Foreign Gifts and Form 3520 for Americans Abroad may become relevant when a U.S. person receives a large gift or inheritance from a foreign individual, foreign estate, foreign corporation, foreign partnership, or certain foreign trusts.
Form 3520 is an information return used to report certain transactions with foreign trusts and the receipt of certain large foreign gifts or bequests. The reporting rules depend on the source, amount, and nature of the transfer. Wakrim Law Firm assists Americans living abroad with international tax reporting and prior-year compliance matters.
The IRS confirms that Form 3520 is used to report certain foreign trust transactions and certain large gifts or bequests received from foreign persons.
Foreign Gifts and Form 3520 for Americans Abroad
The Foreign Gifts and Form 3520 for Americans Abroad rules can apply even when the amount received is not treated as taxable income. The key issue may be the information-reporting obligation rather than whether the gift itself is subject to U.S. income tax.
When Must a Gift From a Foreign Person Be Reported on Form 3520?
A U.S. person who receives more than $100,000 during the tax year in gifts or bequests from a nonresident alien individual or foreign estate may generally be required to report the amounts on Part IV of Form 3520.
Gifts from related foreign persons may need to be aggregated when determining whether the threshold has been exceeded.
This threshold applies to the aggregate value of qualifying gifts or bequests received during the year.
Is a Gift From a Foreign Person Taxable?
A bona fide gift received from a foreign person is generally not treated as U.S. taxable income to the recipient solely because it is a gift. However, a separate Form 3520 information-reporting requirement may apply when the applicable threshold is exceeded.
The tax and reporting treatment can depend on who made the transfer, whether it is properly characterized as a gift, inheritance, trust distribution, or another type of transaction, and whether other U.S. reporting requirements apply.
Foreign Gifts From Corporations or Partnerships
Different reporting thresholds apply to purported gifts received from foreign corporations or foreign partnerships.
For tax year 2026, the IRS states that reporting is generally required when the aggregate amount exceeds $20,573. This threshold is adjusted annually for inflation.
What About Foreign Inheritances?
A bequest or inheritance received from a foreign individual or foreign estate may also fall within the Form 3520 reporting rules when the applicable threshold is exceeded.
Whether the transfer is characterized as a gift, inheritance, trust distribution, or another type of transaction can affect which part of Form 3520 applies.
Foreign Trust Distributions and Form 3520
Form 3520 is also used for certain transactions involving foreign trusts. A distribution received from a foreign trust is generally reported under the foreign trust reporting rules rather than simply being treated as a foreign gift.
U.S. persons who own part of a foreign trust or receive distributions from one may have additional reporting obligations, including possible Form 3520-A requirements in some cases.
The IRS states that distributions from foreign trusts are reported in Part III of Form 3520, and foreign trusts with a U.S. owner may also have Form 3520-A filing obligations.
When Is Form 3520 Due?
Form 3520 is filed separately from the taxpayer’s federal income tax return.
For calendar-year taxpayers, the filing deadline is generally April 15. U.S. citizens and residents who qualify as living outside the United States and Puerto Rico may generally have until June 15, subject to the applicable rules and extensions.
The IRS specifically provides the later deadline for qualifying U.S. persons living abroad.
What Happens If Form 3520 Is Filed Late?
Missing or late Form 3520 filings can lead to significant penalties. For certain reportable foreign gifts or bequests, the IRS may impose a penalty equal to 5% of the value of the gift for each month the failure continues, up to 25%, unless reasonable cause applies.
Because the penalty exposure can be substantial, prior-year filing issues should be reviewed carefully before corrective filings are made.
Form 3520, FBAR, and Form 8938 Are Different
Form 3520 does not replace other international reporting requirements. Depending on the taxpayer’s foreign accounts, financial assets, trusts, or other holdings, FBAR or Form 8938 reporting may also be required.
Learn more about FBAR requirements for Americans living abroad and Form 8938 for Americans Living Abroad
What If You Failed to Report a Foreign Gift in a Prior Year?
Americans abroad sometimes discover that a foreign gift, inheritance, trust distribution, or related transaction should have been reported in an earlier year.
The appropriate response depends on the type of transfer, reporting history, other international forms involved, and the circumstances surrounding the missed filing.
Taxpayers with broader prior-year filing problems can also review our guidance for Americans abroad with unfiled tax returns and, where appropriate, the Streamlined Foreign Offshore Procedures.
How Wakrim Law Firm Can Help
Wakrim Law Firm assists U.S. taxpayers living abroad with Form 3520, foreign gift and inheritance reporting, foreign trust reporting, and related international tax compliance matters.
Our assistance may include reviewing whether a transaction is reportable, identifying applicable filing requirements, evaluating prior-year compliance issues, and helping taxpayers understand available options.
For broader guidance on U.S. tax filing and international reporting obligations, explore our U.S. tax services for Americans living abroad.
Contact Wakrim Law Firm to discuss your international tax reporting situation.
Frequently Asked Questions About Foreign Gifts and Form 3520
Do I have to report a foreign gift over $100,000?
A U.S. person who receives more than $100,000 in aggregate gifts or bequests from a nonresident alien individual or foreign estate during the year may generally need to report the amounts on Form 3520.
Is a foreign inheritance reported on Form 3520?
It may be. Large bequests from foreign individuals or foreign estates can fall within the Form 3520 reporting rules when the applicable threshold is exceeded.
Is Form 3520 filed with Form 1040?
No. Form 3520 is generally filed separately from the taxpayer’s income tax return.
What is the penalty for not reporting a foreign gift?
For certain failures involving foreign gifts or bequests, the penalty may equal 5% of the gift’s value for each month the failure continues, up to 25%, unless reasonable cause applies.