Fill in a Valid IRS 3520 Template

The IRS 3520 form is a tax document that individuals and entities must file to report certain transactions with foreign trusts and the receipt of foreign gifts. This form helps the IRS keep track of foreign financial dealings and ensures compliance with U.S. tax laws. If you need to fill out the IRS 3520, click the button below for assistance.

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The IRS 3520 form plays a crucial role for American taxpayers who have foreign trusts or have received foreign gifts. This form is not merely a routine tax document; it provides the IRS with important information regarding your financial interactions with non-U.S. entities. To ensure compliance, taxpayers must report certain transactions involving foreign trusts, as well as gifts that exceed specified thresholds. It is essential to understand that failing to file this form correctly or on time can lead to hefty penalties, which is why recognizing its importance cannot be overstated. The IRS uses the data collected through Form 3520 to assess potential tax obligations, ensuring transparency and accountability when it comes to cross-border financial activities. Navigating the intricacies of this form requires attention to detail, given that it asks for specific information about the trust, its beneficiaries, and any relevant transactions. Understanding the criteria for filing, the deadlines involved, and potential exemptions can help taxpayers meet their reporting requirements efficiently.

IRS 3520 Example

Form 3520

Department of the Treasury Internal Revenue Service

Annual Return To Report Transactions With

Foreign Trusts and Receipt of Certain Foreign Gifts

▶Go to www.irs.gov/Form3520 for instructions and the latest information.

OMB No. 1545-0159

2020

Note: All information must be in English. Show all amounts in U.S. dollars. File a separate Form 3520 for each foreign trust.

For calendar year 2020, or tax year beginning				, 2020, ending			, 20
A	Check appropriate boxes:	Initial return	Final return	Amended return

B	Check box that applies to person filing return:		Individual	Partnership	Corporation	Trust	Executor

C	Check if any excepted specified foreign financial assets are reported on this form. See instructions

Check all applicable boxes. See applicable instructions.

You are (a) a U.S. transferor who, directly or indirectly, transferred money or other property during the current tax year to a foreign trust; (b) a U.S. person who (1) during the current tax year, transferred property (including cash) to a related foreign trust (or a person related to the trust) in exchange for an obligation, or (2) holds a qualified obligation from the trust that is currently outstanding; or (c) the executor of the estate of a U.S. decedent and (1) the decedent made a transfer to a foreign trust by reason of death, (2) the decedent was treated as the owner of any portion of a foreign trust immediately prior to death, or (3) the decedent’s estate included any portion of the assets of a foreign trust. Complete all applicable identifying information requested below and Part I of the form.

You are a U.S. owner of all or any portion of a foreign trust at any time during the tax year. Complete all applicable identifying information requested below and Part II of the form.

You are (a) a U.S. person (including a U.S. owner) or an executor of the estate of a U.S. person who, during the current tax year, received, directly or indirectly, a distribution from a foreign trust; (b) a U.S. person who is a U.S. owner or beneficiary of a foreign trust and in the current tax year, you or a U.S. person related to you received (1) a loan of cash or marketable securities, directly or indirectly, from such foreign trust, or (2) the uncompensated use of trust property; or (c) a U.S. person who is a U.S. owner or beneficiary of a foreign trust and in the current tax year such foreign trust holds an outstanding qualified obligation of yours or a U.S. person related to you. Complete all applicable identifying information requested below and Part III of the form.

You are a U.S. person who, during the current tax year, received certain gifts or bequests from a foreign person. Complete all applicable identifying information requested below and Part IV of the form.

