Who must file Form 3520 or 3520-A, and what triggers each?

Form 3520 and Form 3520-A are the two information returns behind a single regime: the US reporting of foreign trusts and of large gifts from abroad. Like the other international information returns, neither computes a tax of its own. But two things make this pair unusually dangerous to get wrong. First, there are genuinely two forms — a US person's annual return and a foreign trust's annual return — and they are filed by different parties, on different dates, under different penalty rules. Second, the penalties are among the steepest in the Code and are percentage-based, not the flat-dollar figures that attach to the §6038 forms: a missed trust transfer or distribution can cost the greater of $10,000 or 35% of the amount involved under §6677, and a missed large foreign gift costs 5% a month, up to 25%, under §6039F.

This guide is about the threshold question that precedes the forms' parts and schedules: is there a foreign trust or a large foreign gift in the picture, which of the four reporting triggers fired, and who has to file what? Form 3520 has no filer-category system — nothing here resembles the five categories of Form 5471 or the four of Form 8865. The structure is two forms, a foreign-trust gate, and four triggers (three for trusts, one for gifts). We work the gate first, then each trigger in turn.

In plain terms there are two forms with confusingly similar numbers. Form 3520 is the US person's return — they file it to report putting money or property into a foreign trust, being treated as the trust's owner, taking money or property out of one, or receiving a big gift or inheritance from a foreign person or company. Form 3520-A is the foreign trust's own return — but when a US person is treated as the trust's owner, that US person is on the hook to make sure it gets filed, and files a stand-in version themselves if the trust will not. PILOT determines which of these a client must file, and why; it never computes the trust tax, the interest charge, or the penalty.

Two forms, one regime

The two forms answer different questions and are filed by different parties. Keep them apart from the start.

Form 3520 — the US person's annual return

Form 3520 is filed by the US person, and it gathers four unrelated reporting duties onto one return, each on its own part:

• Part I — transfers by a US person to a foreign trust (and the creation of a foreign trust, and certain transfers at death). §6048(a).
• Part II — a US person who is treated as the owner of a foreign trust under the grantor-trust rules. §6048(b).
• Part III — distributions from a foreign trust to a US person. §6048(c).
• Part IV — large gifts or bequests a US person receives from foreign persons. §6039F.

A single return can carry more than one part — a client who funds a foreign trust they are treated as owning, and takes a distribution from it the same year, reports on Parts I, II, and III at once. The parts are independent triggers, not a sequence.

Form 3520-A — the trust's return a US owner must ensure is filed

Form 3520-A is the foreign trust's own information return. It exists because §6048(b) makes a US person who is treated as the owner of a foreign trust responsible for the trust's annual accounting:

If, at any time during any taxable year of a United States person, such person is treated as the owner of any portion of a foreign trust under the rules of subpart E of part I of subchapter J of chapter 1, such person shall submit such information as the Secretary may prescribe with respect to such trust for such year and shall be responsible to ensure that … such trust makes a return for such year …

— IRC §6048(b)(1)

The practical point is the one preparers miss: a foreign trustee often will not file a US form. So the statute and the Instructions for Form 3520-A put the burden on the US owner. If the foreign trust does not file its own Form 3520-A, the US owner must complete a substitute Form 3520-A and attach it to their own Form 3520 — that is how the US owner avoids the §6677(b) penalty for the trust's non-filing. The duty to see that the form is filed is the US owner's, even though the form is nominally the trust's.

Example 1 — two forms, two deadlines, one trust. USP A is treated as the owner of foreign trust FT B (a calendar-year trust). Two filings flow from the one trust: FT B's Form 3520-A is due March 15, and USP A's Form 3520 (reporting A's owner status on Part II) is due with A's own income-tax return. If FT B will not file, A prepares a substitute Form 3520-A to attach to the Form 3520. One trust, two forms, two different deadlines — and the earlier one belongs to the trust, not to A's 1040.

In plain terms the foreign trust's form (3520-A) is due in March, earlier than the owner's own tax return, and a foreign trustee frequently ignores it. So a US owner cannot wait for their 1040 deadline and cannot assume the trust handled it — they have to chase the 3520-A in the spring, and file the stand-in version themselves if the trust does not.

Is it a foreign trust? The threshold gate

Every trust trigger below depends on the trust being foreign. A domestic trust generates no Form 3520 or 3520-A. So the first question is always whether the trust is foreign, and the test is mechanical — two prongs under §7701(a)(30)(E):

The term "United States person" means … (E) any trust if— (i) a court within the United States is able to exercise primary supervision over the administration of the trust, and (ii) one or more United States persons have the authority to control all substantial decisions of the trust.

