Avoid Form 3520-A's $10,000 Trust Penalty

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Miss Form 3520-A by one month and the IRS can start at $10,000 — or 5% of the year-end value you are treated as owning, whichever is larger. As of the December 2025 instructions, that penalty lands on the U.S. owner even when a foreign trustee never files. A $250,000 foreign grantor trust that skips the return is a $12,500 opening bill, not a paperwork slap on the wrist.

This is the annual information return of a foreign trust with a U.S. owner, not the gift form people Google first. If you already received a large foreign gift or inheritance, use the Form 3520 foreign gift and inheritance guide for Part IV. This article covers the March 15 trust return, the substitute filing path, and how owners living abroad keep the clock from running.

The primary reader is an operator: a founder, investor, or family-office principal treated as owning a foreign trust under the grantor trust rules. Families inheriting through a foreign wrapper and retirees sitting in pension-like structures that the IRS may treat as trusts get the same filing mechanics, with a different first question: is this even a trust?

For more U.S. filing workflows in the same cluster, start in the Expat Tax & Finance hub and work the calendar before you assume Form 1040 covers the trust.

What is Form 3520-A, and who is on the hook?

Form 3520-A is the trust’s annual information return. It exists so a U.S. person treated as an owner under IRC sections 671 through 679 can satisfy section 6048(b). The IRS says the foreign trust must file. The penalty still hits the U.S. owner if the trust does not.

That split is the whole cash-flow problem. You can be current on Form 1040, the FinCEN FBAR for foreign accounts over $10,000 in aggregate, and even Form 3520 Part II and still owe a 3520-A penalty because the trustee never mailed Ogden a complete package.

Owner versus beneficiary versus gift recipient

An owner is the person treated as owning trust assets under the grantor trust rules. A beneficiary is someone who receives a distribution. A gift recipient files Form 3520 Part IV when foreign gifts or bequests cross the IRS thresholds. Those are three different jobs, and they can stack in one year.

As of the IRS gifts-from-foreign-person page, gifts from foreign individuals or estates are reported on Form 3520 Part IV once aggregate gifts exceed $100,000. Purported gifts from foreign corporations or partnerships have a lower, inflation-adjusted threshold ($20,573 for 2026). None of those Part IV rules replace Form 3520-A for a U.S. owner.

Operators who parked a company inside a foreign holding company have a related, but different, trap in the offshore company tax trap for U.S. expats. A corporation files Form 5471. A trust files 3520-A. Mixing the two labels is how people miss March 15.

When is Form 3520-A due if the trust uses a calendar year?

The Instructions for Form 3520-A (December 2025) set the due date as the 15th day of the third month after the trust’s tax year ends. For a calendar-year trust, that is March 15 of the following year. A trust year ending December 31, 2025, was due March 15, 2026, unless a valid Form 7004 extension was on file.

The trust must also send each U.S. owner a Foreign Grantor Trust Owner Statement (pages 3 and 4) and each U.S. beneficiary who received a distribution a Foreign Grantor Trust Beneficiary Statement (page 5) by that same date.

Form 7004 is the only 3520-A extension that counts

The IRS reminder page for U.S. owners is explicit: an automatic six-month extension may be granted by filing Form 7004 using the foreign trust’s employer identification number. The 7004 must be filed by the original 3520-A due date.

The instructions add a second warning in all caps: an extension of time to file an income tax return does not extend Form 3520-A. You must file Form 7004 with the trust EIN. Operators who e-file Form 4868 in June and assume “everything is on extension” still miss March 15.

File the 3520-A itself, including the owner and beneficiary statements, to Internal Revenue Service Center, P.O. Box 409101, Ogden, UT 84409. Put the trust EIN on line 1b. Do not substitute the owner’s Social Security number. If the trust has no EIN, apply at IRS.gov/EIN; if the principal place of business is outside the United States, the IRS still lists the international EIN phone line 267-941-1099.

Do I still owe Form 3520-A if the foreign trustee refuses to file?

Yes. The U.S. owner must file a substitute Form 3520-A and attach it to a timely Form 3520, including extensions, if the trust will not file. Check the “Substitute Form 3520-A” box at the top of the attached 3520-A. Do not mail a second, standalone 3520-A for the same year if you are using the substitute path.

