s due April 15, with an automatic extension to October 15 requiring no separate request.⁸

The $10,000 test is on the aggregate of all your foreign accounts, not each one. Three accounts at $4,000 each puts you over. This catches people who inherit a modest foreign account that, combined with something they already held, pushes them across the threshold.

Form 8938 (FATCA Reporting)

Form 8938 covers a broader set of foreign financial assets: foreign bank accounts, stock in foreign corporations, interests in foreign partnerships, and foreign financial instruments. The thresholds depend on filing status and where you live:⁹

Unmarried, living in the U.S.: file if total foreign financial assets exceed $50,000 on the last day of the year or $75,000 at any point during the year.
Married filing jointly, living in the U.S.: file if total foreign financial assets exceed $100,000 on the last day of the year or $150,000 at any point during the year.

Higher thresholds apply if you live abroad. Form 8938 attaches to your Form 1040 and is filed with your regular return.¹⁰ The same foreign account may need to appear on both the FBAR and Form 8938. The two requirements overlap but are administered separately, and filing one does not satisfy the other.

What Non-Compliance Costs

Missing Form 3520 costs 5% of the foreign gift’s value for each month the return is late, up to 25%.¹¹ On a $500,000 inheritance, that’s $25,000 a month, capped at $125,000. The IRS also gains authority to determine the tax consequences of the gift itself, opening the door to recharacterizing it as taxable income.

Non-willful FBAR violations carry a penalty of up to $10,000 per violation. Willful violations run to the greater of $100,000 or 50% of the account balance at the time of the violation.¹² Courts have treated simple ignorance of the requirement as non-willful, but the calculation shifts once you know and continue not to file. A reasonable cause exception eliminates the non-willful penalty entirely if the violation was due to reasonable cause and the account balance was properly reported.

Missing Form 8938 costs $10,000, with an additional $10,000 for each 30-day period the failure continues after IRS notification, up to $50,000.

If You’re Already Late

The IRS recognizes a reasonable cause defense for Form 3520 penalties, decided case by case. Serious illness, natural disasters, inability to obtain records from a foreign country, and certain system-side issues that prevented timely filing can qualify.¹³ What generally does not qualify: simply not knowing about the requirement, relying on a preparer who failed to mention it, or lack of funds to hire a professional.

If you discover unfiled international information returns and the IRS hasn’t contacted you about them, you can use the Delinquent International Information Return Submission Procedures. File the late returns through normal channels and attach a reasonable cause statement to each explaining the delay.¹⁴ You cannot use this route if you are under IRS examination or criminal investigation. For people who genuinely did not know about Form 3520, this is the cleanest path back into compliance, though the IRS keeps discretion to assess penalties.

1
Office of the Law Revision Counsel. 26 USC 102 – Gifts and Inheritances
2
Internal Revenue Service. Gifts From Foreign Person
3
Internal Revenue Service. Instructions for Form 3520 (Rev. December 2025)
4
Internal Revenue Service. Foreign Currency and Currency Exchange Rates
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U.S. Treasury Fiscal Data. Treasury Reporting Rates of Exchange
6
Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent
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FFIEC BSA/AML Manual. Assessing Compliance with BSA Regulatory Requirements – Reports of Foreign Financial Accounts
8
Internal Revenue Service. Report of Foreign Bank and Financial Accounts (FBAR)
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Internal Revenue Service. Do I Need to File Form 8938, Statement of Specified Foreign Financial Assets
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Internal Revenue Service. Summary of FATCA Reporting for U.S. Taxpayers
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Office of the Law Revision Counsel. 26 USC 6039F – Notice of Large Gifts Received From Foreign Persons
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Office of the Law Revision Counsel. 31 USC 5321 – Civil Penalties
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Internal Revenue Service. Penalty Relief for Reasonable Cause
14
Internal Revenue Service. Delinquent International Information Return Submission Procedures