IRS Form 3520-A (2018): Late & Amended Filing Guide

What IRS Form 3520-A (2018) Is For

IRS Form 3520-A (2018) is an annual information return that documents foreign trusts' activities, income, and ownership with at least one U.S. person involved. The form fulfills the foreign trust reporting requirements under the Internal Revenue Code, allowing the Internal Revenue Service (IRS) to monitor compliance and prevent tax evasion involving foreign financial assets. It ensures that U.S. owners properly report their share of the trust’s income, distributions, and related transactions that may affect income tax obligations.

This filing requirement also extends to foreign grantor trusts, foreign estates, and certain foreign persons subject to the grantor trust rules. Entities holding foreign financial accounts or owning marketable securities through a foreign trust must report these interests for tax purposes. By doing so, maintain transparency regarding trust income, property, and other assets tied to foreign trusts during the relevant tax year.

For related IRS forms that often accompany foreign trust reporting, you can explore our IRS Form Help Center to review additional compliance requirements.

When You’d Use IRS Form 3520-A (2018)

Taxpayers use IRS Form 3520-A (2018) to address filing issues, corrections, or ownership discoveries related to foreign trusts.

• Late filing requirement: You must file a substitute Form 3520-A if a foreign trust fails to file by the due date or valid extension, as the U.S. owner becomes responsible for compliance.
• Correction of prior filings: File this form to amend inaccurate or incomplete data related to trust income, distributions, or owner statements previously submitted to the Internal Revenue Service.
• Discovery of ownership: File when a U.S. person identifies previously unreported ownership or a financial interest in a foreign grantor trust that triggers reporting obligations under the Internal Revenue Code.
• Compliance response: Submit the form after receiving IRS correspondence regarding missing or incomplete returns to demonstrate compliance and avoid further penalties.
• Trust structure changes: File when a person transfers property into a foreign trust, when constructive transfers occur, or when changes in trust property affect its reporting status.

If your situation also involves domestic trust or estate reporting, our Form 1041 income tax return guide explains how U.S. trust filings interact with foreign trust disclosures.

Key Rules or Details for 2018

The 2018 tax year introduced several requirements and compliance details for IRS Form 3520-A (2018) that affected foreign trust reporting by U.S. persons. Understanding these rules helps ensure accurate submissions and reduces exposure to penalties under the Internal Revenue Code.

• Penalty structure: The initial penalty equals $10,000 or 5% of the gross value of the trust’s assets treated as owned by a U.S. person, with additional penalties for continued noncompliance.
• Identification numbers: Each foreign trust must obtain an EIN or reference ID; U.S. citizens and responsible parties cannot substitute a Social Security Number.
• U.S. agent requirement: When a foreign trust does not appoint a U.S. agent, the filer must attach complete trust deeds, financial statements, and all amendments.
• Filing method: The Internal Revenue Service required all filings to be submitted by mail to the Ogden Service Center, as e-filing was not available for the 2018 tax year.
• Trust’s tax year alignment: For income tax purposes, the tax year must correspond with the U.S. owner’s reporting period, ensuring consistent treatment of trust income and distributions.

Where foreign trusts hold or distribute U.S.-source income, the withholding rules described in our Form 1042 annual withholding tax return guide may also apply.

Step-by-Step (High Level)

Filing IRS Form 3520-A (2018) accurately requires careful preparation, complete documentation, and attention to reporting details for foreign trusts.

1. Gather documents: Collect financial statements, trust deeds, and records of property transferred, foreign gifts, or marketable securities held by the foreign trust.
2. Verify tax year: Confirm that the filing corresponds with the correct tax year, ensuring the trust’s income and distributions align with the U.S. owner’s reporting obligations.
3. Prepare required statements: Include the foreign grantor trust owner statement and the foreign grantor trust beneficiary statement for each U.S. beneficiary or grantor trust owner.
4. Use the correct form version: Always file using the official 2018 Form 3520-A, as using later versions may result in the Internal Revenue Service rejecting or delaying processing.
5. File properly: Mail the completed form to the Ogden Service Center; if submitting a substitute Form 3520-A, attach it to Form 3520 rather than mailing it separately.
6. Maintain records: Keep all documents, mailing confirmations, and statements for a reasonable period to support compliance, avoid penalties, and demonstrate good-faith effort in reporting.

If late or amended filings coincide with unfiled income tax returns, our resource on unfiled federal income tax returns outlines how to regain IRS compliance.

Common Mistakes and How to Avoid Them

Many filers make avoidable mistakes when submitting IRS Form 3520-A (2018), often leading to unnecessary penalties or delays in processing. Below are common errors and how to prevent them effectively:

• Mailing substitute returns separately: Always attach a substitute Form 3520-A to Form 3520 when the foreign trust fails to file; submitting it separately can result in rejection or additional penalties.
  
  
• Omitting owner or beneficiary statements: Each U.S. owner and U.S. beneficiary must have their own required annual statements included to meet reporting obligations under the Internal Revenue Code.
  
  
• Incorrect valuations: Calculate the foreign trust’s assets using fair market value, avoiding book value or estimated amounts that could trigger compliance issues.
  
  
• Improper identification numbers: Use the trust’s EIN or reference ID and never replace it with a PTIN or Social Security Number to ensure proper IRS record matching.
  
  
• Weak reasonable cause explanations: When requesting penalty abatement, provide a detailed, well-documented explanation showing reasonable effort and include the penalties-of-perjury declaration.
  
  
• Missing deadlines: Filing after the due date without extension approval can result in an initial penalty equal to 5% of the trust’s gross value and continued fines for noncompliance.

What Happens After You File

After submitting IRS Form 3520-A (2018), the Internal Revenue Service generally reviews the filing within six to eight weeks, depending on the complexity of the foreign trust’s income and activities. You may receive acknowledgment letters, requests for additional information, or penalty assessments if discrepancies are found. Late filings can qualify for penalty relief through a reasonable cause statement, although the review process may take several months. 

If the foreign trust files correctly afterward, penalties may be reduced, and appeal options are available through the IRS Appeals Office. Maintaining all financial statements, trust property records, and correspondence ensures proper documentation for compliance purposes.

FAQs

What are foreign financial assets concerning IRS Form 3520-A (2018)?

Foreign financial assets include trust holdings, accounts, and property managed outside the United States that a U.S. beneficiary or U.S. owner must report. These assets include investment accounts, securities, or funds in a foreign grantor trust or other related entities.

How do foreign trusts affect U.S. reporting requirements?

Under the Internal Revenue Code, foreign trusts require detailed disclosure of ownership and distributions. A U.S. beneficiary must report income and transactions connected to the trust to ensure proper tax treatment and avoid penalties for failing to disclose foreign-held income or assets.

What defines a foreign grantor trust for U.S. tax purposes?

A foreign grantor trust is one where a non-U.S. entity retains ownership control, but a U.S. person has reporting responsibility. This can include situations involving Canadian retirement plans or trusts where the U.S. individual exercises primary supervision over distributions or investment decisions.

Who is required to file Form 3520 in connection with Form 3520-A?

A U.S. owner or U.S. beneficiary must file Form 3520 when reporting certain foreign trust transactions, ownership interests, or foreign partnership connections. The form ensures foreign gifts, transfers, and ownership structures comply with IRS disclosure requirements for cross-border trust and estate activities.

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