Getting a large gift or bequest from family abroad should feel like good news, not a tax headache. But if you are a US person, the IRS wants to know about it, and the form for that job is Form 3520. The reassuring part: the money itself usually is not taxed. The catch: skipping the report can trigger some of the steepest penalties in the tax code. This guide explains what it is, who has to file it, what counts as an overseas gift or a foreign trust transaction, when it is due, and what to do if you are already late.
Understanding Form 3520, also written IRS Form 3520, starts with its long name: the Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. That mouthful covers most of what it does. Put simply, Form 3520 is an informational return, not a tax bill. You are telling the agency what you received or did, not paying tax on the filing itself. In fact, what you receive this way is usually not taxable income at all.
One quirk catches people off guard. You file it separately from your tax return, so it does not get attached to your Form 1040. It goes in its own envelope to the Internal Revenue Service center in Ogden, Utah, and it cannot be e-filed. So even when your return is handled online, this report is printed, signed, and mailed.
You need to file Form 3520 if you are a US person and one of three things happened during the tax year. First, you received a large gift or bequest from family or others abroad. Second, you took part in certain transactions with foreign trusts, such as creating one or moving assets in. Third, you are treated as the owner of a foreign trust, or you received money from one. In short, you use Form 3520 to report certain gifts or bequests and your dealings with foreign trusts.
A US person here means a citizen, a green card holder, or anyone else who counts as a resident for tax purposes, plus the executor of a US person's estate. A foreign person includes a nonresident alien, a foreign corporation, a foreign partnership, or a foreign estate. If any of that describes your year, you are required to file, and the filing requirement stands even when no tax is due. This Form 3520 filing is a reporting obligation first and foremost, and most taxpayers who trip on it never owed a cent of tax. You may have to report a gift even when it is completely tax-free.
This is the most common trigger, reported in Part IV. What you report on Form 3520 for a gift from a foreign person comes down to the amount and the source:
A key trap is aggregation. The agency adds up amounts from related people. If your father gives you $60,000 and your mother gives you $50,000 in the same year, that is $110,000 from related parties, so you cross the $100,000 line even though neither amount did on its own. The same logic applies to large amounts from foreign companies that share a parent, and to several gifts from foreign individuals who are connected.
A bequest works the same way as a gift here, so a bequest from abroad over the threshold needs reporting too. And to stress the point that matters most: disclosing it does not make it taxable. Reporting and taxing are separate, and inheritances from foreign relatives are generally not income to you.
This is where things get more involved and the penalties climb. The form covers three trust situations, each in its own part.
If you have property transferred to a foreign trust, or helped create one, you report that transfer in Part I. If you are treated as the owner of a portion of a foreign trust under the grantor trust rules, you report your ownership of a foreign trust in Part II. And if you are a beneficiary of a foreign trust who received money from one, you report that in Part III. A distribution received from a foreign trust is broader than it sounds: even living rent-free in a home a related foreign trust owns can count as a payout at fair market value.
Because ownership of foreign trusts and distributions from foreign trusts are reported separately, a single foreign asset held in trust can land you on more than one part in the same year. This is the corner of foreign trust reporting where a professional earns their fee, since the rules are technical and the assets have to be valued with care.
People mix these two up constantly. The split between these two forms is simply who files. You file it. The trust itself files Form 3520-A, the Annual Information Return of Foreign Trust With a U.S. Owner, usually through its trustee, to report its own income and activity.
If you own one, the trust is supposed to file its 3520-A. If it does not, you may have to file a substitute yourself so the agency still gets the information. So Form 3520 and 3520-A often travel together for trust owners, though they are two separate filings with two separate deadlines.
It is due at the same time as your income tax return. For most people that means April 15, moving to the next business day when it lands on a weekend or holiday. If you live abroad, you get until June 15. And if you extend your return by filing Form 4868, your Form 3520 deadline moves with it to October 15.
Here is a detail that trips filers up. Extending your Form 1040 does cover this filing, but you need to check box 1k and note the return you extended, or the form may be treated as a late filing. The 3520-A runs on an earlier clock, generally due March 15 with its own six-month extension. Since none of this can be e-filed, give the mail enough time to land before the deadline.