The IRS reminder to U.S. owners of a foreign trust tells you to complete the substitute “to the best of their ability.” Incomplete is still better than silent, but “best of ability” is not a license to leave the owner statement blank. Gather year-end asset values, income, distributions, and beneficiary names before the Form 3520 due date.

You must also furnish copies of the owner and beneficiary statements to the U.S. owners and U.S. beneficiaries by the Form 3520 due date when you are on the substitute path.

How living abroad changes the substitute deadline

The substitute 3520-A is due on the same day as your Form 3520, not on March 15. The Instructions for Form 3520 (December 2025) give calendar-year individuals April 15, then June 15 if, on the regular due date, you live outside the United States and Puerto Rico and your main place of business or post of duty is also outside those places (or you are in military or naval service on duty there). Attach a statement to Form 3520 showing that you qualify.

If you request an extension of time to file your income tax return, Form 3520 is due no later than October 15 for a calendar-year individual. Check box 1k and enter the tax return form number. Mail Form 3520 to the same Ogden P.O. Box 409101 address. Form 3520 is complete only if required attachments — including a substitute 3520-A when needed — are included.

Data note: weekend and holiday rules still apply. If a due date falls on Saturday, Sunday, or a legal holiday, file the next business day. Confirm the current-year calendar before you treat March 15, June 15, or October 15 as immovable.

How the $10,000 Form 3520-A penalty is actually calculated

The initial IRC section 6677 penalty on the U.S. owner is the greater of $10,000 or 5% of the gross value of the portion of the trust treated as owned by that U.S. person at year-end, if the trust fails to file a timely, complete, and accurate Form 3520-A (or fails to furnish the required statements).

An IRS Chief Counsel memo walks a $250,000 example: 5% of $250,000 is $12,500, so the initial penalty is $12,500, not $10,000. A $80,000 trust still hits the $10,000 floor. The percentage only starts to hurt once the owned portion exceeds $200,000.

Year-end U.S.-owned portion	5% of that value	Initial 3520-A penalty (greater of $10,000 or 5%)
$80,000	$4,000	$10,000
$200,000	$10,000	$10,000
$250,000	$12,500	$12,500
$1,000,000	$50,000	$50,000

If noncompliance continues more than 90 days after the IRS mails a notice of failure, additional penalties apply. IRS examiner materials on Forms 3520/3520-A describe a continuation penalty of $10,000 for every 30-day period (or fraction) after that 90-day window. Aggregate penalties are reduced as needed so they do not exceed the gross reportable amount when the IRS can determine that amount.

Missing a complete Form 3520 also keeps the related assessment period open. Under section 6501(c)(8), the time to assess tax tied to the unreported information does not expire until three years after the required information is actually provided. Silence is not a statute-of-limitations strategy.

What counts as a foreign trust you might actually own?

The form does not care that the local lawyer called it a foundation, Stiftung, fideicomiso, or “private pension.” Ownership follows sections 671–679. A grantor includes a person who creates a trust or makes a gratuitous transfer to it, and a person treated as owner of any part of the assets.

After March 18, 2010, a foreign trust that directly or indirectly loans cash or marketable securities to a U.S. person without repayment at a market rate of interest, or lets a U.S. person use trust property without paying fair market value in a reasonable time, is treated as having a U.S. beneficiary — and can be pulled into the grantor trust rules under section 679. Informal “I’ll pay it back” loans from a family trust are a filing event, not a favor.

Nongrantor trusts are different: the trust is treated as its own taxpayer to the extent assets are not owned by another person. You can still have Form 3520 distribution reporting (Part III) without being an owner who must ensure 3520-A. Get the classification right before you skip March 15.

Beginners: if you only received a cash gift from a living parent abroad and never created or funded a trust, you are usually in Part IV territory, not 3520-A. Retirees: some foreign retirement wrappers are trusts, some are pensions, some are neither. Do not copy a neighbor’s filing set. Families: putting a U.S. child’s name as a beneficiary can create a statement obligation even when the parent is the owner.

If you would rather not own a foreign trust at all, keep long-term investable assets in a U.S. brokerage you can actually operate from abroad. Charles Schwab is the usual first call for Americans who need a U.S. brokerage plus ATM access after a move, instead of wrapping the same portfolio inside a foreign fiduciary.

