Form 3520 Instructions: A Plain-English Walkthrough of Every Part

Form 3520 and Form 3520-A are forms that a person or entity may be required to submit under IRS requirements. If a required form is not submitted on time and there is no extension, a CP15 notice will be issued if the IRS catches the problem. The CP15 notice is what triggers the penalty assessment. Not every late filing results in a CP15 notice or a penalty.

Form 3520 can look intimidating when foreign trusts, inheritances, or large gifts are involved. This plain-English guide walks through the form 3520 instructions — what applies to you and how to get it right.

What Form 3520 Is Used For and Why Accurate Reporting Matters

Form 3520 is the “Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts.” U.S. persons — and executors of U.S. decedents' estates — use it to report certain transactions with foreign trusts, ownership of a foreign trust under sections 671 through 679, and certain large foreign gifts or bequests.

A separate Form 3520 must generally be filed for transactions with each foreign trust. It's filed separately from your income tax return and mailed to:

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

For calendar-year individuals, the due date is generally April 15. Qualifying citizens or residents abroad generally have until June 15, with a qualifying statement attached. With an income tax extension, the deadline moves to October 15. Only a complete form counts as timely filed — attachments are part of the filing.

Who Must File: Understanding the Form 3520 Filing Requirements

The 3520 filing requirements may apply if you're a U.S. person who:

1. Created a foreign trust or transferred money or property to one, including by reason of death;
2. Transferred property to a related foreign trust for an obligation;
3. Are treated as the owner of any portion of a foreign trust under sections 671 through 679;
4. Received a distribution from a foreign trust;
5. Received a loan from a related foreign trust or used trust property without paying fair market value; or
6. Received more than $100,000 in gifts or bequests from a nonresident alien individual or foreign estate.

Gifts from foreign corporations or partnerships follow a separate, inflation-adjusted section 6039F threshold, and related donors may need to be aggregated. Trust distributions, however, are not gifts — they belong in Part III. See what Form 3520 reporting of foreign trusts and large gifts or inheritances involves.

What Goes in Each Part of Form 3520?

Begin with page 1's identifying information. Use the trust's EIN, not an SSN or ITIN, and provide U.S. agent information if applicable. If you filed an extension, check box 1k and enter the related return number, such as “1040” for Form 4868.

Part I, Transfers to a Foreign Trust

Complete Part I for reportable transfers or events — the property, its fair market value and basis, the date, and any connected obligations.

Part II: U.S. Owner of a Foreign Trust

Complete Part II if you're treated as owning part of the trust under sections 671 through 679 — even with no transactions during the year. If the trust did not file Form 3520-A, you may need to attach a substitute Form 3520-A, as covered in how Form 3520-A compliance works.

Part III: Distributions From a Foreign Trust

Part III covers distributions of cash or property, certain loans, and uncompensated use of trust property; attach the required beneficiary statement.

Part IV: Foreign Gifts or Bequests

Use Part IV for reportable gifts or inheritances from foreign individuals, estates, corporations, or partnerships. Report the date, donor, and amount. Spouses filing jointly who are both connected with the same trust may generally file a joint Form 3520 and check line 1i.

Common Form 3520 Mistakes That Create Compliance Problems

Common errors include:

• Filing late or without required attachments;
• Assuming the deadline automatically follows your extended tax return;
• Using an SSN instead of the foreign trust’s EIN;
• Omitting beneficiary statements or a substitute Form 3520-A.

Under IRC 6677, penalties generally reach the greater of $10,000 or 35% of certain transfers or distributions — or 5% of owned trust assets for Part II or Form 3520-A failures. Under IRC 6039F, foreign gift penalties may reach 5% per month, up to 25% — see the 3520 and 3520-A tax penalties at stake. The IRS explains these rules in guidance on international information-return penalties. Reasonable cause may excuse a failure that wasn't willful neglect — but foreign-country disclosure risks and a reluctant foreign fiduciary don't qualify.

What to Do If Your Form 3520 Is Already Late

Already late? File a complete, accurate delinquent form at the Ogden address and gather support for reasonable cause. Under section 6501(c)(8), a late filing keeps the assessment period open until three years after the required information is reported. After a CP15 notice triggers the penalty assessment, the IRS can administer the assessment without normal deficiency procedures, as it explains in its guidance on Form 3520 and 3520-A failure-to-file penalties.

Compare every section and attachment in the current IRS Form 3520 instructions.

A confidential consultation can help you understand your filing history and options. Private, protected guidance. Contact the Law Offices of Jason R. Kovan for help backed by attorney-client privilege once an engagement letter is signed.