This is the part worth taking seriously. These penalties are among the harshest in the tax code, and they apply even though the underlying gift or bequest is never taxed. The amount depends on which part you missed:
These add up alarmingly fast. A $200,000 unreported foreign inheritance could mean a $50,000 penalty from the IRS, on money you never owed a cent of income tax on. That gap between zero tax and a five-figure bill is exactly why this filing deserves attention.
There is real good news here, and it is a meaningful shift in tax law practice. For years the IRS assessed these penalties automatically the moment a late form arrived, then left you to fight for relief even with a solid reason. In October 2024 the agency changed course. Before charging a penalty on a late gift report, it now reviews any reasonable cause statement you attach, and by the end of 2024 it extended that review to the trust parts of the form and to the 3520-A.
This is not a free pass. The penalties still exist, and they can still apply if your explanation falls short. But a late filer with a genuine reason, like grief after a relative's death, serious illness, or simply never knowing the rule existed, now gets a real chance to explain before any penalty is set, rather than after.
So if you have just realized you missed a filing, the usual move is to submit the late filing form as soon as you can with a clear reasonable cause statement attached, rather than wait to be found. Coming forward on your own, with a good explanation and supporting documents, almost always beats the alternative. A tax professional who handles foreign reporting can help you report the gap correctly and frame the explanation well, which is the safest way to handle a missed deadline.
Foreign trust and gift reporting sits in the messy corner of US tax, where the rules are technical, the forms stack on one another, and the cost of a small mistake is large. If you are a CPA firm fielding these questions from clients with overseas family, bequests, or trusts, Madras Accountancy works as an offshore partner that prepares and reviews this kind of international filing alongside the rest of your tax prep work. When the busy season stretches your team thin, that extra capacity is the kind of help our outsourced tax preparation team is built to provide.
Usually not. A gift or bequest from abroad is generally not taxable income to you in the US. The catch is reporting. If the amount crosses the threshold, you still have to disclose it, even though no tax is due. Reporting and taxing are two different things here.
It depends on the source. For amounts from a foreign person or estate, the threshold is more than $100,000 in a year. For amounts from foreign companies, it is much lower, $20,116 for 2025. Amounts from related parties are added together to test the limit, so several smaller transfers can still trigger a filing.
Yes, if it is large enough. An overseas bequest is treated like a gift for this purpose, so an amount from overseas over $100,000 in a year goes on Part IV. It is not taxed as income, but the receipt of foreign gifts and bequests over the limit still has to be disclosed.
You file the form. The trust files the 3520-A. The first reports your gifts, bequests, and trust dealings, while the second reports the trust's own income and activity to the agency. If the trust does not file its 3520-A, a US owner may need to file a substitute.
It matches your federal return: April 15 for most filers, June 15 if you live abroad, and October 15 if you extended your return with Form 4868. File it separately and mail it, since it cannot be submitted electronically. The 3520-A is due earlier, around March 15.
No. It has to be printed, signed, and mailed to the IRS in Ogden, Utah. It is filed on its own rather than attached to your return, so plan the timing so it arrives by the deadline.
For a missed gift, the penalty is 5% of the gift per month, up to 25%. For unreported foreign trust transfers or distributions, it is the greater of $10,000 or 35% of the amount. These can be large even when no tax was owed, which is why timely filing matters so much.
File the late form as soon as you can and attach a reasonable cause statement explaining the delay. Since October 2024, the agency reviews that explanation before charging a penalty, on gift reports and on the trust parts too, rather than assessing first. It helps to have a tax professional prepare the filing and the statement.
Single-entry vs double-entry bookkeeping made simple: how each accounting system works, the key differences, and which one your small business needs.
%2075-100%20(12).png)
CPA vs EA (enrolled agent) vs tax attorney: how each tax professional differs, who can represent you to the IRS, and which fits your tax needs.
%2075-100%20(9).png)
Learn how tax professionals should respond to a data breach, report theft to the IRS and states, notify clients, meet FTC rules, and prevent future attacks.
