Posted on April 18, 2013
Written by Avner Polatsek | @AvnerPolatsek
A 3520 form lets the IRS know what money is moving between the US and other countries. If you are a US citizen and are transferring money to or from a foreign trust, you should be filing Form 3520.
While transferring money between US and international trusts isn’t necessarily taxable, the IRS still requires you to file the form so that they can track what is coming in and going out of the US.
When do I need to file a 3520?
Generally, grantors or beneficiaries of a foreign trust need to file a Form 3520 if they’ve have had a reportable event. The form is due on the same date as their tax return.
Reportable events refer to major changes in a foreign trust. Of course, we all have different yardsticks for how we measure major changes, so here is a list of what the IRS considers to be a reportable event:
There are some exceptions to filing certain events on a 3520, but we highly recommend that you consult with your accountant before omitting anything from this form.
Failing to file in a timely manner or providing incorrect or incomplete information could set you back $10,000 or a percentage of your property’s gross value, distributions you’ve received, or your trust’s assets.
In other words, file on time and file correctly! As always, we are happy to help with Form 3520 or any other tax information for US citizens living abroad.
If you have foreign accounts, you may need to file a Report of Foreign Bank and Financial Accounts (FBAR). Take a look at our post “If I am a US citizen living in Canada, do I need to file a US tax return?” for more information.