International tax gap series If you are a U.S. person (other than an organization described in section 501(c) and exempt from tax under section 501(a) of the Internal Revenue Code) who received a large gift or bequest from a foreign person, you may need to complete Part IV of Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts, and file the form by the 15th day of the fourth month following the end of your income tax year (generally, April 15th for individuals), subject to any extension of time to file that may apply. If you file Form 3520 late, or if the information provided is incomplete or incorrect, the IRS may determine the income tax consequences of the receipt of such foreign gift or bequest and you may be subject to penalties under section 6039F(c) if you do not have reasonable cause. For more information, see the instructions to Form 3520. General rule: Foreign gifts and bequests In general, a foreign gift or bequest is any amount received from a person other than a U.S. person (a foreign person) that the recipient treats as a gift or bequest and excludes from gross income. A foreign gift does not include amounts paid for qualified tuition or medical payments made on behalf of the U.S. person. A foreign person includes a nonresident alien individual or foreign corporation, partnership, or estate, as well as a domestic trust that is treated as owned by a foreign person. Distributions from a foreign trust are reportable on Part III of Form 3520. See the Instructions to Part IV of Form 3520 for more information. Reporting requirements You are required to report the receipt of foreign gifts or bequests only if the applicable threshold is exceeded. For purposes of determining the reporting thresholds, you must aggregate gifts received from related parties. See the Instructions to Part IV of Form 3520 for more information; see also Section VI of Notice 97-34 PDF. For gifts or bequests from a nonresident alien or foreign estate, you are required to report the receipt of such gifts or bequests only if the aggregate amount received from that nonresident alien or foreign estate exceeds $100,000 during the taxable year. If the gifts or bequests exceed $100,000, you must separately identify each gift in excess of $5,000. For purported gifts from foreign corporations or foreign partnerships, you are required to report the receipt of such purported gifts only if the aggregate amount received from all entities exceeds $18,567 for 2023 and $19,570 for 2024 (adjusted annually for inflation). You must separately identify each gift and the identity of the donor. Note that the IRS may recharacterize purported gifts from foreign corporations or foreign partnerships. File Form 3520 separately from your income tax return by following the directions in the Instructions to the Form 3520. In general, the due date for a U.S. person to file a Form 3520 is the 15th day of the fourth month following the end of the U.S. person's tax year. If you are a U.S. citizen or resident who lives outside the Unites States and Puerto Rico or if you are in the military or naval service on duty outside the United States and Puerto Rico, then the due date to file a Form 3520 is the 15th day of the 6th month following the end of the U.S. person's tax year. If a U.S. person is granted an extension of time to file an income tax return, the due date for filing Form 3520 is also extended, but not more than to the 15th day of the 10th month following the end of the U.S. person's tax year. For example, if you are a U.S. person with a December 31 calendar year-end, for tax year 2023, you are required to file your Form 3520 by April 15, 2024. If you are a U.S. citizen or resident and live outside the United States and Puerto Rico or if you are in the military or naval service on duty outside the United States and Puerto Rico, your Form 3520 is due June 15, 2024. If you properly filed for an extension of the time to file an income tax return using Form 4868 PDF before the due date of your income tax return, you will also be automatically granted an extension to file your Form 3520 until October 15, 2024. See the Instructions for Form 3520 for additional information. Note: The Form 3520 due date cannot be extended beyond the 15th day of the 10th month following the end of the U.S. person’s tax year (October 15th for calendar year taxpayers). The Form 3520 will be due no later than October 15 for calendar year taxpayers even in the case of U.S. citizens and U.S. residents residing outside of the United States and Puerto Rico who may be granted a discretionary 2-month additional extension (to December 15 for calendar year taxpayers) for their income tax return beyond the 6-month extension requested by filing Form 4868. This discretionary additional 2-month extension does not apply to the Form 3520 due date, which is still due no later than the 15th day of the 10th month following the end of the U.S. person’s tax year (October 15 for calendar year taxpayers). Example: John is a U.S. citizen residing outside the United States. Assume that John has an income tax filing requirement and a Form 3520 filing requirement. He timely filed Form 4868 to request an extension to file his income tax return to October 15. John was unable to file his income tax return by October 15 and requested a discretionary 2-month additional extension of time to file his income tax return to December 15. While his income tax return is now due December 15, his Form 3520 is still due October 15. Filing tips to avoid penalties: If an extension was filed with respect to your income tax return, be sure to check Form 3520, Box 1K, and enter the form number of the income tax return to avoid your Form 3520 being treated as filed late. Special rules applicable to gifts or bequests from covered expatriates U.S. citizens and residents who receive gifts or bequests from covered expatriates under IRC 877A may be subject to tax under IRC section 2801, which imposes a transfer tax on U.S. persons who receive gifts or bequests on or after June 17, 2008, from former U.S. citizens or former U.S. lawful permanent residents that are treated as covered expatriates under IRC 877A. However, the imposition of the section 2801 tax is deferred pending the issuance of final regulations. Refer to the September 2015 proposed Guidance Regarding the Imposition of Tax on Certain Gifts and Bequests from Covered Expatriates PDF for additional information. Where to file Form 3520 Mail Form 3520 to the following address: Internal Revenue Service Center P.O. Box 409101 Ogden, UT 84409 Penalties for failure to file Part IV of Form 3520 If you fail to timely file Part IV of Form 3520, or the information you provide on the form is incomplete or incorrect, the IRS may determine the income tax consequences of the receipt of the foreign gift or bequest. In addition, you may be subject to a penalty equal to five percent of the value of the gift or bequest for each month in which the gift or bequest is not reported, not to exceed 25 percent of the gift, unless you have reasonable cause for the failure to timely or accurately file. See the Instructions for Form 3520 for more information. For additional information regarding penalties, visit the IRS penalties webpage. Note: You may also be required to file FinCEN Form 114. See Report of Foreign Bank and Financial Accounts (FBAR) for more details. for more details. You may also be required to file Form 8938, Statement of Specified Foreign Financial Assets. References: Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts, and instructions Guidance Regarding the Imposition of Tax on Certain Gifts and Bequests from Covered Expatriates PDF Return to: The international tax gap series
