Form 3520: Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts

Form 3520 is used by certain U.S. persons to report transactions with foreign trusts and certain large gifts or inheritances received from foreign sources.

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Introduction

Form 3520 is a federal tax form used by certain U.S. persons to report specific transactions involving foreign trusts and certain gifts or inheritances received from foreign individuals or entities. The form is generally an information-reporting form rather than a form used to directly calculate regular income tax.

Understanding when Form 3520 may apply can help taxpayers identify reporting responsibilities and provide the information required for transactions involving foreign trusts or certain foreign gifts.

What Is Form 3520?

Form 3520 is an information return used to report certain transactions with foreign trusts and certain gifts or bequests received from foreign persons. The form can apply even when the transaction itself does not create taxable income.

Depending on the taxpayer’s situation, Form 3520 may be used to report information such as:

Transfers of money or property to a foreign trust
Certain transactions involving a foreign trust
Ownership or other interests involving a foreign trust
Distributions received from a foreign trust
Certain large gifts or inheritances received from foreign persons
Other information required for applicable foreign trust or foreign gift transactions

The reporting requirements depend on the type of transaction and the taxpayer’s individual circumstances.

Who Uses Form 3520?

Form 3520 may be required for certain U.S. persons who have reportable transactions involving a foreign trust or who receive certain gifts or bequests from foreign persons. The form may apply to individuals, estates, and other taxpayers depending on the circumstances.

Form 3520 may be relevant to people such as:

U.S. citizens
U.S. resident aliens
Certain U.S. persons involved with foreign trusts
Individuals who transfer property to certain foreign trusts
Individuals who receive distributions from certain foreign trusts
Individuals who receive certain large gifts or inheritances from foreign persons

Not every transaction involving a foreign person or foreign financial asset requires Form 3520. The reporting requirements depend on the specific facts and circumstances.

What Information Is Needed?

The information needed to complete Form 3520 generally depends on the type of reportable transaction. Taxpayers may need information about themselves, the foreign trust or foreign person, the property or money involved, and the dates and amounts associated with the transaction.

You may need:

Your name and taxpayer identification information
Information about the foreign trust, when applicable
Information about the foreign person, when applicable
The date of the transaction
The amount or value of property transferred or received
Information about distributions from a foreign trust
Information about gifts or inheritances received
Information about property transferred to a foreign trust
Supporting records for the reported transaction

Keep records that support the information reported on Form 3520.

How to Fill Out/Complete Form 3520

Form 3520 contains different sections for reporting information about foreign trusts, transfers, distributions, and certain gifts or inheritances. Not every section will apply to every taxpayer.

Review the form carefully and complete the sections that relate to the transaction being reported. Use accurate information and keep supporting documentation with your tax records.

Section 1

Section 1 generally addresses certain transfers of money or other property to a foreign trust. Information may be required about the person making the transfer, the foreign trust, and the property involved.

Provide the requested information about the transfer and the foreign trust when this section applies to your situation.

Section 2

Section 2 generally addresses information about certain transactions involving a foreign trust. This section may require information about the trust, the taxpayer, and the nature of the transaction.

Complete the applicable information based on the transaction being reported and maintain records supporting the amounts and information entered.

Section 3

Section 3 generally addresses distributions or other transactions involving a foreign trust. Taxpayers may need information about amounts received, the foreign trust, and other details related to the distribution.

Report the applicable information accurately and make sure the reported amounts agree with your supporting records.

Section 4

Section 4 generally addresses certain gifts or bequests received from foreign persons. Reporting may apply when the value of qualifying gifts or inheritances reaches an applicable reporting threshold.

Provide the requested information about the foreign person, the gift or inheritance, and the amount or value received when this section applies.

Additional Information

Additional information may be required depending on the type of transaction and the taxpayer’s circumstances. Some taxpayers may need to provide information that explains or supports the transaction being reported.

Review the applicable instructions for the tax year being filed and provide any additional information required for the transaction.

Final Review

Review Form 3520 after completing all applicable sections. Check the taxpayer information, foreign trust information, foreign person information, transfer information, distribution information, gift or inheritance information, transaction dates, amounts or property values, supporting records, and final information reported.

A final review can help identify reporting errors before the form is submitted. Taxpayers should retain Form 3520, foreign trust records, transaction records, gift or inheritance documentation, financial records, tax documents, and other supporting records with their tax records.

Common Mistakes

Common Form 3520 mistakes can result from misunderstanding whether a transaction is reportable, using incorrect amounts, or leaving applicable sections incomplete. Foreign trust transactions and large foreign gifts can have different reporting requirements, so the type of transaction should be identified before completing the form.

Some common issues include:

Failing to recognize a reportable foreign trust transaction
Failing to report a qualifying foreign gift or inheritance
Reporting incorrect transaction amounts
Using incorrect dates
Leaving applicable sections incomplete
Providing incomplete foreign trust information
Failing to keep supporting records
Confusing Form 3520 with other foreign information-reporting forms
Assuming that a reportable transaction must always be taxable income

Review the completed form carefully and make sure the information agrees with your records and other applicable tax filings.

Related IRS Forms

Form 3520 may be associated with other federal tax forms depending on the taxpayer’s circumstances and the type of foreign transaction involved. Other forms may be required to report foreign financial accounts, foreign assets, foreign corporations, partnerships, or other international activities.

Commonly related forms may include:

Form 1040, U.S. Individual Income Tax Return
Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner
Form 8938, Statement of Specified Foreign Financial Assets
FinCEN Form 114, Report of Foreign Bank and Financial Accounts
Other forms or schedules that may apply to foreign transactions or assets

The forms required will depend on the taxpayer’s specific circumstances and the type of foreign activity involved.

Where to File or Submit

Form 3520 generally has its own filing requirements and may not be submitted in the same manner as a taxpayer’s regular federal income tax return. The applicable submission method can depend on the taxpayer’s situation and the version of the form being filed.

Before submitting Form 3520, review the filing requirements for the applicable tax year and make sure the completed form contains all required information.

Current IRS Form & Instructions

Use the Form 3520 and instructions that apply to the tax year being filed. Federal tax forms and instructions may be updated over time, so taxpayers should use the appropriate version for the reporting period.

The general information on this page is intended to remain useful across multiple tax years. Specific filing requirements, reporting thresholds, definitions, and other details should be reviewed for the applicable tax year.

Important Information / Disclaimer

This Form 3520 guide is provided for general informational purposes only and is not tax, legal, or accounting advice. Foreign trust and foreign gift reporting requirements can be complex, and the reporting rules may depend on the type, amount, timing, and nature of a transaction.

Taxpayers should review the applicable tax-year requirements and consider consulting a qualified tax professional when their situation involves foreign trusts, substantial foreign gifts, inheritances, or other complex international tax matters. This page is intended as a general educational guide and should not be used as a substitute for reviewing the applicable tax forms, instructions, and tax rules.