1a	Name of U.S. person(s) with respect to whom this Form 3520 is being filed (see instructions)				b	Taxpayer identification number (TIN)

c	Number, street, and room or suite no. If a P.O. box, see instructions.				d	Spouse’s TIN

e	City or town	f State or province		g ZIP or foreign postal code	h	Country

i	Check the box if you are married and filing a joint 2020 income tax return, and you are filing a joint Form 3520 with your spouse . . .

j	If an automatic 2-month extension applies for the U.S. person’s tax return, check this box and attach statement. See instructions . . ▶

k	If an extension was requested for the tax return, check this box		and enter the form number of the tax return to be filed. ▶

2a	Name of foreign trust (if applicable)				b Employer identification number (EIN), if any

cNumber, street, and room or suite no. If a P.O. box, see instructions.

dDate foreign trust was created

eCity or town

fState or province

gZIP or foreign postal code

hCountry

3	Did the foreign trust appoint a U.S. agent (defined in the instructions) who can provide the IRS with all relevant trust information?						Yes	No
	If “Yes,” complete lines 3a through 3g. If “No,” and you are required to complete Part I, complete lines 15 through 18.

3a	Name of U.S. agent				b	TIN, if any

c Number, street, and room or suite no. If a P.O. box, see instructions.

d	City or town	e State or province		f ZIP or postal code	g	Country

4a	Name of U.S. decedent (see instructions)		b Address		c	TIN of decedent

d	Date of death				e	EIN of estate

fCheck applicable box.

U.S. decedent made transfer to a foreign trust by reason of death.
U.S. decedent treated as owner of foreign trust immediately prior to death.
Assets of foreign trust were included in estate of U.S. decedent.
For Privacy Act and Paperwork Reduction Act Notice, see instructions.	Cat. No. 19594V	Form 3520 (2020)

Form 3520 (2020)

Page 2

Part I Transfers by U.S. Persons to a Foreign Trust During the Current Tax Year (see instructions)

5a Name of trust creator

bAddress

cTIN, if any

6a Country code of country where trust was created

bCountry code of country whose law governs the trust

cDate trust was created

7a Will any person (other than the foreign trust) be treated as the owner of the transferred assets after the transfer? . . . .

Yes

b(i)

Name of foreign

trust owner

(ii)

Address

(iii)

Country of residence

(iv)

TIN, if any

(v)

Relevant Code

section

8	Was the transfer a completed gift or bequest? If “Yes,” see instructions	Yes	No
9a	Now or at any time in the future, can any part of the income or corpus of the trust benefit any U.S. beneficiary? . . . .	Yes	No
b	If “No,” could the trust be revised or amended to benefit a U.S. beneficiary?	Yes	No
10	Reserved for future use	Yes	No
10	Reserved for future use	Yes	No

Schedule A—Obligations of a Related Trust (see instructions)

11a During the current tax year, did you transfer property (including cash) to a related foreign trust in exchange for an obligation of the trust or an obligation of a person related to the trust? See instructions . . . . . . . . . . . . . .

If “Yes,” complete the rest of Schedule A, as applicable. If “No,” go to Schedule B.

bWere any of the obligations you received (with respect to a transfer described in line 11a above) qualified obligations? . .

If “Yes,” complete the rest of Schedule A and attach a copy of each loan document entered into with respect to each qualified obligation reported on line 11b. If these documents have been attached to a Form 3520 filed within the previous 3 years, attach only relevant updates.

If “No,” go to Schedule B.

Yes No

(i)

Date of transfer giving rise to obligation

(ii)

Maximum term

(iii)

Yield to maturity

(iv)

FMV of obligation

12With respect to each qualified obligation you reported on line 11b, do you agree to extend the period of assessment of any income or transfer tax attributable to the transfer, and any consequential income tax changes for each year that the

obligation is outstanding, to a date 3 years after the maturity date of the obligation?	Yes	No
Note: You have the right to refuse to extend the period of limitations or limit this extension to a mutually agreed-upon
issue(s) or mutually agreed-upon period of time. Generally, if you refuse to extend the period of limitations with respect to
each qualified obligation you reported on line 11b, then such obligation is not a qualified obligation and you cannot check
“Yes” to the question on line 11b.

