IRS Form 3520 is an information return that U.S. persons file to report certain transactions with foreign trusts and large gifts or bequests received from foreign persons. Filing it does not create any tax liability on its own, but failing to file when required triggers some of the steepest information-return penalties in the tax code: a minimum of $10,000 for foreign trust failures and up to 25% of the gift amount for unreported foreign gifts. The form is separate from your Form 1040, cannot be filed electronically, and often needs to be filed alongside other foreign asset reports.
Who Has to File
Form 3520 applies to U.S. persons, a category that is broader than most people realize. It covers U.S. citizens wherever they live, resident aliens (including green card holders and anyone meeting the substantial presence test), domestic partnerships and corporations, and most estates and trusts organized under U.S. law.1Internal Revenue Service. Classification of Taxpayers for U.S. Tax Purposes Living outside the United States full-time does not exempt you.
You need to file if any of four things happened during your tax year:
- You transferred cash, securities, real estate, or any other property to a foreign trust. The obligation falls on you as the transferor, not on the trust.
- You are treated as the owner of any portion of a foreign trust under the grantor trust rules in Internal Revenue Code Sections 671 through 679. Ownership must be reported every year it exists.2Office of the Law Revision Counsel. 26 U.S.C. Subpart E – Grantors and Others Treated as Substantial Owners
- You received a distribution from a foreign trust in cash or property. There is no minimum dollar amount.
- You received large gifts or bequests from foreign persons above the thresholds described below.
The first three triggers involve foreign trusts and are reported in Parts I through III of the form. Foreign gifts go in Part IV.3Internal Revenue Service. Instructions for Form 3520
Foreign Gift Thresholds
Not every gift from a foreign source has to be reported. Two thresholds apply, depending on the source.
Gifts and bequests from a nonresident alien individual or a foreign estate are reportable only if the total from that person, plus related persons, exceeds $100,000 during the tax year.4Internal Revenue Service. Gifts From Foreign Person Gifts from connected donors are aggregated when testing the $100,000 line.
Gifts from foreign corporations or foreign partnerships have a much lower threshold that adjusts annually for inflation under Section 6039F.5Office of the Law Revision Counsel. 26 U.S. Code 6039F – Notice of Large Gifts Received From Foreign Persons For 2025 the figure is $20,116.6Internal Revenue Service. Rev. Proc. 2024-40 Unlike the individual-donor threshold, this one applies to all foreign corporate and partnership gifts combined for the year, not to each source separately.
The gift itself is generally not taxable to the U.S. recipient. Form 3520 is purely informational. But the IRS treats a reporting failure as its own violation, and the penalty applies regardless of whether any tax was owed on the underlying transfer.
What Makes a Trust “Foreign”
Because three of the four filing triggers turn on whether a trust is foreign, it is worth knowing how the IRS draws that line. A trust is domestic only if it passes both a court test and a control test: a U.S. court must be able to exercise primary supervision over the trust’s administration, and one or more U.S. persons must control all substantial decisions.7Office of the Law Revision Counsel. 26 U.S.C. 7701 – Definitions Failing either test makes the trust foreign.8eCFR. 26 CFR 301.7701-7 – Trusts, Domestic and Foreign
Where the trust was created and where its assets sit do not settle the question. A trust set up abroad but administered by a U.S. trustee under U.S. court supervision could be domestic. A trust created in the United States can flip to foreign if a non-U.S. person takes over substantial decisions. Classification is tested day by day, so status can change mid-year when governance changes.
What Information the Form Requires
Form 3520 has four parts, and you complete only the ones that match your situation.
- Part I covers transfers to a foreign trust: what was transferred, when, and to whom.
- Part II covers ownership of a foreign trust under the grantor trust rules, including the trust’s financial activity for the year.
- Part III covers distributions received from a foreign trust, at any dollar amount.
- Part IV covers reportable foreign gifts and bequests.
For each part, you need the legal name, address, and taxpayer identification number (if one exists) of the foreign trust or donor, along with exact dates, the fair market value of any non-cash property, and a clear description of what changed hands.3Internal Revenue Service. Instructions for Form 3520 Valuing non-cash property such as real estate or business interests is one of the harder pieces of the form; the instructions require fair market value but do not prescribe an appraisal method, so a professional appraisal is the safer route for high-value items.
