What IRS Form 3520-A (2025) Is For
IRS Form 3520-A is an annual information return used to report financial activity related to a foreign trust that includes at least one U.S. person as an owner. The form provides essential details about the trust’s income, distributions, and specified foreign financial assets for income tax purposes. It allows the Internal Revenue Service to verify the accuracy of foreign trust reporting and assess any related tax obligations.
Each U.S. owner must ensure the form is complete and accurate, even when the foreign trustee fails to submit it. The form includes sections covering foreign financial accounts, trust income statements, and foreign gifts distributed to U.S. beneficiaries. Accurate filing helps maintain compliance with federal reporting requirements for foreign financial assets.
Additional guidance on foreign reporting obligations appears in the International & Foreign Reporting Forms resource.
When You’d Use Form 3520-A (2025)
A U.S. owner or foreign grantor trust owner must file Form 3520-A when a foreign trust has financial activity during the trust’s tax year. A person must also file the form when transferring property to a foreign trust or when a U.S. person exercises primary supervision over substantial decisions involving foreign assets. The filing requirements apply to both grantor and foreign non-grantor trusts that generate taxable income reportable to the Internal Revenue Service.
Form 3520-A is used to report transactions, trust income, and any qualified obligation linked to the foreign entity. The annual return must be filed on or before the due date stated in the Internal Revenue Code for calendar year taxpayers. Filing the correct tax forms ensures compliance for U.S. taxpayers, U.S. beneficiaries, and foreign trusts operating in a foreign country.
Key Rules or Details for 2025
A few important changes affect how U.S. owners and taxpayers must manage their reporting obligations for the 2025 tax year. The Internal Revenue Service requires every person treated as an owner of a foreign trust to use the continuous-use version of Form 3520-A. This requirement applies to both grantor and foreign non-grantor trusts that have foreign income, U.S. beneficiaries, or asset holdings.
- Each filer must submit the annual return, which includes trust income statements and beneficiary details.
- Each filer must provide information for all U.S. persons who exercise substantial decisions or primary supervision over the trust.
- Each filer must review every section carefully before submission to prevent penalties for noncompliance.
- Each filer must timely file Form 3520-A and follow all ordinary reporting rules.
Step-by-Step (High Level)
The steps below summarize how a U.S. owner prepares and files Form 3520-A correctly for the 2025 tax year. Each action ensures full compliance with grantor trust rules and reduces the likelihood of missing required annual statements. This process helps protect the filer’s financial accuracy and strengthens asset protection compliance.
Step 1: Gather all records of the foreign bank accounts, distributions, and transactions involving U.S. beneficiaries or owners.
Step 2: Complete each section of the form with accurate information about the trust’s income and financial activities.
Step 3: Include all required annual statements with the income tax return.
Step 4: File the Form 3520-A on time and keep copies for official recordkeeping or legal verification if required.
Common Mistakes and How to Avoid Them
Frequent filing errors in Form 3520-A submissions create delays and accuracy issues for foreign trust reporting. Early identification of procedural problems strengthens compliance and supports proper record matching. Accurate documentation also improves the agency’s ability to review trust activity without interruption. Consistent adherence to required steps reduces rejected or incomplete filings.
- Incorrect Employer Identification Number: This mistake appears when a filer enters an EIN that differs from the trust’s official records, and prevention requires confirming the correct EIN directly from the trust’s formation documents before preparing the return.
- Missing Grantor or Trustee Signatures: This issue appears when signature lines on annual statements remain unsigned, and prevention requires obtaining all required signatures before submission.
- Incomplete Foreign Financial Statements: This problem appears when annual statements lack dividend details or asset summaries, and prevention requires reviewing each schedule to ensure full reporting.
- Omitted Beneficiary Information: This mistake appears when beneficiary statements lack identifying data or distribution entries, and prevention requires validating every beneficiary record for completeness.
What Happens After You File
After a U.S. owner files Form 3520-A, the Internal Revenue Service reviews the return to confirm that all reporting obligations have been met. The agency checks the accuracy of financial data reported for foreign trusts, beneficiaries, and owners. U.S. taxpayers must respond promptly if additional information or documentation is requested to complete the review.
The Internal Revenue Service may evaluate the filing for any indication of tax avoidance or noncompliance with international reporting rules. Reviews can include examining related returns, such as those reporting certain business income tax or foreign trust distributions. U.S. beneficiaries and related parties must retain supporting records to verify ownership, income, and transactions involving foreign persons.
Completing an accurate and timely filing demonstrates cooperation with federal tax law. Consistent compliance also helps U.S. persons and U.S. owners avoid scrutiny related to offshore scheme promoters.
FAQs
What types of foreign financial assets must be reported on Form 3520-A?
Filers are required to report all foreign trust assets, financial interest holdings, and any transactions involving a foreign estate. These include income-generating investments, trust distributions, and accounts managed abroad. Complete reporting helps meet foreign trust reporting requirements.
What happens if a foreign trust fails to file its annual return?
The U.S. owner must prepare a substitute form or a substitute Form 3520 and include it with their filing. The Internal Revenue Service expects accurate reporting of all foreign trust files and assets. Filing on time helps prevent penalties and maintain compliance.
Are certain foreign gifts or inheritances reportable?
Yes, certain foreign gifts or bequests linked to foreign trusts or foreign persons must be disclosed on Form 3520-A. Reporting these gifts ensures transparency for income tax and gift taxes.
How is foreign trust income treated for U.S. taxpayers?
Foreign trust income is taxable to the U.S. owner or U.S. beneficiaries according to grantor trust rules. The income must be reported accurately within the trust’s financial statements. Unreported income may prompt an IRS review for potential noncompliance with tax laws.
Does Foreign Trust Reporting Cover Canadian Retirement Plans?
Certain Canadian retirement plans qualify as tax-favored foreign trusts and require annual disclosure. Filers must include these accounts when listing foreign financial assets. Reporting them ensures compliance for business income tax and estate tax purposes.
Who should file Form 3520-A?
Any U.S. owner or grantor trust owner with a financial interest in a foreign trust must file the annual return. The filing includes details about U.S. beneficiaries, foreign trust income, and certain foreign gifts. Proper completion satisfies foreign trust reporting requirements for U.S. taxpayers.
Assistance with form preparation is provided through the IRS Form Help Center.
