Do I owe tax on a gift or inheritance from a foreign relative?

Generally a foreign gift or inheritance is not taxable income to a U.S. recipient — but above the reporting thresholds it can still need to be reported on Form 3520. The thresholds differ for gifts from individuals versus foreign entities, and they can change, so confirm the current figures.

I missed a Form 3520 in a prior year — what now?

There are catch-up options, and reasonable-cause relief from penalties may be available depending on your facts. The right path is fact-specific. Atamatax provides preparation support; this is not legal advice.

Form 3520 & 3520-A: Foreign Gifts, Inheritances & Trusts

Q: Is my foreign pension a 'foreign trust' I have to report?

It depends. Some foreign pensions and savings wrappers may be treated as foreign trusts, while certain tax-favored accounts can qualify for relief from Form 3520/3520-A reporting under IRS guidance. Because this is fact-specific and debated, it's worth confirming for your situation.

When a U.S. person reports large foreign gifts or inheritances, how foreign trusts (including some foreign pensions) come into play, and why the penalties are unusually harsh.

Form 3520 is an information return for U.S. persons who receive certain large foreign gifts or inheritances, or who have dealings with a foreign trust. A related form, Form 3520-A, is the annual information return of a foreign trust with a U.S. owner. Neither is a tax bill by itself — they're reporting — but missing them can be costly.

Which form, and roughly when

It helps to separate the situations the 3520 family covers, since the trigger and threshold differ for each:

Situation	Form	Rough threshold / trigger
Gift/bequest from a foreign individual or estate	Form 3520	Aggregate above a high annual threshold (around $100,000, adjusted)
Gift from a foreign corporation or partnership	Form 3520	A much lower threshold (a few tens of thousands, indexed)
Transfers to / distributions from a foreign trust	Form 3520	Generally reportable regardless of amount
Foreign trust with a U.S. owner	Form 3520-A	Annual trust information return (often the U.S. owner ensures it's filed)

Confirm the current-year figures before relying on them — the gift thresholds are adjusted over time, and the entity threshold is much lower than the individual one. Receiving a foreign gift or inheritance is generally not taxable income to a U.S. recipient, but it can still be reportable, and the penalty risk usually comes from the missed reporting, not from tax owed.

Foreign trusts — and the surprises

Transfers to, ownership of, and distributions from a foreign trust can trigger Form 3520 (and Form 3520-A for the trust). The trap for expats is that some non-U.S. retirement and savings arrangements — certain foreign pensions, and wrappers like a Canadian TFSA or an RESP — may be treated as foreign trusts for U.S. purposes. Whether a particular arrangement is a trust is fact-specific and sometimes debated.

Distributions from a foreign trust to a U.S. beneficiary.
Being treated as the U.S. owner of a foreign trust (grantor-trust rules).
Some foreign pension or savings wrappers that may be characterized as trusts.

Note: certain tax-favored foreign retirement and savings accounts can qualify for relief from Form 3520/3520-A reporting under IRS guidance. Eligibility is specific, so it's worth confirming rather than assuming either way.

If you think a 3520 may apply

Identify the source — was it a foreign individual/estate, a foreign entity, or a trust? That sets the threshold and form.
Total the amounts received in the year (aggregating related gifts) and compare to the relevant threshold.
Characterise any pension or savings wrapper — check whether it's a trust for U.S. purposes and whether tax-favored-account relief applies.
File Form 3520 (and ensure 3520-A where a foreign trust has a U.S. owner) by the applicable deadline.

Why the penalties matter

Form 3520 penalties are unusually steep — for unreported foreign gifts they can run as a percentage of the gift per month, and trust-related penalties can be a significant percentage of the amounts involved. Reasonable-cause relief may apply in some cases, but the exposure is large enough that careful, timely reporting is generally the safer path.

Received a large foreign gift or hold a foreign pension/trust?

The free Tax Risk Check helps you think through whether Form 3520 or 3520-A reporting is likely in play. Atamatax provides preparation support; this is not individualized tax or legal advice.

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Atamatax provides tax preparation support and educational resources. This website does not constitute legal or tax advice.