Married couples who file a joint income tax return may file a single combined Form 3520 rather than two.3Internal Revenue Service. Instructions for Form 3520
Form 3520-A: The Trust’s Own Return
If you are the U.S. owner of a foreign trust, there is a second form to keep track of. Form 3520-A is filed by the trust itself and reports information about the trust, its U.S. beneficiaries, and any U.S. owner.9Internal Revenue Service. About Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner For a calendar-year trust, Form 3520-A is due March 15.10Internal Revenue Service. Instructions for Form 3520-A
The catch: the U.S. owner is responsible for making sure the trust files. If the foreign trustee will not, the U.S. owner must prepare a substitute Form 3520-A and attach it to their own Form 3520.10Internal Revenue Service. Instructions for Form 3520-A Not doing so exposes the U.S. owner to the same penalties as if the trust itself had failed to file. Getting a foreign trustee to cooperate with U.S. filings is one of the more common friction points in international trust compliance.
Deadlines, Extensions, and How to File
Form 3520 is due on the 15th day of the fourth month after the end of your tax year. For calendar-year filers, that is April 15.11Internal Revenue Service. Reminder to U.S. Owners of a Foreign Trust If the date falls on a weekend or federal holiday, the deadline moves to the next business day.
U.S. citizens and resident aliens whose main place of business and home are both outside the United States and Puerto Rico get an automatic two-month extension to June 15 with no request required.12Internal Revenue Service. U.S. Citizens and Resident Aliens Abroad – Automatic 2-Month Extension of Time to File Filing Form 4868, the standard individual extension, pushes the Form 3520 deadline to October 15.11Internal Revenue Service. Reminder to U.S. Owners of a Foreign Trust
Form 3520 cannot be e-filed. Print it, sign it by hand, and mail it to the IRS as a standalone document. Do not attach it to your Form 1040.3Internal Revenue Service. Instructions for Form 3520 The IRS does not send confirmation of receipt, so use certified mail with return receipt or an approved private delivery service with tracking. That mailing receipt is your only proof of timely filing if the IRS later says the form never arrived.
The Penalties for Missing It
Penalties differ depending on whether the failure involves a foreign trust or a foreign gift.
Foreign Trust Failures
For missed or incomplete reporting of a foreign trust transaction, the penalty starts at the greater of $10,000 or 35% of the gross reportable amount.13Office of the Law Revision Counsel. 26 U.S.C. 6677 – Failure to File Information With Respect to Certain Foreign Trusts The gross reportable amount is generally the property transferred, the portion of the trust owned, or the distribution received, depending on which part of the form was skipped.
If the failure continues more than 90 days after the IRS mails notice of it, an additional $10,000 penalty accrues for each 30-day period. Total penalties per failure are capped at the gross reportable amount, but for large trusts that ceiling is high.
Foreign Gift Failures
Failing to report a foreign gift above the threshold costs 5% of the gift’s value per month, capped at 25%.5Office of the Law Revision Counsel. 26 U.S. Code 6039F – Notice of Large Gifts Received From Foreign Persons On a $500,000 gift, that is $25,000 per month up to a $125,000 ceiling. The penalty applies even though the gift itself carries no federal income tax.
Asking for Penalty Relief
The IRS can waive Form 3520 penalties if you can show reasonable cause. The standard is that you exercised ordinary care and prudence but were still unable to comply.14Internal Revenue Service. Penalty Relief for Reasonable Cause Circumstances the IRS will weigh include serious illness or a death in the family, natural disasters, inability to obtain records, and reliance on erroneous written advice from the IRS.
Arguments that rarely succeed on their own include not knowing the requirement existed, relying on a tax preparer who missed it, or simple oversight. First-time filers with a clean compliance history have a stronger case, especially where the failure grew out of genuine confusion rather than neglect.
For years the IRS auto-assessed penalties under Section 6677 without reading reasonable cause statements attached to late returns, leaving taxpayers to fight after the fact in Appeals or federal court. In late 2024 the IRS said it would begin reviewing reasonable cause statements before assessing those penalties.15Taxpayer Advocate Service. IRS Hears Concerns From TAS and Practitioners, Makes Favorable Changes to Foreign Gifts and Inheritance Filing Penalties If you are filing late, attach a detailed reasonable cause statement rather than filing bare and waiting for the notice.
Other Foreign Reporting You May Owe at the Same Time
Form 3520 sits alongside two other reports that often apply to the same assets.
Form 8938, the FATCA report, is filed with your Form 1040 if your specified foreign financial assets exceed the applicable threshold, which starts at $50,000 for domestic filers. Assets already reported on a timely Form 3520 do not have to be described in full detail on Form 8938, but you still identify them and include their value in the threshold calculation.
The FBAR (FinCEN Form 114) is filed electronically with FinCEN whenever the combined value of your foreign financial accounts exceeds $10,000 at any point in the year. It is entirely separate from Form 3520 and Form 8938, with its own filing system and penalty regime.
Filing any one of these forms does not satisfy the requirements for the others. A single foreign trust interest can trigger all three, each with its own deadline and rules. The safest approach when you know you have foreign trust or gift activity is to map every applicable form before the earliest deadline arrives.