Schedule B—Gratuitous Transfers (see instructions)

13During the current tax year, did you make any transfers (directly or indirectly) to the trust and receive less than FMV, or no

consideration at all, for the property transferred?				. . . . . . . . . . . . .			. . . . . . . . .		Yes	No
If “Yes,” complete columns (a) through (i) below and the rest of Schedule B, as applicable. When completing columns (a)
through (i) with respect to each nonqualified obligation, enter “-0-” in column (h).
If “No,” go to Schedule C.

(a)	(b)	(c)	(d)		(e)	(f)	(g)	(h)	(i)
Date of	Description	FMV of property	U.S. adjusted		Gain recognized	Excess, if any,	Description	FMV of property	Excess of
transfer	of property	transferred	basis of		at time of	of column (c)	of property	received	column (c) over
	transferred		property		transfer,	over the sum of	received,		column (h)
			transferred		if any	columns (d) and (e)	if any




Totals ▶						$			$

14You are required to attach a copy of each sale or loan document entered into in connection with a transfer reported on line 13. If these documents have been attached to a Form 3520 filed within the previous 3 years, attach only relevant updates.

				Attached	Year
	Are you attaching a copy of any of the following?	Yes	No	Previously	Attached
a	Sale document
b	Loan document
c	Subsequent variances to original sale or loan documents

Form 3520 (2020)

Page 3

Part I Schedule B—Gratuitous Transfers (continued)

Note: Complete lines 15 through 18 only if you answered “No” to line 3, acknowledging that the foreign trust did not appoint a U.S. agent to provide the IRS with all relevant trust information.

15	(a)	(b)		(c)		(d)
	Name of beneficiary	Address of beneficiary		U.S. beneficiary?		TIN, if any

				Yes	No





16	(a)	(b)				(c)
	Name of trustee	Address of trustee				TIN, if any





17	(a)	(b)	(c)			(d)
	Name of other person	Address of other person with trust powers	Description of powers			TIN, if any
	with trust powers	Address of other person with trust powers	Description of powers			TIN, if any
	with trust powers

18If you checked “No” on line 3, you are required to attach a copy of all trust documents as indicated below. If these documents have been attached to a Form 3520-A or Form 3520 filed within the previous 3 years, attach only relevant updates.

				Attached	Year
	Are you attaching a copy of any of the following?	Yes	No	Previously	Attached
a	Summary of all written and oral agreements and understandings relating to the trust . . . .
b	Trust instrument
c	Memoranda or letters of wishes
d	Subsequent variances to original trust documents
e	Trust financial statements
f	Organizational chart and other trust documents

Schedule C—Qualified Obligations Outstanding in the Current Tax Year (see instructions)

19Did you, at any time during your tax year, hold an outstanding obligation of a related foreign trust (or a person related to the

trust) that you reported as a qualified obligation in the current tax year?	Yes	No
If “Yes,” complete columns (a) through (f) below for each obligation.

(a)

Date of original

obligation

(b)

Tax year qualified

obligation first reported

(c)

Amount of principal

payments made during

your tax year

(d)

Amount of interest

payments made during

your tax year

(e)

Balance of the outstanding

obligation at the end

of the tax year

(f)

Does the obligation

still meet the criteria for a qualified obligation?

Yes

Form 3520 (2020)

Form 3520 (2020)								Page 4
Part II		U.S. Owner of a Foreign Trust (see instructions)
20		(a)		(b)	(c)	(d)	(e)
		Name of foreign	Address		Country of tax residence	TIN, if any	Relevant Code
		trust owner	Address		Country of tax residence	TIN, if any	section
		trust owner					section



21a	Country code of country where foreign trust was created			b Country code of country whose law governs the trust		c Date foreign trust was created

22	Did the foreign trust file Form 3520-A for the current year?					. . . . .	Yes	No
	If “Yes,” attach the Foreign Grantor Trust Owner Statement you received from the foreign trust.
	If “No,” to the best of your ability, complete and attach a substitute Form 3520-A for the foreign trust.
	See instructions for information on penalties for failing to complete and attach a substitute Form 3520-A.

