What IRS Form 3520 (2016) Is For

IRS Form 3520 (2016) is used by U.S. persons to report three main types of international activities: transactions with foreign trusts, ownership of foreign trusts under grantor trust rules, and receipt of certain large gifts or bequests from foreign persons (IRS Instructions for Form 3520 (2016)). U.S. persons must file this form if they transferred property to a foreign trust, are treated as owning part of a foreign trust, received distributions from a foreign trust, or received more than $100,000 from foreign individuals or more than $15,671 from foreign corporations as gifts.

When You'd Use Form 3520 for 2016 (Late or Amended Filing)

You would file Form 3520 for the 2016 tax year as a late or amended return in several scenarios: if you received IRS notices requesting the unfiled form, discovered unreported foreign trust transactions during a subsequent year's preparation, or need to correct previously filed information.

Late filing may occur when taxpayers initially were unaware of the reporting requirements or received foreign gifts/distributions that triggered the thresholds. Since Form 3520 has substantial penalties for non-compliance, filing late is still better than not filing at all, though penalties may apply (IRS Instructions for Form 3520 (2016)).

Key Rules Specific to 2016

The 2016 Form 3520 used the original due date structure where the form was due on the same date as your income tax return, including extensions, rather than the April 15th due date that applied to later years.

The foreign gift reporting thresholds for 2016 were $100,000 from foreign individuals and $15,671 from foreign corporations or partnerships. For 2016, if you filed for an extension of your income tax return, the Form 3520 deadline was also extended to the same date (IRS Instructions for Form 3520 (2016)).

The form must be mailed to Internal Revenue Service Center, P.O. Box 409101, Ogden, UT 84409.

Step-by-Step (High Level)

• Gather tax transcripts: Request account transcripts from 2016 using IRS procedures to verify what returns were filed and any outstanding issues with the IRS
  
  
• Complete the correct-year form: Use the actual 2016 version of Form 3520, not current year forms, as requirements and formats may differ
  
  
• Attach required schedules: Include all supporting schedules (A, B, C as applicable) and required documentation such as trust documents if no U.S. agent exists
  
  
• Choose mailing method: Mail the completed form with attachments to the Ogden Service Center; e-filing was not available for Form 3520 in 2016
  
  
• Keep complete copies: Retain copies of all submitted documents as processing can take several months and you may need to reference them
  
  

Common Mistakes and How to Avoid Them

• Using wrong form year: Always use the 2016 version of Form 3520, not current forms, as reporting requirements and thresholds differ between years
  
  
• Incomplete trust information: Failing to provide complete foreign trust details including trustee information, trust terms, and financial statements when no U.S. agent is designated
  
  
• Incorrect gift threshold calculations: Misunderstanding that the $100,000 threshold applies per foreign person (aggregating related parties) and $15,671 applies to corporate gifts, not per transaction
  
  
• Missing qualified obligation elections: Failing to properly elect qualified obligation treatment or extend assessment periods when exchanging property for trust obligations
  
  
• Inadequate documentation: Not attaching required trust documents, financial statements, or authorization agreements when reporting trust ownership or transactions
  
  
• Wrong mailing address: Sending to local IRS offices instead of the designated Ogden Service Center, which can delay processing significantly
  
  

What Happens After You File

The IRS typically takes several weeks to process Form 3520, though complex cases involving foreign trusts may take longer for review. You may receive notices requesting additional documentation or clarification of reported transactions.

If penalties apply for late filing, you'll receive a notice with payment options including installment agreements if you cannot pay in full immediately.

The IRS may also request additional information about the foreign trust or gifts reported (IRS Instructions for Form 3520 (2016)).

If you disagree with any penalties or determinations, you have appeal rights and can request penalty abatement if you can demonstrate reasonable cause for the late filing.

FAQs

What penalties apply for filing Form 3520 late for 2016?

Initial penalties are generally the greater of $10,000 or 35% of transferred property value, 35% of unreported distributions, or 5% of trust assets you're treated as owning. Additional penalties apply if non-compliance continues beyond 90 days after IRS notice (IRS Instructions for Form 3520 (2016)).

Can I still get a refund for 2016 if I file Form 3520 late?

Form 3520 is an information return that doesn't typically generate refunds. However, if filing triggers amendments to your 2016 income tax return, refund claims are generally limited to three years from the original due date.

Do I need transcripts before filing a late Form 3520?

While not required, requesting account transcripts helps verify what returns were filed and identifies any existing IRS records about your 2016 foreign transactions, which can inform your filing strategy.

Should I also amend my state tax return?

Most states don't have equivalent foreign trust reporting requirements, but if filing Form 3520 triggers changes to your federal taxable income, you may need to amend state returns that were based on that federal information.

Can I request penalty relief for late filing?

Yes, you can request reasonable cause penalty relief if you can demonstrate the failure to file timely was due to reasonable cause and not willful neglect. However, foreign country penalties for disclosure or trust provisions preventing disclosure are not considered reasonable cause (IRS Instructions for Form 3520 (2016)).

What if the foreign trust no longer exists?

You must still file Form 3520 for 2016 transactions even if the trust has since terminated. Use the trust information as it existed during 2016 and note the current status in your filing.

How do I know if my foreign gifts reached the reporting thresholds?

Aggregate all gifts received during 2016 from each foreign person (including related parties). The thresholds are $100,000 from foreign individuals/estates and $15,671 from foreign corporations/partnerships, with no per-transaction minimums within these categories (IRS Instructions for Form 3520 (2016)).

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