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Foreign Grantor Trust IRS Form 3520 Filing Date Changes

Updated: Mar 2

For tax years beginning after 2016, the due date for a U.S. person to file IRS Form 3520 has changed to the fifteenth day of the fourth month following the end of the U.S. person’s tax year. For those following a calendar year, (taking into account the Emancipation Day holiday) the deadline in 2018 is April 17, 2018.

IRS Form 3520

U.S. persons engaging in transactions with a foreign grantor trust, such as transfers to, or distributions from the trust must file IRS Form 3520: Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts, and Instructions.

A U.S. person who is treated as the owner of a foreign trust under the U.S. grantor trust rules must also file IRS Form 3520 even in a year where the U.S. owner did not have any transactions with the foreign grantor trust.

There are several situations in which a Form 3520 is required to be filed such as when a U.S. person:

  • Creates or transfers money or property to a foreign grantor trust;

  • Receives (directly or indirectly) any distributions from a foreign grantor trust; OR

  • Receives certain gifts or bequests from foreign entities.

IRS Form 3520-A

The trust owner is also required to prepare IRS Form 3520-A: Annual Information Return of Foreign Trust with a U.S. Owner, and Instructions. This form provides information about the foreign grantor trust, its U.S. beneficiaries, and any U.S. person who is treated as an owner of any portion of the trust.

A U.S. person treated as an owner of any portion of a foreign trust under the grantor trust rules must ensure the foreign trust:

  • Files Form 3520-A with the IRS; and

  • Provides the completed IRS Form 3520-A to the trust’s U.S. owners and U.S. beneficiaries.

Penalties

If the forms are filed late, incompletely or incorrectly, the IRS may impose penalties. For example, the penalties related to only IRS Form 3520 Parts I and III start at the greater of US$10,000.00 or 35% of the gross reportable amount.

Trivia Note: Why April 17 this year?

The big tax day in the U.S. is April 15. The date is bumped out when the 15th falls on a weekend. This year, the date is further bumped out a day because of the Washington, D.C. holiday “Emancipation Day.”

Emancipation Day commemorates the D.C. Compensated Emancipation Act of 1862 which ended slavery in Washington, D.C., freed 3,100 individuals, reimbursed those who had legally owned them, and offered the newly freed men and women money to emigrate.

For assistance, please contact me via my contact page or at elizabeth@elizabethmcmorrowlaw.com.

#ForeignGrantorTrust #IRSReporting #Trusts #Form3520

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