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Form 3520 and 3520-A

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Form 3520 and 3520-A: Foreign Trust and Foreign Gift

Many US persons (defined later) are not aware that they may have to file a tax form to the IRS when they have certain transactions or connection with foreign trusts or they receive gifts from foreign persons/entities. US persons refer to not only US citizens or green card holder. Foreigners who live in the US more than 183 days without exemption are also considered as US persons.

If you own a foreign trust and you are a US person, you need to file Form 3520-A annually. In the following situations, you need to file a Form 3520 with the IRS.

  • Receive over $100,000 of gift or bequest from foreign individuals or estate
  • Receive over $16,388 from foreign corporations or partnerships
  • Receive distribution from a foreign trust
  • You are a owner of any part of the assets of a foreign trust

The deadline for Form 3520 and Form 3520-A is the same as your income tax return. The penalty of not filing or late filing Form 3520 and Form 3520-A is 5% of the gift or bequest for each month during which the failure continues, up to a maximum of 25% of the gift. You will receive a CP15 if you failed to file the forms before the IRS catches you. The penalty is a civil penalty and can only be abated with reasonable causes.

Please contact Dimov Tax team at hello@dimovtax.com or (833)829-1120 if you need more information or assistance with this matter. We are licensed to assist with filing these forms, fighting penalties, applying for abatements, or consulting on applicability of this regulation to your case.