Form 3520 Reference for Tax Professionals
General background on foreign gifts, inheritances, and foreign trust reporting for professional preparers. Verify current IRS instructions and the facts of each client’s situation.
Foreign Gifts & Inheritances (Part IV)
Under Internal Revenue Code Section 6039F, U.S. citizens and resident aliens who receive gifts or inheritances from non-U.S. foreign sources during the tax year must report them on Part IV of Form 3520 if the aggregate threshold is met:
• Gifts from Foreign Non-Resident Individuals or Estates:
Filing required if total aggregate gifts exceed $100,000 USD in the tax calendar year. If total exceeds $100k, each individual gift transaction over $5,000 must be itemized (Date, Description, Fair Market Value).
• Gifts from Foreign Corporations or Partnerships:
Filing required if total aggregate gifts exceed $20,116 USD for 2025 / $20,573 USD for 2026 (indexed annually for inflation).
Note: Foreign gifts are generally not taxable income for U.S. federal income tax purposes, but failure to report the gift on Form 3520 can result in reporting penalties.
Foreign Trust Reporting (Parts I, II & III)
Form 3520 is also used to report creation of, transfers to, and distributions from foreign trusts:
- Part I: Transfers by U.S. persons to foreign trusts during the tax year.
- Part II: U.S. owner of a foreign trust (must also ensure Form 3520-A is filed by trust trustee).
- Part III: Receipt of distributions, cash loans, or uncompensated use of property from a foreign trust.
IRS Non-Filing Penalty Breakdown
The IRS enforces some of the strictest civil tax penalties for delinquent or missing Form 3520 filings:
Part IV Foreign Gift Penalties
Penalty equal to 5% of the gift amount per month late, up to a maximum of 25% of the total foreign gift.
Foreign Trust Penalties
Initial penalty of $10,000 or 35% of the gross reportable amount, whichever is greater.
Deadlines & Form 4868 Extensions
Form 3520 is due on the date that your individual income tax return (Form 1040) is due (generally April 15th, or June 15th if living outside the U.S. on April 15th).
If you file an extension for Form 1040 (Form 4868), the extension automatically extends your Form 3520 deadline to October 15th.
IRS Mailing Instructions & Certified Mail
Form 3520 MUST NOT be attached to your Form 1040 income tax return. It is a standalone filing sent directly to:
P.O. Box 409101
Ogden, UT 84409 USA
The preparer is responsible for verifying the current mailing address, permitted delivery method, and applicable proof-of-timely-filing requirements using current IRS instructions.
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