23Enter the gross value of the portion of the foreign trust that you are treated as owning at the end of your tax year . ▶ $

Part III Distributions to a U.S. Person From a Foreign Trust During the Current Tax Year (see instructions)

Note: If you received an amount from a portion of a foreign trust of which you are treated as the owner, only complete lines 24 and 27.

24Enter cash amounts or FMV of property received, directly or indirectly, during your current tax year, from the foreign trust (exclude loans and uncompensated use of trust property included on line 25).

(a)	(b)	(c)	(d)	(e)	(f)
Date of distribution	Description of property received	FMV of property received	Description of property	FMV of property	Excess of column (c)
		(determined on date	transferred, if any	transferred	over column (e)
		of distribution)

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ▶ $

25During your current tax year, did you (or a person related to you) receive a loan or uncompensated use of trust property from a

related foreign trust (including an extension of credit upon the purchase of property from the trust)?	Yes	No
If “Yes,” complete columns (a) through (g) below for each such loan or use of trust property.

Note: See instructions for additional information, including how to complete columns (a) through (g) for use of trust property.

(a)	(b)	(c)	(d)		(e)		(f)	(g)
(a)	(b)	(c)	(d)	Is the obligation a			(f)	Amount treated as
FMV of loan proceeds	Date of original	Maximum term of	Interest rate	qualified obligation?			FMV of qualified	distribution from the trust
or property	transaction	repayment of	of obligation				obligation	(subtract column (f)
		obligation		Yes		No		from column (a))

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ▶ $

26With respect to each obligation you reported as a qualified obligation on line 25, do you agree to extend the period of assessment of any income or transfer tax attributable to the transaction, and any consequential income tax changes for each

year that the obligation is outstanding, to a date 3 years after the maturity date of the obligation? . . .	.	.	.	. . .	Yes	No
Note: You have the right to refuse to extend the period of limitations or limit this extension to a mutually agreed-upon issue(s)
or mutually agreed-upon period of time. Generally, if you refuse to extend the period of limitations with respect to an obligation
that you reported as a qualified obligation on line 25, then such obligation is not a qualified obligation and you cannot check
“Yes” in column (e) of line 25.
27 Total distributions received during your current tax year. Add line 24, column (f), and line 25, column (g) .	.	.	.	▶ $

28Did the trust, at any time during the current tax year, hold an outstanding obligation of yours (or a person related to you) that

you reported as a qualified obligation?	Yes	No
If “Yes,” complete columns (a) through (f) below for each obligation.

(a)	(b)	(c)	(d)
Date of original	Tax year qualified	Amount of principal payments	Amount of interest payments
loan transaction	obligation first	made during your tax year	made during your tax year
	reported

(e)

Balance of the outstanding

obligation at the end

of the tax year

(f)

Does the loan still

meet the criteria of a qualified obligation?

Yes

Form 3520 (2020)

Page 5

Part III Distributions to a U.S. Person From a Foreign Trust During the Current Tax Year (continued)

29Did you receive a Foreign Grantor Trust Beneficiary Statement from the foreign trust with respect to a distribution? If “Yes,” attach the statement and do not complete the remainder of Part III with respect to that distribution.

If “No,” complete Schedule A with respect to that distribution. Also, complete Schedule C if you enter an amount greater than zero on line 37.

30Did you receive a Foreign Nongrantor Trust Beneficiary Statement from the foreign trust with respect to a distribution?

If “Yes,” attach the statement and complete either Schedule A or Schedule B below. See instructions. Also, complete Schedule C if you enter an amount greater than zero on line 37 or line 41a.

If “No,” complete Schedule A with respect to that distribution. Also, complete Schedule C if you enter an amount greater than zero on line 37.

