What IRS Form 3520 (2025) Is For
A U.S. person uses IRS Form 3520 (2025) to report certain transactions involving a foreign trust, ownership of a foreign trust under the grantor trust rules, or the receipt of large gifts or bequests from foreign persons. It enables the Internal Revenue Service to monitor and enforce compliance with international reporting requirements related to income tax and asset transfers.
This form applies to individuals, estates, and entities with financial connections to foreign trusts or that receive substantial foreign gifts. It ensures that property transferred, distributions received, and foreign trust assets treated as owned by a U.S. person are reported adequately for income tax purposes. Filing this annual return also helps the IRS verify whether the taxpayer has accurately reflected any income from these transactions on their income tax return.
For additional international reporting forms that may apply alongside foreign trust disclosures, you can visit our IRS Form Help Center to review related filing requirements.
When You’d Use IRS Form 3520 (2025)
You would file IRS Form 3520 (2025) when you engage in transactions involving foreign trusts or receive foreign gifts or bequests that meet IRS reporting thresholds.
- Receiving foreign gifts: File Form 3520 if you receive certain foreign gifts or bequests that exceed the fair market thresholds for the tax year, as required by the Internal Revenue Code.
- Transactions with foreign trusts: File Form 3520 when you transfer property to, receive distributions from, or otherwise report transactions with foreign trusts as a U.S. person.
- Becoming a U.S. owner of a foreign trust: File Form 3520 if you become an owner under sections 671–679 of the Internal Revenue Code for income tax purposes.
- Filing amended or late returns: File Form 3520 as an amended or late submission if you discover unreported transactions involving foreign trusts or certain foreign gifts after your original filing.
If your filing also involves domestic trust or estate reporting, our Form 1041 income tax return for estates and trusts guide explains how domestic trust rules interact with foreign trust compliance.
Key Rules or Details for 2025
The Internal Revenue Service has updated several important provisions and compliance details for IRS Form 3520 (2025) for the 2025 tax year.
- Updated thresholds: The fair market value threshold for gifts from foreign corporations or partnerships has increased to $20,116, while the threshold for gifts from foreign individuals remains at $100,000.
- Penalty relief policy: Beginning October 24, 2024, the Internal Revenue Service announced that penalties for late-filed Forms 3520 are no longer automatic and will be reviewed based on reasonable cause.
- Filing deadline: IRS Form 3520 must be filed by the 15th day of the fourth month after the end of the person’s tax year unless an extension has been approved.
- Filing method: The form cannot be filed electronically and must be mailed to the Internal Revenue Service Center in Ogden, Utah, for proper processing.
- Ownership reporting: A U.S. owner must ensure that the foreign trust files Form 3520-A or attach a substitute form to meet the annual reporting requirements for trust assets.
When foreign trust transactions involve U.S.-source income, the withholding requirements outlined in our Form 1042 annual withholding tax return guide may also apply.
Step-by-Step (High Level)
Follow these essential steps to ensure that IRS Form 3520 (2025) is completed accurately and filed in compliance with IRS procedures.
- Gather account transcripts: Request your IRS account transcripts to confirm whether any related returns have been filed and to review any prior notices regarding foreign transactions.
- Use the correct-year form: Ensure that you file the version of Form 3520 that matches the specific tax year involved, as using the wrong form may delay IRS processing or create discrepancies.
- Attach supporting schedules: Include Form 3520-A, detailed statements of trust property, and any reasonable cause explanations or identifying information required for full compliance.
- Mail the completed form: Please mail the signed form to the Internal Revenue Service Center in Ogden, Utah, since Form 3520 cannot be filed electronically.
- Keep copies for records: Maintain copies of the filed form, attachments, and fair market documentation to verify your compliance and to provide support in the event of an IRS inquiry.
To better understand how foreign gift reporting compares with domestic gift tax rules, you can review our Form 709 gift tax return guide.
Common Mistakes and How to Avoid Them
Many taxpayers make avoidable errors when filing IRS Form 3520 (2025). The following points explain the most common mistakes and how to prevent them.
- Do not file separate forms for each trust: File Form 3520 for each foreign trust rather than combining multiple trusts on one form to ensure accurate reporting.
- Missing gift reporting thresholds: Report gifts that exceed the IRS fair market value limits to report foreign gifts promptly and comply with reporting requirements.
- Incomplete ownership sections: Complete Part II for all U.S. owners of foreign trusts, even when no trust transactions occurred during the same tax year, to meet ownership disclosure obligations.
- Using an incorrect form version: To maintain consistency with IRS documentation, use the version of Form 3520 that corresponds with the specific tax year being filed.
- Omitting Form 3520-A attachments: Attach a substitute Form 3520-A if the foreign trust does not file its return, so the Internal Revenue Service has the necessary trust information.
- Failing to provide a reasonable cause statement: If filing late, include a written reasonable cause statement explaining circumstances such as illness or military or naval service that prevented timely filing.
If your late or amended Form 3520 filing overlaps with unfiled income tax returns, our resource on unfiled federal income tax returns provides steps for restoring full IRS compliance.
What Happens After You File
After you file Form 3520, the IRS usually processes it within six to eight weeks, although complex cases may take longer. The Internal Revenue Service may send an acknowledgment of receipt or request additional information if details require verification. Under the updated policy, penalties for late or amended filings are reviewed individually to determine whether reasonable cause applies.
You may establish a payment plan for principal and interest payments using Form 9465 or other IRS-approved options if tax is owed. U.S. taxpayers who disagree with any penalty or adjustment retain the right to appeal through the IRS Collections Due Process procedures.
FAQs
When is a U.S. person required to report a foreign trust?
A U.S. person must file Form 3520 promptly to report any transactions involving a foreign trust, including property transfers, ownership interests, or distributions received during the tax year. Filing ensures proper disclosure of reporting obligations under the Internal Revenue Code.
How should foreign persons be reported on Form 3520?
Suppose a U.S. taxpayer receives foreign gifts or transactions from foreign persons. In that case, they must include the sender’s identifying details and taxpayer identification number, when available, to help the IRS verify compliance with income tax reporting rules.
What qualifies as a foreign gift under IRS rules?
Foreign gifts include money or property received from a nonresident alien individual, foreign corporation, or partnership whose gross value exceeds IRS thresholds for the specific tax year. To meet federal reporting obligations, these must be reported on Form 3520.
Does a foreign estate require filing Form 3520?
Suppose a U.S. person receives a distribution or bequest from a foreign estate that exceeds the fair market reporting limit. In that case, they must file Form 3520 to disclose the transaction and ensure compliance with IRS reporting obligations.
