Form 3520 Filing Assistance | Foreign Gifts, Inheritances & Foreign Trust Reporting 

Form 3520 Filing Services by Z-Tax & Accounting

If you received a large gift from a foreign person, inherited assets from a non-U.S. individual, or have an interest in a foreign trust, you may be required to file IRS Form 3520. Failure to file this information return can result in substantial penalties, even when no tax is owed.

At Z-Tax & Accounting, we assist individuals, expatriates, dual citizens, green card holders, international families, and U.S. taxpayers with foreign reporting obligations, including Form 3520, Form 3520-A, FBAR (FinCEN Form 114), Form 8938, and Streamlined Filing Compliance Procedures.

What Is Form 3520?

Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, is an information return required by the Internal Revenue Service (IRS).

The form is used to report:

• Large gifts received from foreign individuals

• Large gifts received from foreign estates

• Gifts received from foreign corporations or foreign partnerships

• Certain transactions involving foreign trusts

• Ownership interests in foreign trusts

• Distributions received from foreign trusts

Form 3520 is generally filed separately from your income tax return and serves as an informational disclosure to the IRS.

When Is Form 3520 Required?

You may be required to file Form 3520 if:

Foreign Gifts or Inheritances

A U.S. person receives gifts or inheritances from:

• A foreign individual

• A foreign estate

that exceed the annual IRS reporting threshold.

The reporting threshold is adjusted periodically by the IRS. In many recent years, gifts and inheritances from foreign individuals or estates exceeding approximately $100,000 have required disclosure.

Gifts From Foreign Corporations or Partnerships

You may also need to file Form 3520 if you receive gifts from:

• Foreign corporations

• Foreign partnerships

that exceed the IRS reporting threshold for the year.

Foreign Trust Transactions

Form 3520 may also be required if you:

• Create a foreign trust

• Transfer assets to a foreign trust

• Receive distributions from a foreign trust

• Own certain interests in a foreign trust

Foreign trust reporting requirements are highly complex and often require coordination with Form 3520-A and other international information returns.

Is a Foreign Inheritance Taxable?

In many situations, an inheritance received from a foreign individual or foreign estate is not taxable income for U.S. federal income tax purposes.

However, even when no tax is due, the inheritance may still need to be reported on Form 3520.

Many taxpayers mistakenly assume that because an inheritance is not taxable, no reporting is required. This misunderstanding frequently leads to missed filings and potential penalties.

Examples of Foreign Gifts and Inheritances

Common situations requiring Form 3520 review include:

• Inheritance received from parents living abroad

• Funds transferred from overseas family members

• Gifts received from non-U.S. relatives

• Inherited foreign bank accounts

• Inherited foreign investment accounts

• Foreign real estate inherited from family members

• Funds distributed from a foreign family trust

• Transfers from foreign family businesses

Penalties for Failure to File Form 3520

The IRS may assess substantial penalties for failure to file Form 3520 when required.

Potential penalties may apply for:

• Late filing

• Incomplete filing

• Inaccurate filing

• Failure to disclose foreign gifts

• Failure to report foreign trust transactions

In some cases, penalties can reach thousands of dollars even when no tax is owed.

Because international information return penalties can be severe, taxpayers should address filing obligations promptly.

Form 3520 and Other International Reporting Requirements

Taxpayers required to file Form 3520 may also have additional international reporting obligations.

Depending on your situation, you may also need:

FBAR (FinCEN Form 114)

Required when the aggregate value of foreign financial accounts exceeds reporting thresholds.

Form 8938

Statement of Specified Foreign Financial Assets.

Form 5471

Information Return of U.S. Persons With Respect to Certain Foreign Corporations.

Form 8865

Return of U.S. Persons With Respect to Certain Foreign Partnerships.

Form 8858

Information Return for Foreign Disregarded Entities.

Form 8621

PFIC reporting for certain foreign mutual funds and investment accounts.

Missed Form 3520 Filings?

Many taxpayers discover years later that they should have filed Form 3520.

Common reasons include:

• Unaware of reporting requirements

• Incorrect professional advice

• Recent discovery of foreign reporting obligations

• Inherited foreign accounts not previously disclosed

• Immigration to the United States after receiving foreign assets

In many situations, corrective filing options may be available, including Streamlined Filing Compliance Procedures and other international tax compliance solutions.

Each case should be evaluated individually.

How Z-Tax & Accounting Can Help

We assist clients nationwide and internationally with:

• Form 3520 preparation

• Form 3520-A preparation

• Foreign gift reporting

• Foreign inheritance reporting

• Foreign trust reporting

• FBAR filings

• Form 8938 reporting

• Streamlined Domestic Offshore Procedures (SDOP)

• Streamlined Foreign Offshore Procedures (SFOP)

• Delinquent international information return submissions

• IRS correspondence involving foreign reporting matters

Our firm works with clients who have foreign assets, foreign bank accounts, overseas inheritances, foreign trusts, and international tax compliance concerns.

Schedule a Consultation

If you received a foreign gift, inherited assets from a non-U.S. person, or have questions regarding foreign trust reporting requirements, contact Z-Tax & Accounting for a confidential consultation.

We can help determine whether Form 3520 is required, evaluate any related international reporting obligations, and assist with achieving IRS compliance while minimizing potential penalties.

Z-Tax & Accounting
International Tax Compliance • Expat Tax Services • Foreign Reporting • IRS Representation

Serving clients throughout the United States and internationally.

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