Yes

No N/A

Schedule A—Default Calculation of Trust Distributions (see instructions)

31	Enter amount from line 27	. . . . . . . . .			31
32	Number of years the trust has been a foreign trust (see instructions) . . . ▶	32

33Enter total distributions received from the foreign trust during the 3 preceding tax years (or during the number

	of years the trust has been a foreign trust, if fewer than 3 years)	33
34	Multiply line 33 by 1.25	34

35Average distribution. Divide line 34 by 3.0 (or the number of years the trust has been a foreign trust, if fewer

	than 3 years) and enter the result		35
36	Amount treated as ordinary income earned in the current year. Enter the smaller of line 31 or line 35 . . .		36
37	Amount treated as accumulation distribution. Subtract line 36 from line 31. If zero, do not complete the rest of Part III		37
38	Applicable number of years of trust. Divide line 32 by 2.0 and enter the result here ▶	38

Schedule B—Actual Calculation of Trust Distributions (see instructions)

39	Enter amount from line 27
40a	Amount treated as ordinary income in the current tax year
b	Qualified dividends	. . . . . . . . . . . ▶	40b
41a	Amount treated as accumulation distribution. If zero, do not complete Schedule C, Part III
b	Amount of line 41a that is tax exempt .	. . . . . . . . . . . ▶	41b
42a	Amount treated as net short-term capital gain in the current tax year
b	Amount treated as net long-term capital gain in the current tax year
c	28% rate gain	. . . . . . . . . . . ▶	42c
d	Unrecaptured section 1250 gain . .	. . . . . . . . . . . ▶	42d
43	Amount treated as distribution from trust corpus

44Enter any other distributed amount received from the foreign trust not included on lines 40a, 41a, 42a, 42b,

	and 43. (Attach explanation.)
45	Amount of foreign trust’s aggregate undistributed net income
46	Amount of foreign trust’s weighted undistributed net income

47Applicable number of years of trust. Divide line 46 by line 45 and enter the result

here . . . . . . . . . . . . . . . . . . . . . . ▶

Schedule C—Calculation of Interest Charge (see instructions)

40a

41a

42a

42b

48	Enter accumulation distribution from line 37 or line 41a, as applicable	48
49	Enter tax on total accumulation distribution from line 28 of Form 4970. (Attach Form 4970—see instructions.) .	49

50Enter applicable number of years of foreign trust from line 38 or line 47, as

	applicable (round to nearest half year) . . . . . . . . . . . . ▶	50
51	Combined interest rate imposed on the total accumulation distribution (see instructions)		51
52	Interest charge. Multiply the amount on line 49 by the combined interest rate on line 51		52

53Tax attributable to accumulation distributions. Add lines 49 and 52. Enter here and as “additional tax” on your

income tax return

Form 3520 (2020)

Page 6

Part IV U.S. Recipients of Gifts or Bequests Received During the Current Tax Year From Foreign Persons (see instructions)

54During your current tax year, did you receive more than $100,000 that you treated as gifts or bequests from a nonresident

alien (including a distribution received from a domestic trust treated as owned by a foreign person) or a foreign estate? See

Yes

instructions for special rules regarding related donors

. . .

If “Yes,” complete columns (a) through (c) with respect to each such gift or bequest in excess of $5,000. If more space is

needed, attach a statement.

(a)

(b)

(c)

Date of gift or bequest

Description of property received

FMV of property received

Total

▶

55During your current tax year, did you receive more than $16,649 that you treated as gifts from a foreign corporation or a foreign partnership (including a distribution received from a domestic trust treated as owned by a foreign person)? See

instructions regarding related donors

. . . . .

. . .

Yes

If “Yes,” complete columns (a) through (g) with respect to each such gift. If more space is needed, attach a statement.

(a)

(b)

(c)

(d)

Date of gift

Name of foreign donor

Address of foreign donor

TIN, if any

(e)

(f)

(g)

Check the box that applies to the foreign donor

Description of property received

FMV of property received

Corporation

Partnership

Do you have any reason to believe that the foreign donor, in making any gift or bequest described in lines 54 and 55, was

acting as a nominee or intermediary for any other person? If “Yes,” see instructions . . . .

