What IRS Form 3520 (2018) Is For

Form 3520 is used by U.S. persons to report certain transactions with foreign trusts, ownership interests in foreign trusts under the grantor trust rules, and the receipt of large gifts or bequests from foreign individuals or entities. You must file this form if you created or transferred property to a foreign trust, are treated as an owner of a foreign trust, received distributions from a foreign trust, or received gifts above specified thresholds from foreign sources during 2018.

When You'd Use Form 3520 for 2018 (Late or Amended Filing)

You'd file Form 3520 for 2018 as a late or amended return if you received IRS notices about missing information returns, discovered unreported foreign trust transactions or gifts after filing your 2018 income tax return, or need to correct incomplete or inaccurate information previously submitted.

Late filing is common when taxpayers become aware of reporting requirements after receiving IRS correspondence or during subsequent tax years when consulting professionals about international tax obligations. The IRS extends the statute of limitations for tax assessment to three years from when the complete Form 3520 is finally filed, giving them additional time to review your tax situation.

Key Rules Specific to 2018

The 2018 Form 3520 follows the same fundamental reporting requirements as other years, with foreign gift thresholds of $100,000 from individuals/estates and $16,076 from corporations/partnerships. The form was due by April 15, 2019 (or June 15, 2019 for qualifying overseas filers), with extensions available until October 15, 2019.

All forms must be mailed to IRS, P.O. Box 409101, Ogden, UT 84409, as electronic filing was not available for this form in 2018.

Step-by-Step (High Level)

• Gather documentation: Collect account transcripts, foreign trust documents, gift records, and any related correspondence from the IRS or foreign entities
  
  
• Complete the correct-year form: Use the 2018 version of Form 3520 with all applicable Parts (I-IV) based on your specific reporting requirements
  
  
• Attach required schedules: Include trust agreements, financial statements, and any supporting documentation as specified in the instructions
  
  
• Mail with tracking: Send the complete package via certified mail to the Ogden, UT processing center with all required attachments
  
  
• Keep comprehensive copies: Maintain copies of everything filed, including proof of mailing, for your permanent records
  
  

Common Mistakes and How to Avoid Them

• Missing the filing requirement entirely - Review the detailed "Who Must File" criteria carefully, as many taxpayers don't realize they need to report foreign gifts or trust relationships
  
  
• Incomplete form submission - Ensure all applicable Parts are completed and all required attachments are included, as incomplete forms trigger penalty assessments
  
  
• Wrong identifying information - Double-check trust names, addresses, and identifying numbers, as incorrect information can delay processing and trigger penalties
  
  
• Misunderstanding gift thresholds - Remember that the thresholds are aggregate amounts from related foreign persons, not per-gift limits
  
  
• Failing to coordinate with Form 3520-A - If you're a U.S. owner of a foreign trust, ensure the trust files its Form 3520-A and provides you with required annual statements
  
  
• Not claiming reasonable cause - If filing late, include a detailed reasonable cause statement explaining why the failure wasn't due to willful neglect
  
  

What Happens After You File

The IRS typically takes several months to process Form 3520, as these are complex information returns requiring manual review. You may receive notices requesting additional information or clarification about reported transactions.

If penalties were assessed for late filing, you can request reasonable cause consideration by providing detailed explanations and supporting documentation. For any amounts owed, you can request an installment agreement using Form 9465 to pay over time.

If you disagree with IRS determinations, you have appeal rights through the IRS Appeals Office, typically within 30 days of receiving an adverse notice.

FAQs

What penalties apply for filing Form 3520 late for 2018?

Penalties are severe, typically the greater of $10,000 or up to 35% of unreported transfers/distributions, plus 5% per month (up to 25%) for unreported foreign gifts. However, penalties can be waived if you demonstrate reasonable cause and not willful neglect.

Can I get transcripts for international information returns like Form 3520?

Yes, you can request transcripts through IRS.gov, by calling 1-800-908-9946, or using Form 4506-T. These transcripts show what the IRS has on file and help verify your filing history.

How long do I have to file an amended Form 3520 for 2018?

There's no specific statute of limitations for amending information returns like Form 3520. However, file as soon as you discover errors or omissions to minimize potential penalties and show good faith compliance.

If I file Form 3520 late, do I need to amend my 2018 income tax return?

Not necessarily. Form 3520 is an information return that may not affect your tax liability. However, if the foreign trust transactions or gifts should have been reported as income, you may need to file Form 1040X to amend your income tax return.

Should I also amend my state tax return after filing Form 3520?

This depends on your state's conformity with federal international reporting requirements. Consult your state's tax authority or a tax professional to determine if state filing obligations exist.

What constitutes "reasonable cause" for late filing?

Reasonable cause requires showing the failure was due to circumstances beyond your control and not willful neglect. Examples include serious illness, natural disasters, or reliance on erroneous professional advice. Foreign secrecy laws or uncooperative trustees are specifically not considered reasonable cause.

Can I request penalty abatement for Form 3520 penalties?

Yes, you can request penalty abatement based on reasonable cause, first-time penalty abatement (if eligible), or administrative waiver provisions. Submit a detailed written request with supporting documentation explaining the circumstances that led to late filing.

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