Form 3520 (Rev. December 2023)–2024 Tax Year Checklist
Purpose
Form 3520 reports transactions with foreign trusts and the receipt of certain large foreign gifts or bequests. U.S. individuals use this form to report transfers to foreign trusts, ownership interests in foreign trusts, distributions received from foreign trusts, and foreign gifts or bequests exceeding specified thresholds. The December 2023 form revision maintains a continuous-use format, applicable for tax year 2024 and subsequent years until superseded.
Who Must File
You must file Form 3520 if you are a U.S. person and any of the following apply:
- You created a foreign trust or transferred property to a foreign trust during 2024
- You are treated as the owner of any portion of a foreign trust under grantor trust rules (sections 671-679)
- You received a distribution from a foreign trust during 2024
- You received gifts or bequests from a nonresident alien or foreign estate exceeding $100,000 in aggregate during 2024
- You received gifts from foreign corporations or partnerships exceeding $19,570 in aggregate during 2024
Filing Steps for 2024
Step 1: Determine Your Filing Status
Identify which reporting category applies to you: U.S. transferor to a foreign trust (Part I), U.S. owner of a foreign trust (Part II), distributee from a foreign trust (Part III), or recipient of large foreign gifts or bequests (Part IV). You may need to complete multiple parts if more than one category applies.
Step 2: Verify U.S. Person Status
Confirm you meet the definition of a U.S. person, which includes U.S. citizens, U.S. residents (including dual residents claiming treaty benefits), domestic partnerships, domestic corporations, non-foreign estates, and domestic trusts. Nonresident aliens generally do not file Form 3520 unless they are executors of U.S. decedent estates.
Step 3: Complete Identifying Information
Fill in the header section on page 1 with your name, taxpayer identification number, address, and the tax year being reported. If you and your spouse are both transferors, owners, or beneficiaries of the same foreign trust and filing a joint income tax return, you may file a joint Form 3520 by checking box 1i.
Step 4: Report Transfers to Foreign Trusts (Part I)
If you transferred property to a foreign trust in 2024, complete Part I. Determine whether you received a qualified obligation in exchange for your transfer. For qualified obligations, complete Schedule A with the transfer date, obligation term (maximum 5 years), yield to maturity (100-130% of applicable federal rate), and fair market value. Attach loan documents unless previously filed within the prior 3 years. On line 12, agree to extend the assessment period to 3 years beyond the obligation’s maturity date.
Step 5: Report Gratuitous Transfers (Part I, Schedule B)
Complete Schedule B for all gratuitous transfers made in 2024 to a related foreign trust where you did not receive full fair market value consideration. Report the property description, date of transfer, cost basis, fair market value, gain recognized, and any property received in return. Complete all columns accurately for lines 13a through 13i.
Step 6: Identify U.S. Agent or Provide Trust Details
On line 3, indicate whether the foreign trust has appointed a U.S. agent. If the trust has a U.S. agent, provide the agent’s name, address, and taxpayer identification number. If no U.S. agent exists, complete lines 15-18 listing all beneficiaries, trustees, and persons with trust powers. Attach complete trust documents unless you are filing only updates to previously submitted documents.
Step 7: Complete U.S. Owner Reporting (Part II)
Suppose you are treated as the owner of a foreign trust under grantor trust rules—complete Part II. Determine whether the foreign trust filed Form 3520-A (Annual Information Return of Foreign Trust With a U.S. Owner). If the trust failed to file Form 3520-A, you must complete and attach a substitute Form 3520-A to your Form 3520 to avoid penalties. The substitute form is due by the same date as your Form 3520.
Step 8: Report Distributions from Foreign Trusts (Part III)
Suppose you received distributions from a foreign trust in 2024—complete Part III. Check line 29 if you received a Foreign Grantor Trust Beneficiary Statement from the trust. If yes, attach the statement and do not complete the remainder of Part III for that distribution. Check line 30 if you received a Foreign Nongrantor Trust Beneficiary Statement and attach it. If you received neither statement, complete Schedule A for each distribution.
Step 9: Calculate Accumulation Distribution Tax
For nongrantor trust distributions, determine whether you received an accumulation distribution by completing the applicable schedules in Part III. If line 48 shows an accumulation distribution amount, use Form 4970 (Tax on Accumulation Distribution of Trusts) as a worksheet. Enter the amount from line 48 on Form 4970 line 1, compute the tax using Form 4970 lines 1-28, and enter the result from Form 4970 line 28 on Form 3520 line 49. Attach the completed Form 4970 worksheet to your Form 3520. Report this additional tax on your 2024 income tax return.
Step 10: Report Large Foreign Gifts and Bequests (Part IV)
Complete Part IV if you received aggregate gifts or bequests exceeding the reporting thresholds in 2024. For gifts or bequests from nonresident aliens or foreign estates, report if the aggregate amount from each donor exceeded $100,000. Once this threshold is met, separately identify each gift exceeding $5,000. For gifts from foreign corporations or partnerships, report if the aggregate amount from all such entities exceeded $19,570—complete lines 54a through 54c with donor information and gift amounts.
Step 11: File Separate Forms for Each Trust
Prepare and file a separate Form 3520 for each foreign trust with which you had reportable transactions. Do not combine information for multiple trusts on a single form. Each trust requires its own complete Form 3520 filing.
Step 12: Sign and Submit by the Deadline
Sign and date the form under penalties of perjury. If using a paid preparer, ensure they provide their signature, Preparer Tax Identification Number (PTIN), and firm information. Form 3520 is due by the 15th day of the 4th month following the end of your tax year (generally April 15 for calendar-year individuals).
If you live and work outside the United States, the due date extends to the 15th day of the 6th month (June 15). If you filed for an extension of your income tax return, Form 3520 is due no later than the 15th day of the 10th month (October 15). Mail the completed form to the Internal Revenue Service Center, P.O. Box 409101, Ogden, UT 84409.
Key Definitions
- Foreign Trust: Any trust that does not meet both requirements of a domestic trust. A domestic trust must be subject to primary court supervision in the United States and have one or more U.S. persons with authority to control all substantial decisions.
- Qualified Obligation: An obligation that meets six requirements, including written documentation, a maximum 5-year term, a denomination in U.S. dollars, a yield between 100 and 130% of the applicable federal rate, an agreement to extend the assessment period, and annual status reporting.
- Gratuitous Transfer: Any transfer to a foreign trust apart from a transfer for full fair market value or a distribution to the trust from an entity interest held by the trust.
- U.S. Beneficiary: Any U.S. person who could benefit from the trust at any time, whether or not designated as a beneficiary in the trust instrument.
- Accumulation Distribution: The amount that is distributed beyond what the foreign trust earned in net income for the year, which shows income that was saved up before and already taxed by the trust.
Important Reminders
File Form 3520 separately from your income tax return. A complete Form 3520 includes all required attachments. If you fail to file a complete and timely Form 3520, the assessment period for related taxes remains open until 3 years after the necessary information is properly reported.
Check the amended return box on line A if you are filing an amended Form 3520 for the 2024 tax year. If you filed for an extension to file your income tax return, check box 1k and enter the form number of the tax return for which the extension applies.
Penalties
Failure to file Form 3520 timely or completely may result in penalties equal to the greater of $10,000 or 35% of the gross reportable amount for certain violations. Additional penalties apply if noncompliance continues more than 90 days after the IRS notice. Penalties for failure to report foreign gifts are 5% of the gift amount for each month of noncompliance, up to a maximum of 25%. Reasonable cause may eliminate penalties if you can demonstrate the failure was not due to willful neglect.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