— IRC §7701(a)(30)(E)

A trust is a United States (domestic) trust only if it satisfies BOTH prongs — the court test (a US court can exercise primary supervision over the trust's administration) and the control test (one or more US persons control all substantial decisions of the trust). The regulation makes the consequence explicit: "The term foreign trust means any trust other than a domestic trust" (Reg §301.7701-7(a)(2)). So a trust is foreign if it fails either test — a single failed prong is enough.

This direction trips people up, so state it the careful way: you do not need both tests to fail. A trust with an entirely US-based corpus and US beneficiaries is still foreign if a foreign person holds the power to make even one substantial decision (the control test fails), or if its administration is seated abroad (the court test fails). Reg §301.7701-7(d) lists the "substantial decisions" — distributions, the selection of beneficiaries, the removal of trustees, investment decisions, and more — and "control" means US persons hold all of them with no foreign person able to veto any.

Example 2 — the gate, both ways. A trust is administered in the US, but its trust instrument gives a foreign protector the power to veto distributions. Because a foreign person controls a substantial decision, the control test fails, so the trust is a foreign trust — and the §6048 reporting world applies. Change the fact: every substantial decision rests with US trustees and a US court supervises the administration. Now the trust passes both tests, is domestic, and no Form 3520 or 3520-A arises from the trust structure. The trust is foreign if it fails either test; it is domestic only if it passes both.

In plain terms "foreign trust" is not about where the money sits — it is about who is in charge. If any non-US person can block a real decision, or the trust is run abroad, it is a foreign trust for these forms, even if everything and everyone else is American. PILOT asks this as a plain yes/no about the trust, not a dissertation on trust law.

The four reporting triggers

With a foreign trust (or a foreign gift) confirmed, four triggers each map to a part of Form 3520. Work them in order.

Trigger 1 — Transferring property to a foreign trust (§6048(a), Part I)

The first trigger is a US person putting money or property into a foreign trust. §6048(a) frames it as a "reportable event," and the transfer is the core one:

The term "reportable event" means— (i) the creation of any foreign trust by a United States person, (ii) the transfer of any money or property (directly or indirectly) to a foreign trust by a United States person, including a transfer by reason of death …

— IRC §6048(a)(3)(A)

So three kinds of event land on Part I: creating a foreign trust, transferring money or property to one (directly or indirectly, including a constructive transfer such as a below-market loan to the trust), and certain transfers at death. The "responsible party" who reports is the grantor (on creation), the transferor (on a lifetime transfer), or the executor (at death). One narrow but important carve-out: a transfer to a foreign trust in exchange for full fair-market-value consideration is not a reportable §6048(a) transfer (§6048(a)(3)(B)(i)) — a genuine arm's-length sale to the trust is not the same as funding it.

Example 3 — the transfer in. USP A moves $500,000 of marketable securities into foreign trust FT B to fund it. That is a transfer of property to a foreign trust by a US person, so USP A files Form 3520, Part I for the year of the transfer. (If A had instead sold the securities to FT B for their full fair-market value, the full-consideration exception would take the transfer out of Part I — but a sale to a related foreign trust invites its own scrutiny, and the §679 owner analysis below can still apply.)

Trigger 2 — Being treated as the foreign trust's owner (§679 → §6048(b), Part II + Form 3520-A)

The second trigger does not require any transaction during the year at all — it is status. A US person who is treated as the owner of a foreign trust under the grantor-trust rules of §§671–679 reports that status on Part II every year it lasts — that is the §6048(b) reporting duty — and carries the Form 3520-A duty above. Keep the two strands straight: §§671–679 decide whether a US person is an owner; §6048(b) is the reporting obligation that puts owner status on Part II and drives Form 3520-A. The everyday engine of owner status for a foreign trust is §679:

A United States person who directly or indirectly transfers property to a foreign trust … shall be treated as the owner for his taxable year of the portion of such trust attributable to such property if for such year there is a United States beneficiary of any portion of such trust.

— IRC §679(a)(1)

Read that as a two-part switch: a US person transfers property to a foreign trust, and the trust has a US beneficiary — and the transferor is treated as the owner of the portion they funded, taxed on its income and saddled with the Form 3520-A duty. The "has a US beneficiary" test is deliberately broad: a trust is treated as having a US beneficiary unless its terms make it impossible for any income or corpus to reach a US person, and §679(d) lets the IRS presume a US beneficiary unless the transferor proves otherwise. §679 is not the only path to owner status — §§673–678 can apply where a US grantor keeps reversions or powers — but the US-transferor-plus-US-beneficiary pattern is the common one.

