What IRS Form 3520 (2019) Is For

IRS Form 3520 is an annual information return that U.S. persons must file to report certain transactions with foreign trusts, ownership of foreign trusts, and receipt of large gifts or bequests from foreign persons.

The form serves four main reporting purposes:

• Reporting transfers to foreign trusts (Part I)
  
  
• Reporting U.S. ownership of foreign trusts under grantor trust rules (Part II)
  
  
• Reporting distributions received from foreign trusts (Part III)
  
  
• Reporting foreign gifts exceeding specific thresholds (Part IV)
  
  

(IRS Instructions for Form 3520 (2019))

When You'd Use Form 3520 for 2019 (Late or Amended Filing)

Taxpayers typically file Form 3520 for the 2019 tax year in late or amended situations when they discover unfiled obligations after receiving IRS notices of penalties or during compliance reviews.

Common scenarios include discovering unreported foreign trust transactions, receiving CP notices for unpaid international penalties, or learning about reporting requirements through professional advice.

Since the original due date was April 15, 2020 (or October 15, 2020 with extension), late filers face significant penalties but may still claim reasonable cause relief (IRS Failure to File Form 3520/3520-A Penalties). The statute of limitations for assessment remains open until three years after a complete and accurate Form 3520 is filed, making compliance essential even years later.

Key Rules Specific to 2019

The 2019 tax year followed the penalty structure implemented after December 31, 2009, where initial penalties equal the greater of $10,000 or 35% of the gross reportable amount for Parts I and III reporting failures.

For 2019, foreign gift reporting thresholds were $100,000 from nonresident alien individuals or foreign estates, and $16,388 from foreign corporations or partnerships (IRS Instructions for Form 3520 (2019)).

The 2019 form required separate filing for each foreign trust and mandated attachment of Form 3520-A owner statements when applicable. Extension provisions allowed filing until October 15, 2020, for taxpayers who properly extended their 2019 individual returns.

Step-by-Step (High Level)

• Begin by gathering tax transcripts using Form 4506-T to understand your filing history and any assessed penalties
  
  
• Complete the correct 2019 version of Form 3520, ensuring all required parts are filled accurately based on your specific foreign trust relationships or gift receipts
  
  
• Attach all required schedules including Form 3520-A statements if you're reporting trust ownership, and prepare detailed computations for penalty calculations if seeking reasonable cause relief
  
  
• Mail the complete package to Internal Revenue Service Center, P.O. Box 409101, Ogden, UT 84409, as Form 3520 cannot be filed electronically
  
  
• Keep copies of all submitted documents and certified mail receipts, as processing times can extend several months and the IRS may request additional documentation (IRS Instructions for Form 3520 (2019))
  
  

Common Mistakes and How to Avoid Them

• Incomplete valuation reporting - Ensure all property transfers and distributions are valued using section 2512 methods as of the transaction date, maintaining contemporaneous records of your valuation methodology
  
  
• Missing Form 3520-A attachments - When reporting trust ownership, always attach the required owner statements from Form 3520-A, or complete substitute statements if the foreign trust failed to file
  
  
• Incorrect penalty calculations - Distinguish between initial penalties (greater of $10,000 or 35% of gross reportable amount) and continuation penalties ($10,000 per 30-day period after 90 days from notice)
  
  
• Filing separate forms requirement - Submit a separate Form 3520 for each foreign trust, as combining multiple trusts on one form creates processing complications
  
  
• Reasonable cause documentation gaps - Include a complete written statement under penalties of perjury explaining circumstances, contemporaneous documentation, and good faith efforts to comply
  
  
• Missing foreign gift aggregation - Properly aggregate related-party gifts to determine if reporting thresholds are met, as gifts from related foreign persons must be combined for threshold purposes
  
  

What Happens After You File

The IRS typically processes Form 3520 within 6-12 months, though complex cases involving penalty disputes may take longer. You'll receive acknowledgment of receipt, followed by either acceptance or additional information requests through correspondence.

If penalties were previously assessed, the Service will review your reasonable cause arguments and may abate penalties or maintain assessments requiring payment or appeal.

For outstanding balances, you can request installment agreements using Form 9465 or explore other payment options (IRS International Information Reporting Penalties). Appeals rights exist for penalty determinations, allowing taxpayers to contest assessments through the Office of Appeals within specified timeframes, typically 30 days from the final penalty determination notice.

FAQs

Can I still file Form 3520 for 2019 even though it's years late?

Yes, no statute of limitations prevents late filing, and filing remains beneficial to stop continuing penalties and establish reasonable cause arguments.

What penalties apply to late 2019 Form 3520 filing?

Initial penalties equal the greater of $10,000 or 35% of unreported amounts, plus potential continuation penalties of $10,000 per 30-day period, though reasonable cause may provide relief.

How do I get tax transcripts to prepare my late filing?

Request transcripts using Form 4506-T or online at irs.gov/individuals/get-transcript to obtain return and account information for the 2019 tax year.

Is there a refund statute concern for 2019?

Form 3520 is an information return that doesn't generate refunds, but related income tax amendments have a three-year refund statute from the original due date.

Should I amend my state return when filing late Form 3520?

Form 3520 reporting typically doesn't affect state tax liability since it's federal information reporting, but consult state-specific rules regarding foreign income disclosure requirements.

Can continuation penalties exceed the reportable amount?

No, total penalties cannot exceed the gross reportable amount, and any excess must be refunded per IRC section 6677(e).

What constitutes reasonable cause for late Form 3520 filing?

Reasonable cause requires demonstrating that failure to comply was due to circumstances beyond your control and not willful neglect, supported by contemporaneous documentation and good faith compliance efforts.

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