. . . . .

. . .

Yes

Under penalties of perjury, I declare that I have examined this return, including any accompanying reports, schedules, or statements, and to the best of my

Sign

knowledge and belief, it is true, correct, and complete.

Here

▲

Signature

Title

Date

Paid

Print/Type preparer’s name

Preparer’s signature

Date

Check

PTIN

self-employed

Preparer

Firm’s name

▶

Firm’s EIN ▶

Use Only

Firm’s address ▶

Phone no.

Form 3520 (2020)

Click for IRS 3520 File

File Breakdown

Fact Name	Description
Purpose	The IRS Form 3520 is used to report certain transactions with foreign trusts and receipts of certain foreign gifts.
Who Needs to File	U.S. persons, including citizens and residents, must file this form if they receive gifts over a certain amount from foreign individuals or if they have foreign trust transactions.
Filing Deadline	The form is due on the 15th day of the 4th month after the end of the taxpayer's tax year. Extensions may apply.
Penalties for Non-Compliance	If you fail to file, fines can be substantial, reaching up to 35% of the amount involved.
Foreign Gift Limits	For 2023, you must report gifts over $100,000 from foreign individuals or over $16,649 if it’s from foreign estates or corporations.
Governing Law	This form is governed primarily by the Internal Revenue Code, particularly sections 6048 and 6039F.

Guide to Using IRS 3520

Once you gather all necessary documents, you will be ready to complete the IRS Form 3520. This form requires specific information regarding foreign trusts and transactions with foreign corporations. Take your time while filling it out to ensure accuracy.

Start by downloading the latest version of IRS Form 3520 from the official IRS website.
Read the instructions included with the form carefully, ensuring you understand what is required.
At the top of the form, fill in your personal information including your name, address, and taxpayer identification number.
Identify the type of event that requires you to file this form by checking the corresponding box on the form.
Provide detailed information regarding the foreign trust or foreign corporation involved. Include the name, address, and identifying number.
Input the value of any assets transferred during the applicable tax year. Be sure to have supporting documentation on hand.
If there are any distributions made to you from the foreign trust, such distributions must be detailed clearly.
Complete any additional sections that apply to your specific situation, following the instructions for each section carefully.
Review the form thoroughly to catch any errors or omissions. Ensure all required signatures are present.
Make a copy of the completed form for your records before submitting it.
Submit the form by the due date, ensuring it is sent to the correct IRS address as specified in the instructions.

Get Answers on IRS 3520

What is the IRS Form 3520?

The IRS Form 3520 is used to report certain transactions with foreign trusts and the receipt of foreign gifts. This form helps the IRS track overseas financial activities to ensure compliance with U.S. tax laws.

Who needs to file Form 3520?

You need to file Form 3520 if you are a U.S. person and you:

Receive a distribution from a foreign trust
Are the grantor of a foreign trust
Receive gifts exceeding $100,000 from foreign individuals or estates

When is the due date for filing Form 3520?

Form 3520 is due on the 15th day of the 4th month following the end of the tax year. For most people, this means it is usually due by April 15. If you file for an extension for your federal tax return, it will also apply to Form 3520.

What are the consequences of not filing Form 3520?

If you fail to file Form 3520 when required, you may face significant penalties. The IRS may impose a penalty of up to 35% of the amount received from foreign trusts or gifts not reported. Other penalties may also apply depending on your specific situation.

What information do I need to provide on Form 3520?

The form requires detailed information, including:

Your name and address
The name and address of the foreign trust or individual
Details about the transactions or gifts
The value of the assets involved

Can I file Form 3520 electronically?

As of now, the IRS does not allow electronic filing of Form 3520. You must print it out, complete it, and mail it to the appropriate address based on your location.

Is there a specific format for Form 3520?

Form 3520 must be completed using the official IRS form format. Follow the instructions provided with the form carefully to ensure all required information is included and accurately reported.

What should I do if I receive a notice from the IRS about Form 3520?