Example 4 — the §679 owner. USP A settles foreign trust FT B and funds it; A's US-resident children are among the potential beneficiaries. Because a US person transferred property to a foreign trust that has a US beneficiary, A is treated as the owner of the funded portion under §679. A therefore files Form 3520, Part II for every year the status continues — even a year with no transactions — and must ensure FT B files Form 3520-A, filing a substitute if it does not. Owner status, once it attaches, is an annual filing duty until it ends.

In plain terms if your client set up or put money into a foreign trust and any US person could ever benefit from it, the law usually treats your client as the trust's owner. That makes them responsible for two things every year — their own Part II and the trust's 3520-A — whether or not anything happened in the trust that year. "Nothing changed this year" is not a reason to skip it.

Trigger 3 — Receiving a distribution from a foreign trust (§6048(c), Part III)

The third trigger is a US person receiving something from a foreign trust:

If any United States person receives (directly or indirectly) during any taxable year of such person any distribution from a foreign trust, such person shall make a return with respect to such trust for such year …

— IRC §6048(c)(1)

Any distribution — to a beneficiary or to the owner — puts the recipient on Part III. The trap is what counts as a "distribution." It is not just a check labeled distribution. Under §643(i), a loan of cash or marketable securities from the trust, or the rent-free use of trust property, is treated as a distribution:

if a foreign trust makes a loan of cash or marketable securities (or permits the use of any other trust property) directly or indirectly to or by … any grantor or beneficiary of such trust who is a United States person … the amount of such loan (or the fair market value of the use of such property) shall be treated as a distribution by such trust to such grantor or beneficiary …

— IRC §643(i)(1)

So a US beneficiary who borrows from the foreign trust, or lives in a property the trust owns without paying market rent, has received a deemed distribution and reports it on Part III — even though no one called it a distribution. (The loan escapes this only as a "qualified obligation" meeting a strict set of terms, and the use escapes it only if the trust is paid fair value within a reasonable time.) Other constructive distributions — the trust paying a US person's credit-card charges, or letting them write checks on the trust's account — are caught the same way.

Example 5 — the distribution, including the loan that is really a distribution. US beneficiary USP C receives a $40,000 cash distribution from foreign trust FT B; C reports it on Form 3520, Part III. Now suppose instead that FT B makes C an interest-free "loan" of $40,000, or lets C live rent-free in a condo the trust owns. Under §643(i), the loan amount (and the fair rental value of the use) is treated as a distribution — so it lands on Part III all the same. Calling a transfer a loan, or simply handing over the keys, does not take it off the form.

Trigger 4 — Receiving a large foreign gift or bequest (§6039F, Part IV)

The fourth trigger has nothing to do with trusts. A US person who receives a large gift or bequest from a foreign person reports it on Part IV under §6039F:

the term "foreign gift" means any amount received from a person other than a United States person which the recipient treats as a gift or bequest.

— IRC §6039F(b)

The statute sets a single floor — aggregate foreign gifts over an inflation-adjusted amount (it names $10,000, indexed from a 1995 base under §6039F(d)) — and leaves the operating thresholds to the IRS. The Instructions for Form 3520 implement two reporting thresholds, and which one applies depends entirely on who the donor is:

Two practical wrinkles. The totals are aggregated across related foreign donors — several gifts from a parent, grandparent, and sibling abroad are added together before the threshold is tested, a pattern that routinely pushes a family below the per-gift radar over the line. And a distribution from a foreign trust is not a "foreign gift" — §6039F(b) expressly carves out anything reported under §6048(c), so a trust distribution goes on Part III, not Part IV.

Example 6 — the threshold turns on who gave it. USP A receives a $150,000 cash gift from a foreign individual (a parent abroad). That is over the $100,000 individual/estate threshold, so A reports it on Form 3520, Part IV. Now change only the donor: A receives $30,000 from a foreign corporation. Even though $30,000 is far below $100,000, it is over the corporation/partnership threshold (about $20,000), so it is reportable. Same recipient, smaller amount — reportable — because the donor is an entity, not an individual. The threshold tracks the donor type, not the size alone.

In plain terms a gift from a foreign person only goes on the form once the year's gifts from them (and their relatives) top $100,000. A gift from a foreign company gets reported at a much lower line — around $20,000. So a modest payment from an overseas business can be reportable when a far larger gift from a relative is not. PILOT asks only the threshold question — over the line for that donor type, yes or no — never the exact figure.

Due dates — two forms, two deadlines

The split deadlines are themselves a trap.

