Form 3520 &
Foreign Gift Tax Rules
Receiving a gift from someone outside the United States? You may have IRS reporting obligations even though the gift itself is not taxable. This guide covers everything you need to know about Form 3520 and foreign gift reporting.
Reporting Thresholds (2025)
Foreign Individual / Estate
$100,000
aggregate per year
Foreign Corporation / Partnership
$19,093
aggregate per year
Foreign Trust Distribution
$0
any amount must be reported
What Is Form 3520?
IRS Form 3520, officially titled "Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts," is an information return that U.S. persons must file when they have certain transactions with foreign trusts or receive large gifts from foreign persons.
The form serves two main purposes: reporting transactions with foreign trusts (Parts I–III) and reporting the receipt of large foreign gifts or bequests (Part IV). This guide focuses primarily on Part IV — the foreign gift reporting requirements that affect many Americans with family or business connections abroad.
Key Point: No Tax Owed
Form 3520 is an information return, not a tax return. Filing Form 3520 does not mean you owe any tax on the foreign gift. The U.S. does not tax gifts received from foreign persons. The form exists solely for reporting and transparency purposes.
Who Must File?
You must file Form 3520 if you are a U.S. person (citizen, resident alien, trust, estate, or corporation) and you receive a foreign gift that exceeds the reporting thresholds.
Gifts from Foreign Individuals or Estates
File if you receive more than $100,000 in aggregate during the tax year from a nonresident alien individual or a foreign estate. This includes cash, property, and other assets. Multiple gifts from the same person are aggregated.
Gifts from Foreign Corporations or Partnerships
File if you receive more than $19,093 (2025, adjusted annually for inflation) in aggregate from a foreign corporation or foreign partnership. Note: the IRS may recharacterize these as compensation or dividends rather than gifts if the entity has a business relationship with you.
Foreign Trust Distributions
File if you receive any distribution from a foreign trust, regardless of amount. Unlike foreign gifts, foreign trust distributions may be taxable as income. The rules for foreign trusts are complex and typically require professional assistance.
Common Scenarios
Gift from parents living abroad
If your parents are nonresident aliens and send you more than $100,000 in a year (combined from both parents if they are treated as a single unit), you must file Form 3520. The gift is not taxable — only reportable. If each parent sends gifts independently and each is under $100,000, you may not need to file, but the IRS looks at related parties carefully.
Inheritance from a foreign relative
Bequests from foreign estates are treated like foreign gifts for Form 3520 purposes. If you inherit more than $100,000 from a foreign estate, you must report it on Form 3520. The inheritance itself is not subject to U.S. income tax (though any income earned on the inherited assets after receipt is taxable).
Wedding gift from overseas family
Large wedding gifts from foreign relatives must be aggregated with any other gifts from the same person during the year. If the total exceeds $100,000, Form 3520 is required. Many families are surprised by this requirement when receiving substantial wedding gifts from relatives abroad.
Down payment help from foreign parents
Foreign parents helping with a home down payment is one of the most common triggers for Form 3520. If they send $200,000 for a down payment, you must file Form 3520. Additionally, your mortgage lender may require a gift letter documenting the source of funds.
How to File Form 3520
Determine if you meet the filing threshold
Check if you received more than $100,000 from a foreign individual or foreign estate, or more than $19,093 from a foreign corporation or partnership during the tax year.
Gather documentation
Collect records of all gifts received from foreign persons, including wire transfer records, bank statements, gift letters, and any documentation of the donor's foreign status.
Complete Part IV of Form 3520
Part IV of Form 3520 is specifically for reporting foreign gifts. List each foreign donor, their country, the amount received, and a description of the property if not cash.
File Form 3520 separately
Mail the completed Form 3520 to the IRS Service Center in Ogden, Utah. Do not attach it to your Form 1040. Keep copies of all filed forms and supporting documentation.
Consider professional assistance
Given the severe penalties for non-filing or incorrect filing, consider working with a tax professional experienced in international tax matters, especially for complex situations involving foreign trusts.
Penalties for Non-Filing
Penalties Are Severe
The penalties for failing to file Form 3520 are among the harshest in the tax code for information returns:
- Foreign gifts: 5% of the gift per month, up to 25% maximum
- Foreign trust distributions: 35% of the gross distribution
- Foreign trust ownership: Greater of $10,000 or 5% of trust value
- Extended statute of limitations on your entire tax return
If you have failed to file Form 3520 in prior years, the IRS offers several options for coming into compliance, including the Streamlined Filing Compliance Procedures and the Delinquent International Information Return Submission Procedures. A tax professional experienced in international tax can help you determine the best approach.
Frequently Asked Questions
What is Form 3520?
Form 3520 (Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts) is an IRS information return that U.S. persons must file when they receive large gifts or bequests from foreign persons or entities. It is a reporting form — filing it does not mean you owe any tax on the gift.
When do I need to file Form 3520 for foreign gifts?
You must file Form 3520 if you receive more than $100,000 in aggregate from a foreign person (nonresident alien individual or foreign estate) during the tax year, or more than $19,093 (2025 threshold, adjusted annually for inflation) from a foreign corporation or foreign partnership. These thresholds apply to the aggregate amount received from each source, not per gift.
Do I have to pay tax on gifts from foreign persons?
No. Gifts from foreign persons are generally not subject to U.S. income tax or gift tax for the recipient. The U.S. gift tax applies to U.S. citizen and resident donors, not to foreign donors giving to U.S. persons. Form 3520 is purely an information return — it reports the gift but does not create a tax liability.
What are the penalties for not filing Form 3520?
The penalties are severe. For failure to report foreign gifts, the penalty is 5% of the gift amount for each month the return is late, up to a maximum of 25% of the gift. For a $500,000 gift, this could mean penalties up to $125,000. The IRS may also extend the statute of limitations on your entire tax return if Form 3520 is not filed.
Is money received from parents overseas taxable?
No. Money received as a gift from parents living overseas is not taxable income in the United States. However, if the total gifts from your foreign parents exceed $100,000 in a calendar year, you must report them on Form 3520. This is a reporting requirement only — no tax is owed on the gift itself.
Do I need to report a gift from a foreign trust?
Yes. If you receive a distribution from a foreign trust, you must report it on Form 3520 regardless of the amount. Unlike gifts from foreign individuals (which have a $100,000 threshold), foreign trust distributions must always be reported. Additionally, distributions from foreign trusts may be taxable as income, unlike direct gifts.
What counts as a foreign gift?
A foreign gift is any amount received from a foreign person (nonresident alien individual, foreign corporation, foreign partnership, or foreign estate) that the recipient treats as a gift or bequest. It does not include amounts paid for qualified tuition or medical expenses, or amounts received from a foreign trust (which have separate reporting rules).
When is Form 3520 due?
Form 3520 is due on the same date as your income tax return, including extensions. For most individuals, this means April 15 (or October 15 with an extension). Form 3520 is filed separately from your income tax return — it is mailed to the IRS Service Center in Ogden, Utah, not attached to your Form 1040.
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