If you receive a notice from the IRS regarding Form 3520, it is important to read it carefully. The notice may ask for additional information or confirm that you have not filed the form. Respond in a timely manner and consult with a tax professional if needed.

Where can I get help with Form 3520?

You may find information and resources on the official IRS website. Additionally, consulting a tax professional or an attorney who specializes in international tax issues can provide you with personalized assistance.

Common mistakes

Filling out the IRS Form 3520 can be a daunting task, and mistakes often occur. One common error is failing to file the form altogether. Individuals may overlook the requirement if they are not fully aware of their obligations regarding foreign trusts or gifts. Thus, it is important to understand when the form is necessary to avoid penalties.

Another mistake frequently made is misreporting specific amounts. When individuals fail to accurately report the value of gifts or distributions, they risk facing significant monetary fines. It is essential to carefully calculate any amounts being reported on the form to ensure accuracy.

Many also neglect to include all necessary documentation. The IRS requires that certain additional forms and information accompany the 3520. Without the proper attachments, the form is incomplete, which can trigger further inquiries from the IRS.

Some filers incorrectly assume that they can submit their form without an accompanying explanation for any discrepancies. Clear explanations regarding foreign trusts or gifts help establish context and may mitigate potential issues. Supporting documentation may also fortify one’s case during any audits.

Using the wrong form version is another prevalent error. People sometimes mistakenly refer to older versions of the form, leading to potential compliance problems. It is crucial to ensure that the most current version of the form is used at the time of submission.

In addition, individuals may be unaware of deadlines for filing. Delays can lead to late fees, so understanding all relevant timelines is vital. Planning ahead and knowing when the form is due can help avoid unnecessary stress.

A frequent oversight involves not signing the form correctly. A form that is not signed, or is signed incorrectly, is considered invalid. This seemingly small detail can delay processing and create additional complications.

Lastly, inadequate record-keeping often proves detrimental. Many individuals fail to maintain appropriate records related to foreign gifts or trusts that might be necessary for their future filings. Keeping thorough documentation can be invaluable in providing evidence if questions arise later.

Documents used along the form

The IRS Form 3520 serves as an essential document for U.S. taxpayers reporting certain transactions with foreign trusts and receipt of foreign gifts. Due to the complexity of international financial regulations, several other forms and documents are frequently used in conjunction with Form 3520. These documents help ensure compliance with tax obligations and provide comprehensive reporting of foreign financial interests.

IRS Form 3520-A: This is the Annual Information Return of Foreign Trust With a U.S. Owner. It provides detailed information about the foreign trust's income, deductions, and distributions. It complements Form 3520 by offering a clearer picture of the trust's financial situation.
IRS Form 8938: This form is known as the Statement of Specified Foreign Financial Assets. Taxpayers use it to report foreign financial assets that exceed certain thresholds. It is critical for identifying financial interests that may not be covered by Form 3520.
FinCEN Form 114: Also referred to as the Foreign Bank Account Report (FBAR), this document must be filed by U.S. persons with foreign bank accounts that exceed $10,000 at any time during the calendar year. Noncompliance can lead to substantial penalties.
IRS Form 8858: This is the Information Return of U.S. Persons With Respect to Foreign Disregarded Entities. This form is necessary for taxpayers owning foreign entities that are disregarded for U.S. tax purposes and helps in disclosing ownership and financial details.
IRS Form 5471: This document relates to the Information Return of U.S. Persons With Respect to Certain Foreign Corporations. It is required for shareholders of certain foreign corporations and provides detailed information on the corporation’s finances and activities.
IRS Form 8621: This form is for reporting Interest in a Passive Foreign Investment Company (PFIC). Taxpayers who hold shares in a PFIC must file this return to report their income from these investments.
IRS Form 1065: The U.S. Return of Partnership Income is filed by partnerships to report their income, deductions, gains, and losses. Partnerships with foreign partners or investments may need to be aware of Form 3520 implications.