• Form 3520 is due on the same date as the US person's income-tax return, including extensions — but it is filed separately, mailed to the IRS service center in Ogden, UT, not attached to the Form 1040 or 1120. Extending the income-tax return extends the Form 3520.
• Form 3520-A is due by the 15th day of the 3rd month after the close of the trust's tax year — March 15 for a calendar-year trust, earlier than the owner's own return. An extension is requested on Form 7004, filed with the trust's EIN; an extension of the US owner's income-tax return does not extend the 3520-A.

A US owner therefore tracks two clocks: a March deadline for the trust's 3520-A (or the substitute they must attach to their own Form 3520) and the later deadline for their own Form 3520.

Exceptions and relief

Several rules switch off §6048 reporting for transfers, owner status, and distributions. The most important are administrative reliefs for ordinary foreign retirement and savings plans:

• Tax-favored foreign retirement and savings trusts (Rev. Proc. 2020-17). §6048 reporting — both Form 3520 and Form 3520-A — does not apply to an "eligible individual's" transactions with, or ownership of, an "applicable tax-favored foreign trust": certain foreign retirement trusts (think Mexican AFOREs, Hong Kong MPF, Swiss pillar arrangements, and similar registered, contribution-limited plans) and certain foreign non-retirement medical, disability, or educational savings trusts. Eligibility is plan-by-plan and conditioned on the taxpayer being compliant with US income-tax filing for the plan. This is the relief that keeps ordinary foreign pension accounts off Form 3520.
• Canadian RRSPs and RRIFs (Rev. Proc. 2014-55). A separate, older relief exempts beneficiaries of Canadian registered retirement plans (RRSPs, RRIFs, and other plans within Article XVIII(7) of the US–Canada treaty) from §6048 reporting. Canadian registered plans run on this procedure, not Rev. Proc. 2020-17.
• Charitable and deferred-compensation trusts (§6048(a)(3)(B)(ii)). Transfers to a foreign trust the IRS has determined to be a §501(c)(3) organization, and to certain §402(b) / §404(a)(4) / §404A deferred-compensation arrangements, are outside Part I.
• Full-value transfers (§6048(a)(3)(B)(i)). A transfer to a foreign trust in exchange for at least the property's fair market value is not a reportable §6048(a) transfer (above).

Example 7 — the foreign pension that is exempt. USP A holds a registered, tax-favored retirement plan in their home country that meets the Rev. Proc. 2020-17 conditions, and A has reported the plan's contributions and earnings on their US returns. Even if the plan is technically a "foreign trust" with A as owner, the procedure switches off §6048 reporting — no Form 3520 and no Form 3520-A for that plan. (A Canadian RRSP reaches the same result under Rev. Proc. 2014-55 instead.) Note what these reliefs do not touch: the plan can still be reportable on Form 8938 and the FBAR, which run on their own rules.

Penalties — a regime of its own

The reason Form 3520 / 3520-A sits at the top of every international-compliance risk list is the penalty structure. It is percentage-based and its own regime — do not import the flat figures from the other forms.

For the trust parts (I–III), the penalty is §6677(a):

the person required to file such notice or return shall pay a penalty equal to the greater of $10,000 or 35 percent of the gross reportable amount.

— IRC §6677(a)

• Parts I and III (§6048(a) transfers and §6048(c) distributions): the greater of $10,000 or 35% of the gross reportable amount — 35% of the transferred property's value, or 35% of the distribution.
• Part II / Form 3520-A (§6048(b) owner reporting): §6677(b) applies the same rule with 5% substituted for 35% — the greater of $10,000 or 5% of the year-end value of the trust portion the US person is treated as owning.
• Continuation: if the failure persists more than 90 days after the IRS mails notice, an additional $10,000 for each 30-day period; the aggregate is capped at the gross reportable amount.

For the gift part (IV), the penalty is the separate §6039F(c):

such United States person shall pay … an amount equal to 5 percent of the amount of such foreign gift for each month for which the failure continues (not to exceed 25 percent of such amount in the aggregate).

— IRC §6039F(c)(1)

That is the two-regime point, and it is where the precision matters: a missed trust transfer or distribution is §6677 (the greater of $10,000 or 35%); a missed large foreign gift is §6039F(c) (5% a month, capped at 25%). These are different statutes, different bases, different math — never collapse them into one number.

And do not carry the other forms' penalties across: the 3520 regime is not the flat $10,000 of the §6038 forms (5471, 8858, 8865), not the $25,000 of §6038A (Form 5472), and not the 10%-of-value §6038B penalty (Form 926). It stands alone.

Two defenses and a clock round it out. Reasonable cause is available (§6677(d); §6039F(c)(2)), but the statute slams one door shut:

The fact that a foreign jurisdiction would impose a civil or criminal penalty on the taxpayer (or any other person) for disclosing the required information is not reasonable cause.

