What Form 3520 reports
Form 3520 is an information return, not a tax return. It reports two different things. First, under IRC §6039F, the receipt of large gifts or bequests from foreign persons. Second, under IRC §6048, transactions with foreign trusts: transfers to one, distributions from one, and ownership of one under the grantor-trust rules. A US owner of a foreign trust is also responsible for the trust's own annual return, Form 3520-A, and files a substitute if the trust does not. Form 3520 is due with your income tax return, including extensions, but is filed separately, not attached to Form 1040.
Foreign gifts and inheritances: the thresholds
You must report on Form 3520 if, during the year, you received more than $100,000 in gifts or bequests from a nonresident alien individual or a foreign estate. Gifts from related foreign persons are aggregated to test the threshold, so ten gifts of $15,000 from a parent and their siblings count together. A separate, inflation-adjusted threshold applies to gifts from foreign corporations or partnerships: $20,116 for 2025. The $100,000 individual threshold is fixed and does not adjust. The gift itself is generally excluded from your income under IRC §102; the filing is disclosure, and it exists so the IRS can distinguish a genuine gift from disguised income.
The expat cases that trigger this most often: an inheritance from a non-US parent; a house deposit or wedding gift from foreign in-laws; a family business interest transferred by a foreign relative; and, less obviously, funds moved to you by a foreign family member "to hold" that are in substance a gift.
The penalty for a late or missing gift report
Under IRC §6039F(c), a US person who fails to report a foreign gift on time pays 5 percent of the amount of the gift for each month the failure continues, up to 25 percent of the gift in total, and the IRS may determine the tax consequences of the gift itself. On a $300,000 inheritance reported eight months late, that is the full 25 percent: $75,000, on money that was never taxable. The reasonable-cause exception in §6039F(c)(2) exists and is the basis on which most late reports are filed, but it is a request the IRS evaluates, not a right.
Foreign trusts, and the arrangements that turn out to be one
The trust half of Form 3520 reaches further than the word "trust" suggests. Under US rules, some foreign pension plans, employer savings schemes, education savings arrangements, and family holding structures are classified as foreign trusts even though nobody involved calls them that. The consequences are heavier than for gifts. Under IRC §6677, a failure to report a transfer to a foreign trust or a distribution from one carries a penalty of the greater of $10,000 or 35 percent of the amount involved; a US owner who fails to ensure the trust's Form 3520-A is filed faces the greater of $10,000 or 5 percent of the gross value of the trust's assets. These apply per failure, per year.
Relief exists for the most common expat case. Revenue Procedure 2020-17 exempts eligible tax-favored foreign retirement trusts and certain foreign non-retirement savings trusts from Forms 3520 and 3520-A, provided the arrangement meets the procedure's conditions on contribution limits, tax treatment in its home country, and information reporting. Whether a particular Hong Kong MPF, Singapore CPF, Australian superannuation fund, or UK workplace pension qualifies is a fact question about that arrangement, and it is decided before a filing position is taken, not after.
How Capital Tax Limited handles Forms 3520 and 3520-A
A preparer at Capital Tax Limited prepares Form 3520 for reportable foreign gifts and bequests and for transactions with foreign trusts, and Form 3520-A or the substitute owner statement where you are treated as a US owner of a foreign trust. The service is preparation of the forms from the information you provide. Where a foreign trust's assets need to be valued, that valuation is outside the scope of the engagement; you supply it, from the trustee, an administrator, or a valuer, and the preparer reports it. Forms 3520 and 3520-A are priced per form and quoted with the engagement.
Missed prior years
Late Forms 3520 and 3520-A are not brought current by attaching them to an amended return; they follow their own filing route, with a reasonable-cause statement where one can honestly be made. Where the omission sits alongside unfiled returns or FBARs, it is generally handled inside the Streamlined Filing Compliance Procedures together with them. Because the gift penalty accrues monthly, the timing of a late filing matters more here than for most forms, and prior years are screened before anything is submitted.
Next step
Describe what you received or what you hold: the amount, from whom, when, and whether any pension, savings plan, or family structure abroad might be involved. A preparer at Capital Tax Limited confirms what is reportable, which forms apply, and what the filing will involve.
Discuss a foreign gift, inheritance, or trust Form 8938 and foreign-asset reporting