These forms and documents collectively support U.S. taxpayers in fulfilling their reporting obligations regarding foreign trusts and assets. Being aware of and compliant with each requirement is critical for mitigating potential penalties and ensuring accurate tax reporting.

Similar forms

The IRS Form 3520 relates to the reporting of certain transactions with foreign trusts and the receipt of foreign gifts. Here are five documents that share similarities with Form 3520:

IRS Form 709: This form is for reporting gifts and calculating any gift tax owed. Much like Form 3520, it requires the disclosure of significant financial gifts, ensuring compliance with tax regulations.
IRS Form 8865: Used for reporting foreign partnerships, Form 8865 is similar in that it requires U.S. taxpayers to report their interest in foreign entities, just as Form 3520 does for foreign trusts.
IRS Form 8938: This form is utilized for reporting specified foreign financial assets. Both Form 8938 and Form 3520 help ensure that U.S. taxpayers disclose their foreign financial activities to the IRS, thus maintaining transparency.
FBAR (FinCEN Form 114): The Foreign Bank Account Report requires individuals to report foreign bank accounts held outside the U.S. Similar to Form 3520, FBAR aims to prevent tax evasion by tracking foreign financial interests.
IRS Form 5500: This form is used for reporting employee benefit plans. While it covers different topics, it similarly maintains strict reporting standards for financial entities, ensuring that relevant information is made available to the IRS.

Dos and Don'ts

When filling out the IRS 3520 form, it’s essential to follow certain practices to ensure that the submission is accurate and complete. Here are ten things you should and shouldn't do:

Do read the instructions carefully before starting the form.
Don't rush through the form; take your time to understand each section.
Do gather all necessary documentation beforehand to support your claims.
Don't leave any fields blank; if a question does not apply, mark it as “N/A” or “None.”
Do double-check your calculations for accuracy.
Don't submit the form without signing and dating it.
Do keep a copy of the completed form for your records.
Don't ignore deadlines; timely submission is crucial to avoid penalties.
Do use clear and legible handwriting if filling out a paper form.
Don't forget to consult a tax professional if you have questions or uncertainties.

Misconceptions

The IRS Form 3520, known as the Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts, is often misunderstood. Here are some common misconceptions about this form:

Misconception 1: Only U.S. citizens need to file Form 3520.

This is incorrect. Both U.S. citizens and resident aliens must file Form 3520 if they engage in certain transactions with foreign trusts or receive foreign gifts above specific thresholds.

Misconception 2: Filing Form 3520 is optional if the individual believes they will not owe taxes.

Filing is not optional. Even if no tax is owed, failure to file may result in significant penalties. It's essential to adhere to reporting requirements to avoid such consequences.

Misconception 3: Form 3520 and Form 3520-A are the same and can be filed interchangeably.

This is a common misunderstanding. Form 3520-A is specifically for foreign trusts, while Form 3520 is for U.S. persons. Each serves different purposes and has distinct filing requirements.

Misconception 4: The deadline for filing Form 3520 aligns with the tax return deadline.

This is misleading. Form 3520 has its own filing deadline, which may differ from that of the standard income tax return. It's crucial to be aware of the specific due dates for compliance.

Key takeaways

When dealing with the IRS 3520 form, there are several important points to keep in mind. This form is used to report certain transactions with foreign trusts and the receipt of certain foreign gifts. It's essential to fill it out correctly to avoid penalties. Here are some key takeaways:

The IRS 3520 form must be filed by U.S. persons who receive gifts from foreign entities exceeding $100,000 or inheritances over $10,000.
It is crucial to file the form by the due date, which is typically the same as your tax return deadline but can be extended.
Accurate reporting is necessary. Be thorough when detailing the source of gifts or trust transactions to prevent misunderstandings.
Keeping copies of the form and any supporting documents is vital for your records. You may need them for future reference or audits.
Fines for late or incomplete submissions can be severe, so taking the time to understand and complete the form properly is essential.