— IRC §6677(d)

So "the foreign bank-secrecy law forbade disclosure" is not an excuse — and neither, per the instructions, is a reluctant foreign trustee or a confidentiality clause in the trust instrument. Finally, under §6501(c)(8) an incomplete or missing §6048 return keeps the assessment statute of limitations open on the related items until the information is furnished — an unfiled Form 3520 can hold the year open indefinitely. (A §6662(j) 40% accuracy penalty can also reach an underpayment tied to an undisclosed foreign asset.)

In plain terms this is the most expensive form to miss in the international set, and the penalty is a slice of the money involved, not a flat fee — start at the greater of $10,000 or 35% for an unreported trust transfer or distribution, 5% for the owner form, and 5% a month for a missed foreign gift. "The foreign bank would not let us disclose" does not get the client out of it, and the IRS's clock on the year does not even start until the form is filed.

Currency notes

The live currency points here are not OBBBA — they are an indexed threshold and two pieces of relief:

• The corporation/partnership gift threshold is indexed every year. Because §6039F(d) indexes the statutory floor, the Part IV threshold for gifts from foreign corporations and partnerships drifts annually — $19,570 for 2024, $20,116 for 2025, and $20,573 for 2026. The current Instructions for Form 3520 give this figure by reference (to IRS.gov/InflationAdjustment) rather than printing it, so always confirm the current year. The $100,000 threshold for gifts from foreign individuals and estates is an IRS administrative figure and has not moved.
• Rev. Proc. 2020-17 (2020) created the tax-favored-foreign-trust exemption above — the single most useful relief for ordinary foreign pension and savings plans, and a relatively recent addition.
• Proposed regulations (REG-124850-08), published May 8, 2024, would build out the §6048 and §6039F rules — including an expanded exemption for tax-favored foreign retirement and savings trusts (Prop. Reg. §1.6048-5). They are proposed, but taxpayers may generally rely on them for years ending after May 8, 2024 until final rules issue. Watch for finalization.
• OBBBA did not change these triggers. The 2025 reconciliation act (OBBBA, Pub. L. 119-21) §70353 restored §958(b)(4), which governs the downward attribution that decides controlled-foreign-corporation and PFIC status (the subject of the Form 5471 and Form 8621 guides). It did not amend §6048, §6039F, §6677, or §679 — so whether a foreign-trust transaction or a foreign gift is reportable is unchanged. That is why this guide carries the "No OBBBA Change" tag.

Relationships to other regimes and forms

A foreign trust rarely shows up alone, and Form 3520 has to be coordinated with the rest of the international set.

• Form 8938 and the FBAR. An interest in a foreign trust is a specified foreign financial asset for Form 8938, and a US grantor or beneficiary can have an FBAR obligation for the trust's foreign accounts. The forms coordinate only inside the income-tax system: Form 8938's duplicative-reporting rule lets an interest already reported on Form 3520 / 3520-A be identified on Form 8938, Part IV rather than re-detailed — but Form 8938 is still filed, and the FBAR is entirely separate.
• Forms 5471, 8865, and 8621 — when the trust owns companies. If the foreign trust owns foreign corporations, foreign partnerships, or PFIC stock, those holdings can pull in Form 5471, Form 8865, or Form 8621 at the level of the US owner or beneficiary who is treated as holding them — Form 3520 reports the trust relationship, those forms report the entities underneath it.
• Form 926 — keep it distinct. A transfer to a foreign trust is a §6048(a) / Form 3520 event. It is not a Form 926 event: Form 926 reports transfers to a foreign corporation under §6038B, a different statute with a different (10%-of-value) penalty. Classify the transferee — trust versus corporation — and the form follows. Because Form 3520 is not a §6038 form, its penalty regime (§6677 / §6039F) is its own, not the §6038 / §6038A / §6038B figures.

In plain terms the same foreign trust can drive a 3520, an FBAR, a Form 8938, and — if it owns foreign companies — a 5471, 8865, or 8621 on top. And do not confuse putting money into a foreign trust (Form 3520) with putting it into a foreign corporation (Form 926); they are different forms with different penalties. PILOT runs that whole determination across a structure — which forms each US person must file, and why.

What Form 3520 is not

Form 3520 and 3520-A report — they do not compute your client's tax. The throwback-rule tax on an accumulation distribution, the §668 interest charge, the trust's distributable and undistributed net income, the recharacterization of a purported corporate gift, and the penalty itself are separate, downstream computations that build on the facts these forms capture. The first question — and the one this guide answers — is simply whether a Form 3520 or 3520-A obligation exists: for which US person, on which trigger, and whether an exception switches it off.