Form 3520-A: A Guide for U.S. Expats
4 min read
October 25, 2022
October 25, 2022
At a glance
If you are a U.S. owner of a foreign trust, you may have to file IRS Form 3520-A. Learn more about this form with the expat tax preparation experts at H&R Block.
If you take any part in a foreign trust, the IRS wants to know about it—even if you’re only the one managing the assets for a beneficiary who can’t realistically do it themselves. That’s where Form 3520-A comes in.
What is Form 3520-A?
Tax form 3520-A is a form filed annually by the trustee of foreign trust to provide information to the IRS about the trust. This information includes its U.S. beneficiaries, any U.S. person who has any ownership the foreign trust, and also income of the trust. It is similar to a financial statement that a U.S. trust would file. IRS form 3520-A documents transactions between the trust and the U.S. owner, as well as between the trust and US beneficiary.
Not all trust owners need to file 3520-A—the IRS recently made a change excluding certain foreign trusts used exclusively for retirement funds/pension, educational purposes, medical purposes, and a few other criteria.
Why does the IRS want to know all this? In short, to prevent tax evasion. Over the past few years, the IRS has really cracked down on U.S. persons who fail to disclose foreign financial accounts, and the fines and penalties for getting caught are pretty steep.
Penalties for not filing the Annual Information Return of Foreign Trust with a U.S. Owner
The IRS has recently become more aggressive in finding and penalizing those Americans who don’t properly report foreign financial information, which is bad news if you’re supposed to file this form and you forget. Most forms have steep fines associated when you fail to file them (Form 5471, for example, comes with a $10,000 penalty for each annual accounting period you miss). If you forget to file more than one form, those fines can really add up. If you forget to file more than one form, those fines can really add up. While they do vary on a case-by-case basis, penalties for not filing 3520-A include:
- An initial penalty equal to the greater of $10,000 or 5% of the gross value of the portion of the foreign trust’s assets treated as owned by a U.S
- An additional separate 5% penalty (or $10,000 if greater) if that person fails to ensure that the foreign trust files Form 3520-A and provides annual statements to its U.S. owners and beneficiaries, or if that person does not provide all required information required or includes incorrect information.
In short, you’d better be safe than sorry. If you’re unsure about what forms you need to file, that’s okay—when you use our virtual Expat Tax Services, we guarantee that your taxes will be done right.
What’s the difference between Form 3520 and 3520-A?
The main difference between Form 3520 and 3520-A is who actually files it.
Who files Form 3520-A?
Except in cases where the foreign trust used exclusively for certain retirement funds/pension, educational purposes, medical purposes, the trustee is who files this form. The form should be filed by the foreign trust (FT), but the U.S. owner is responsible to ensure it is filed timely and accurately. If you’re unsure, we recommend leaving it to the professionals—like us.
When and where to file form 3520-A
Form 3520-A is due on 15th day of the 3rd month after the end of the trust’s tax year. A calendar year trust is due March 15. Can’t make the deadline? You can file Form 7004 for an extension.
If the Form 3520-A instructions are confusing, you can simply upload your documents to your H&R Block online tax portal and your experienced Tax Advisor will do it all for you
Need help filing Form 3520-A? Not sure if you need to file? Trust the experts at H&R Block.
Not sure what applies to your specific situation? Feel like this is all a little overwhelming and complicated? You’re not alone—and that’s why we’re here. Get the peace of mind your taxes are done right (and avoid any nasty surprise penalties) by letting us handle the hard part. Your expert Tax Advisor will be there every step of the way, helping you make tax season stress-free and easy. Get started today!
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