What IRS Form 3520 (2023) Is For

Form 3520 is the annual information return that U.S. persons must file to report specific transactions with foreign trusts, ownership of foreign trusts, and receipt of large gifts or bequests from foreign persons. You must file this form if you transferred money or property to a foreign trust, are treated as owning part of a foreign trust, received distributions from a foreign trust, or received qualifying foreign gifts exceeding certain thresholds (IRS Instructions for Form 3520 (2023)).

When You'd Use Form 3520 for 2023 (Late or Amended Filing)

You would file Form 3520 for 2023 as a late or amended return in several scenarios. Most commonly, taxpayers discover filing obligations after receiving IRS notices assessing significant penalties—often the greater of $10,000 or 35% of the gross reportable amount for late filing (IRS Failure to File Form 3520/3520-A Penalties).

You might also need to file late if you received foreign gifts totaling more than $100,000 from individuals or more than $18,567 from foreign corporations/partnerships in 2023 but didn't initially realize the reporting requirement (IRS Instructions for Form 3520 (2023)). Additionally, if you discover errors in a previously filed return or learn about unreported foreign trust transactions, you would file an amended Form 3520 for 2023.

Key Rules Specific to 2023

For 2023, the foreign gift reporting threshold from foreign corporations and partnerships was $18,567 (adjusted annually for inflation under section 6039F), while the threshold for gifts from foreign individuals remained at $100,000 (IRS.gov Gifts from foreign person).

The 2023 version of Form 3520 continued to require separate forms for each foreign trust, and the penalty structure remained at the greater of $10,000 or 35% of the gross reportable amount for late filing after December 31, 2009.

The reasonable cause exception for penalty relief remained available but explicitly excludes foreign law restrictions on disclosure as acceptable justification (IRS Instructions for Form 3520 (2023)).

Step-by-Step (High Level)

• Gather tax transcripts and records: Obtain account transcripts from the IRS and collect all documentation related to foreign trusts, gifts, or transactions for 2023
  
  
• Complete the correct-year form: Use the December 2023 revision of Form 3520, checking the "Amended Return" box if correcting a previously filed return
  
  
• Attach required schedules: Include all applicable schedules (A, B, C) and any substitute Form 3520-A if you're a U.S. owner and the foreign trust failed to file Form 3520-A
  
  
• Mail with required attachments: Send the complete package to Internal Revenue Service Center, P.O. Box 409101, Ogden, UT 84409—Form 3520 cannot be e-filed
  
  
• Keep copies and track submission: Maintain copies of all documents and consider certified mail for proof of delivery (IRS Instructions for Form 3520 (2023))
  
  

Common Mistakes and How to Avoid Them

• Filing separate forms for each trust: Many taxpayers incorrectly combine multiple foreign trusts on one form—you must file a separate Form 3520 for each foreign trust involved
  
  
• Misunderstanding gift thresholds: The $100,000 threshold applies to gifts from foreign individuals, while the lower inflation-adjusted threshold ($18,567 for 2023) applies to foreign corporations and partnerships
  
  
• Incomplete reasonable cause statements: When requesting penalty relief, you must include a written statement under penalty of perjury using specific IRS-required language—general explanations are insufficient
  
  
• Missing required attachments: Failing to attach substitute Form 3520-A when required as a U.S. owner, or omitting necessary schedules, makes the filing incomplete
  
  
• Incorrect gross value calculations: Use fair market value determinations under section 2512 regulations without considering restrictions on the property—formal appraisals aren't required but maintain contemporaneous records
  
  
• Assuming foreign legal restrictions provide reasonable cause: The IRS explicitly states that foreign country penalties for disclosure or trust instrument provisions preventing disclosure do not constitute reasonable cause for penalty relief (IRS Instructions for Form 3520 (2023))
  
  

What Happens After You File

The IRS typically takes several months to process Form 3520 filings, and you may receive correspondence requesting additional information or documentation.

If penalties were previously assessed, filing a complete and timely Form 3520 may support your reasonable cause request for penalty abatement, but you must submit a written statement under penalty of perjury explaining why the failure wasn't willful neglect (IRS Failure to File Form 3520/3520-A Penalties).

For payment of any assessed penalties or taxes, you can request installment agreements using Form 9465 if you cannot pay the full amount immediately (IRS.gov Payment plans).

If the IRS maintains penalties after your reasonable cause request, you have appeal rights through the Independent Office of Appeals, and you generally have 30 days from any rejection letter to file your appeal request (IRS.gov Penalty appeal eligibility).

FAQs

How much are the penalties for filing Form 3520 late for 2023?

The initial penalty is the greater of $10,000 or 35% of the gross reportable amount (value of trust transfers, distributions, or gifts). Additional penalties of $10,000 accrue every 30 days after 90 days from the IRS notice, capped at the total reportable amount (IRS Failure to File Form 3520/3520-A Penalties).

Can I get penalty relief if I file my 2023 Form 3520 late?

Yes, if you can demonstrate reasonable cause and that the failure wasn't due to willful neglect. You must provide a written statement under penalty of perjury, but foreign legal restrictions on disclosure are explicitly not considered reasonable cause (IRS Instructions for Form 3520 (2023)).

Where do I get my tax transcripts before filing a late Form 3520?

Request account transcripts online at IRS.gov, by calling 1-800-908-9946, or by mailing Form 4506-T. These transcripts help you understand what the IRS has on file and any penalties already assessed for the 2023 tax year (IRS Instructions for Form 3520 (2023)).

Is there a statute of limitations for refunds if I'm owed money from 2023?

Generally, you must claim refunds within three years of the original due date or two years from when you paid the tax, whichever is later. For 2023, this typically means by April 15, 2027, unless you filed for extensions or made payments later (IRS Instructions for Form 3520 (2023)).

Do I need to amend my state tax return if I file a late or amended Form 3520 for 2023?

Form 3520 is purely an information return and doesn't directly affect your federal income tax, so state amendments typically aren't required. However, if the foreign trust activities result in additional federal taxable income that affects your state return, you may need to amend state filings accordingly.

Can I e-file Form 3520 for 2023?

No, Form 3520 must be mailed to the IRS at their Ogden, Utah processing center. Electronic filing is not available for this form (IRS Instructions for Form 3520 (2023)).

What if the foreign trust didn't file Form 3520-A and I'm a U.S. owner?

You must complete and attach a substitute Form 3520-A to your Form 3520 by your filing deadline to avoid the 5% penalty on the gross value of trust assets you're treated as owning. The substitute form should be completed to the best of your ability with available information (IRS Instructions for Form 3520 (2023)).

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