Form 3520-A filing checklist for owners abroad

1. Inventory every foreign arrangement that holds assets you funded, control, or can use: trusts, foundations, nominee structures, and intra-family loans.
2. Ask a cross-border advisor whether you are an owner under sections 671–679, a beneficiary, both, or neither. Write down the answer. Do not guess from a marketing brochure.
3. If you are an owner, get or confirm the trust EIN. Line 1b cannot be your SSN.
4. Appoint or confirm a U.S. agent if the trust will rely on that status; enter the agent’s name, address, and TIN on Form 3520-A Part I lines 3a–3g or the trust is not treated as having a U.S. agent.
5. Collect year-end values, income, expenses, and every distribution, including indirect ones. A distribution for section 6048(c) includes corpus and certain gifts, whether or not the recipient is named in the deed.
6. If the trustee will file: calendar March 15 (or the next business day) and Form 7004 if you need September. Confirm the owner and beneficiary statements actually left the trustee’s office.
7. If the trustee will not file: prepare a substitute 3520-A, attach it to Form 3520, check the substitute box, and mail the package to Ogden. Expats who qualify attach the June 15 statement; if you filed Form 4868, check box 1k and aim at October 15.
8. Keep copies of the statements you furnished to other U.S. owners and beneficiaries.
9. If you also file Form 8938, use Part IV’s duplicative-reporting exception only when this Form 3520-A is actually included in that count. Thresholds and asset lists still live on the Form 8938 foreign asset valuation guide.

Paper remains the default. Do not assume your 1040 software e-filed 3520-A because you checked a foreign-trust box. Confirm the Ogden mailing and keep proof of delivery.

Starter path and operator path

Starter path: this year, list every foreign account and legal wrapper, then separate “bank account / FBAR” from “someone else holds legal title for my benefit.” If the second list is empty, you probably do not have a 3520-A. If it is not empty, book an advisor before March, not during an audit.

Operator path: put 3520-A on a permanent operations calendar next to estimated taxes. Budget trustee cooperation as a paid deliverable. If the trustee will not sign U.S. forms, switch to the substitute filing path as a standard close, not an emergency. Recalculate the 5% exposure whenever the owned portion crosses $200,000.

Secondary readers: a family that received one large foreign inheritance through a trust may need both a first-year transfer report on Form 3520 and an annual 3520-A if a U.S. person is treated as owner going forward. A retiree collecting a simple foreign social-security analog usually does not. A remote founder who “temporarily” parked IP in a Belize trust usually does.

Conclusion

Form 3520-A is a March information return with a U.S.-owner penalty measured in five-figure dollars. The trustee is supposed to file. You still pay if they do not. Use Form 7004 with the trust EIN when you need more time on 3520-A, and use a substitute 3520-A on Form 3520 when the trustee will not cooperate. Living abroad can move Form 3520 to June 15 or October 15. It does not move the trust’s own March 15 date unless 7004 is actually filed.

Treat foreign-trust reporting as a cash-flow control, not a once-a-decade legal project. The cheapest year is the year Ogden receives a complete form on time.

Data notes / Sources checked

As of September 2026, figures below come from the IRS December 2025 continuous-use instructions unless noted. Congress, the IRS, and local trust law can change classification and due dates.

• Instructions for Form 3520-A (December 2025) — due date, Ogden address, EIN rule, substitute filing, reasonable cause, grantor definitions, section 679 loan rule.
• IRS reminder to U.S. owners of a foreign trust — Form 7004 extension, substitute attached to Form 3520, do not double-file.
• Instructions for Form 3520 (December 2025) — April 15 / June 15 / October 15 calendar, box 1k, section 6501(c)(8), section 6677 percentages.
• About Form 7004 — automatic extension vehicle for Form 3520-A.
• IRS: Gifts from foreign person — Part IV thresholds that are not a substitute for 3520-A.
• IRS EIN application — online EIN; international applicants may use 267-941-1099.
• FinCEN: Report of Foreign Bank and Financial Accounts — separate $10,000 aggregate FBAR rule for foreign financial accounts, including accounts a trust may hold.
• 26 U.S.C. § 6677 — statutory penalty amounts and reasonable-cause language for foreign-trust information returns.