Guides

Form 3520: Reporting Foreign Gifts and Trusts

By The Ledgerism Editorial Team · The Ledgerism Brief Editorial Team produces original, methodology-disclosed accounting and tax research—data trackers, databases, and reference guides built to be the most-cited source in the field. Every figure is verified against primary sources including FASB, the IRS, the PCAOB, NASBA, the AICPA, and state boards of accountancy.

Form 3520 is the annual return a U.S. person files to report large gifts or bequests from foreign persons and transactions with foreign trusts. You may need to file if you received more than $100,000 from a nonresident alien individual or foreign estate, more than $20,573 (2026) from foreign corporations or partnerships, or if you created, transferred to, own, or received a distribution from a foreign trust. It is an information return, not a tax bill, but missing it carries some of the harshest penalties in the tax code.

The gift itself is generally not taxable to the U.S. recipient. The penalty is for failing to report, and it is measured as a percentage of the amount involved, not the tax owed. That distinction is why a non-taxable inheritance can still generate a five- or six-figure penalty.

Who Must File Form 3520

Four categories of U.S. persons must file Form 3520, and a single taxpayer can fall into more than one in the same year. The form separates foreign-gift reporting from foreign-trust reporting into distinct parts, but both live on the same return. A “U.S. person” here includes citizens, resident aliens, domestic partnerships, corporations, estates, and most domestic trusts.

The four triggers, tied to IRC sections 6048 and 6039F:

1. Reportable events (Part I): You created a foreign trust or transferred money or property to one, or you hold a qualified obligation from a related foreign trust.
2. Owner of a foreign trust (Part II): You are treated as the owner of any part of a foreign trust under the grantor trust rules (IRC sections 671 through 679).
3. Distributions received (Part III): You received a distribution from a foreign trust, or received the uncompensated use of trust property or a loan of cash or marketable securities.
4. Large foreign gifts (Part IV): You received gifts or bequests above the threshold from a nonresident alien, foreign estate, foreign corporation, or foreign partnership.

Foreign Gift Reporting Thresholds

Two separate dollar thresholds decide whether a foreign gift is reportable, and which one applies depends on who the donor is. Gifts from foreign individuals and estates use a fixed $100,000 line. Gifts from foreign corporations and partnerships use a much lower, inflation-adjusted line, $20,573 for 2026. You aggregate related donors before testing either threshold.

The two thresholds work differently, so a table makes the split clear.

Aggregation is where filers get caught. If a foreign parent sends you $60,000 and the other sends $50,000 in the same year, the IRS treats that as $110,000 from related parties, and the whole amount becomes reportable even though neither transfer alone crossed $100,000. Once you cross a threshold, you must itemize each gift above $5,000 and identify the donor.

A “foreign gift” is money or property received that you treat as a gift or bequest and that is not includible in your gross income. It excludes qualified tuition or medical payments made on your behalf directly to the institution, and it excludes distributions from foreign trusts, which are reported in Part III instead.

Reporting Foreign Trust Transactions

Foreign trust reporting is broader than gifts and often applies even in a year with no cash changing hands. If you are treated as the U.S. owner of a foreign trust, you complete Part II every year regardless of activity, and you generally must ensure a Form 3520-A is filed for the trust. Transfers to the trust go in Part I; distributions, loans, and uncompensated use of trust property go in Part III.

Common trust transactions that trigger Part I or Part III reporting:

• Transferring cash or property to a foreign trust, whether at creation or later.
• Receiving a distribution of cash or property from a foreign trust.
• Receiving a loan of cash or marketable securities from a related foreign trust, which can be treated as a distribution.
• Using foreign trust property (such as a residence) without paying fair market rent.

If you are the U.S. owner, the trust is expected to file Form 3520-A by the 15th day of the 3rd month after its tax year end (March 16, 2026, for a calendar-year trust). When a foreign trust will not file, the U.S. owner can complete a substitute Form 3520-A and attach it to their own Form 3520 by the Form 3520 due date to avoid the ownership penalty. Understanding the grantor trust rules that flow trust income back to the owner is often the first step in getting this right.

