What IRS Form 3520 (2015) Is For

Form 3520 is the Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts that U.S. persons must file to report specific international activities. You must file this form if you: transferred money or property to a foreign trust, are treated as the owner of foreign trust assets, received distributions from foreign trusts, or received large gifts from foreign persons exceeding specified thresholds (IRS Instructions for Form 3520 (2015)). The form ensures compliance with U.S. tax reporting requirements for complex international financial arrangements.

When You'd Use Form 3520 for 2015 (Late or Amended Filing)

You would file Form 3520 for the 2015 tax year as a late or amended return if you originally failed to file by the April 15, 2016 deadline (or October 15, 2016 with extension) and have now received IRS notices, discovered unreported foreign trust transactions, or need to correct previously filed information.

Common scenarios include receiving CP notices for unreported foreign financial activities, discovering foreign trust ownership or distributions that weren't reported, or needing to correct errors in previously submitted forms. For 2015 filings, the IRS can assess penalties and interest from the original due date, and the statute of limitations for assessment remains open until three years after the complete form is properly filed (IRS Instructions for Form 3520 (2015)).

Key Rules Specific to 2015

The 2015 Form 3520 includes specific provisions under the HIRE Act that took effect after March 18, 2010, affecting foreign trust reporting requirements. Key 2015-specific rules include enhanced reporting for loans from foreign trusts to U.S. persons and stricter definitions of qualified obligations (IRS Form 3520 (2015)).

The form also incorporates Item C, a new checkbox for filers who satisfy Form 8938 reporting obligations by filing Form 3520, which was added to reduce duplicative reporting requirements. These rules differ from earlier versions and established precedents for current foreign trust reporting standards.

Step-by-Step (High Level)

• Gather your tax transcripts using Form 4506-T to obtain account transcripts for 2015 and verify previously filed returns (IRS.gov)
  
  
• Complete the correct 2015 version of Form 3520 using the specific year's instructions and forms available from IRS.gov prior year forms section
  
  
• Attach required schedules (A, B, C as applicable), trust documents, and any substitute Form 3520-A if the foreign trust didn't file
  
  
• Mail the completed form to Internal Revenue Service Center, P.O. Box 409101, Ogden, UT 84409 as specified in the 2015 instructions
  
  
• Keep copies of all submitted documents and maintain supporting records for the extended assessment period
  
  

Common Mistakes and How to Avoid Them

• Incomplete trust identification: Always provide either an EIN or reference ID number for the foreign trust on line 2b to ensure proper IRS tracking (IRS Instructions for Form 3520 (2015))
  
  
• Missing reasonable cause statements: If filing late, attach detailed explanations for reasonable cause to potentially avoid penalties under Section 6677
  
  
• Incorrect gross value calculations: Use fair market value as determined under Section 2031 regulations, maintaining contemporaneous records of valuation methods (IRS Instructions for Form 3520 (2015))
  
  
• Forgetting the assessment period extension: Remember that incomplete filings extend the IRS assessment period to three years after proper submission (Section 6501(c)(8))
  
  
• Mixing tax years: Use only the 2015 version of forms and instructions, as requirements differ between tax years
  
  
• Inadequate documentation: Attach all required trust documents, sale agreements, and loan documents as specified in the instructions to avoid processing delays
  
  

What Happens After You File

The IRS processes Form 3520 filings and may send acknowledgment letters, requests for additional documentation, or penalty assessments if reasonable cause isn't established.

If you owe penalties or taxes, you can request installment agreements using Form 9465 for monthly payment plans (IRS.gov).

The IRS maintains appeal rights under standard procedures if you disagree with penalty assessments or determinations. Keep in mind that filing Form 3520 may trigger reviews of related returns or generate additional correspondence requiring responses within specified timeframes.

FAQs

What penalties apply for late filing of 2015 Form 3520?

Penalties are the greater of $10,000 or 35% of property transferred to foreign trusts, 35% of distributions received, or 5% of trust assets owned, with additional penalties for continued noncompliance (IRS Instructions for Form 3520 (2015)).

Can I get transcripts for 2015 to help prepare my late filing?

Yes, use Form 4506-T to request account transcripts or access them online through IRS.gov, which will show previously filed information and any IRS actions on your account.

How long does the IRS have to assess penalties after I file late?

The assessment period doesn't expire until three years after you file a complete Form 3520, regardless of when the original return was due (Section 6501(c)(8)).

Should I also amend my state tax return?

Check with your state tax authority, as requirements vary by state for international reporting form amendments.

What constitutes reasonable cause for avoiding penalties?

Reasonable cause requires demonstrating the failure was not due to willful neglect, but foreign privacy laws or trust restrictions don't qualify as reasonable cause (Section 6677(d), IRS Instructions for Form 3520 (2015)).

Can I set up a payment plan if I owe penalties?

Yes, you can request installment agreements using Form 9465 or apply through IRS.gov payment options if you cannot pay penalties in full.

Do I need to file separate forms for multiple foreign trusts?

Yes, you must file a separate Form 3520 for each foreign trust, as specified in the instructions, though spouses filing jointly may combine their reporting on one form per trust (IRS Instructions for Form 3520 (2015)).

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