The Filing Deadline

Form 3520 is due on the 15th day of the 4th month after your tax year ends, April 15, 2026, for calendar-year individuals, and it is filed separately from your income tax return. You mail it to the IRS center in Ogden, Utah, rather than attaching it to your Form 1040. It is not e-filed with the return.

Extensions follow your income tax situation. If you get an extension to file your income tax return, the Form 3520 deadline moves to the 15th day of the 10th month (October 15). U.S. persons living abroad or on military duty outside the country get an automatic shift to the 15th day of the 6th month (June 15). Because the form travels on its own, filing a timely Form 4868 extension helps only if you also track the separate 3520 mailing.

The Penalties for Not Filing

Form 3520 penalties are calculated on the gross amount involved, not on any tax due, which is what makes them severe. Foreign-gift failures run under IRC section 6039F at 5% of the gift per month, capped at 25%. Foreign-trust failures run under IRC section 6677 and start at 35% of the amount transferred or distributed.

Additional penalties can accrue if the failure continues after the IRS mails a notice, and the section 6677 penalty cannot exceed the gross reportable amount. On a $500,000 unreported inheritance from a foreign parent, a 25% gift penalty is $125,000, and the underlying gift may not have been taxable at all. These amounts sit outside the domestic transfer tax figures tracked in our estate and gift tax report, because a foreign gift is a reporting event rather than a U.S. gift-tax event.

The main defense is reasonable cause. No penalty applies if you can show the failure was due to reasonable cause and not willful neglect, though the IRS has stated that a foreign jurisdiction’s laws or a trustee’s refusal to provide information do not, by themselves, establish reasonable cause. Facts matter here, and outcomes can vary by circumstance, so documentation of what you knew and when is often decisive.

FAQ

Do I owe tax on a foreign gift reported on Form 3520?
Usually no. A gift or bequest from a foreign person is generally not taxable income to the U.S. recipient, and Form 3520 is an information return rather than a tax computation. Tax can still arise indirectly, for example on income the gifted asset later generates or on certain foreign trust distributions, but the reported gift itself is typically tax-free.

What is the difference between Form 3520 and Form 3520-A?
Form 3520 is filed by the U.S. person who receives a gift, owns a foreign trust, or transacts with one. Form 3520-A is the annual information return of the foreign trust itself, due March 16 for calendar-year trusts, and it reports the trust’s income and each U.S. owner’s interest. A U.S. owner may file a substitute 3520-A when the trust does not.

Is Form 3520 filed with my tax return?
No. Form 3520 is filed separately and mailed to the IRS service center in Ogden, Utah, not attached to your Form 1040 or e-filed with it. Its due date tracks your income tax return, April 15 for most individuals, with an extension to October 15 if you extend your income tax return, but the physical filing is independent.

What counts as a related party for the $100,000 threshold?
Gifts from a single foreign donor combine with gifts from parties related to that donor, such as a spouse or family members acting together. Two foreign parents each sending you money in the same year are treated as related, so $60,000 from one and $50,000 from the other total $110,000 and cross the threshold even though neither gift alone does.

Can Form 3520 penalties be removed?
In many cases, yes, through reasonable cause relief. You can attach a reasonable cause statement to a late-filed form or respond to a penalty notice showing the failure was not willful. The IRS revised its review procedures in 2024 to consider reasonable cause statements before assessing certain penalties, though relief is not guaranteed and depends on your specific facts.

Does receiving an inheritance from abroad trigger Form 3520?
Often yes. A bequest from a nonresident alien or foreign estate is treated as a foreign gift for reporting, so an inheritance over $100,000 in a year is reportable in Part IV. The inheritance is generally not taxable to you as income, but the reporting obligation, and the 25% penalty for missing it, still applies.

Reviewed by The Ledgerism Editorial Team. Last reviewed: July 2026.

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