Form 3520: What US Persons in Canada Have to Report

Form 3520 is the IRS return a US citizen or green-card holder files to report dealings with a foreign trust or a large gift or bequest from a foreign person. For an American living in Canada it usually comes up three ways: an inheritance or gift from a Canadian parent over $100,000 in a year, a Canadian account that may be a foreign trust (TFSA, RESP, FHSA), or a payout from one. RRSPs and RRIFs are out of it. The form goes in separately from your 1040, and the penalties start high.

What is Form 3520 and who has to file it?

Any US person who, in the tax year, transferred property to a foreign trust, was treated as the owner of a foreign trust under the grantor trust rules, received a distribution from one, or received large gifts or bequests from foreign persons. The Instructions for Form 3520 split those four events into Parts I to IV, and a separate form is filed for each foreign trust.

The instructions add one thing owners miss: Part II has to be completed “even if there have been no transactions involving the trust during the tax year.” Owning the trust is the reporting event.

What happened in the year	Part of Form 3520	Reporting threshold	Penalty if it’s late or wrong
You created or transferred money or property to a foreign trust	Part I	Any reportable transfer (most fair market value sales are excepted)	Greater of $10,000 or 35% of the gross value transferred (IRC 6677(a))
You’re treated as the owner of a foreign trust	Part II, plus a substitute Form 3520-A if the trust doesn’t file its own	Any ownership during the year, even with no transactions	Greater of $10,000 or 5% of the gross value of the portion you own (IRC 6677(b))
You received a distribution from a foreign trust	Part III	Any distribution	Greater of $10,000 or 35% of the gross distributions
You received gifts or bequests from a nonresident alien individual or a foreign estate	Part IV, line 54	More than $100,000 in the year, related donors counted together	5% of the gift per month, up to 25% (IRC 6039F(c))
You received gifts from a foreign corporation or partnership	Part IV, line 55	More than $20,116 for 2025, $20,573 for 2026	5% of the gift per month, up to 25%

Reasonable cause, and not willful neglect, switches off each of these penalties. More on that below.

Do I file Form 3520 for an inheritance from Canada?

Yes, once what you received in the year from a nonresident alien individual or a foreign estate tops $100,000. A Canadian parent who was never a US citizen or resident is a nonresident alien, and their estate will generally be a foreign estate. The IRS gifts from foreign person page says you aggregate amounts from people you know or have reason to know are related, and once you’re over $100,000 you separately identify each gift above $5,000.

The receipt itself usually isn’t income. IRC 102(a) says gross income “does not include the value of property acquired by gift, bequest, devise, or inheritance.” Form 3520 is a disclosure, not a tax bill. Income the inherited property earns after you get it is taxable in the normal way. One trap in the instructions: if the money reaches you from a foreign trust rather than from the estate or the person, it’s a Part III distribution, not a Part IV gift.

• The instructions’ own example: $75,000 from Abby and $40,000 from Brian, both nonresident aliens, who are related to each other. You answer “Yes” on line 54 and list both.
• Gifts from a Canadian holding company or partnership use the much lower indexed line 55 threshold, $20,116 for 2025 and $20,573 for 2026 (IRS, Gifts from foreign person), and the IRS may recharacterize them.
• Tuition or medical bills a foreign relative pays directly on your behalf aren’t gifts for Part IV.

The full parent-to-child picture, including the separate tax on gifts from a covered expatriate, is in US tax on an inheritance or gift from a Canadian parent.

Is my TFSA, RESP or FHSA a foreign trust?

It can be, and nothing from the IRS settles it either way. Form 3520 applies to a US person “treated as the owner of any part of the assets of a foreign trust” under sections 671 to 679. Whether a Canadian account held in trust form is that kind of trust is the open question. The Form 3520 and 3520-A instructions, Rev. Proc. 2020-17 and the 2024 proposed regulations never mention the TFSA, so practice splits.

What the sources do establish is narrower. Rev. Proc. 2020-17 exempts an eligible individual’s tax-favored foreign trusts in two categories. Each has to operate “exclusively or almost exclusively” for its listed purpose and meet further conditions (tax-favored status, information reporting to the local tax authority, withdrawal limits), among them:

• A retirement trust where “only contributions with respect to income earned from the performance of personal services are permitted.”
• A non-retirement savings trust operating “exclusively or almost exclusively” for medical, disability, or educational benefits, with contributions capped at $10,000 a year or $200,000 lifetime.

The 2024 proposed regulations add a de minimis savings trust: the aggregate value of the trusts in that country stays at no more than $50,000 at any point in the year, regardless of how many trusts there are. You may rely on them for tax years ending after May 8, 2024, but only if you and related persons apply them “in their entirety and in a consistent manner.” Rev. Proc. 2020-17’s relief is limited to an “eligible individual”: someone who has filed the required US returns and, to the extent required, reported the trust’s contributions, earnings and distributions as income.

Each account has its own guide: whether a TFSA is a foreign trust, whether an FHSA is one, and RESP planning across the border.

Are RRSPs and RRIFs exempt from Form 3520?

Yes. The instructions list, among the exceptions to filing, “Transfers to, ownership of, and distributions from a Canadian registered retirement savings plan (RRSP), a Canadian registered retirement income fund (RRIF), or any other Canadian retirement plan” within section 3 of Rev. Proc. 2014-55. Rev. Proc. 2020-17 left that exception in place.

It’s an exemption from foreign trust reporting only. The instructions say these exemptions “do not affect any other reporting obligations,” and the IRS’s streamlined FAQs add that you “may need to report your Canadian retirement plan on FBARs or Forms 8938.” Form 8938 vs FBAR sorts out which of those applies.

When is Form 3520 due, and can I extend it?

The 15th day of the 4th month after your tax year ends, so April 15 for most people. If on your 1040’s due date you live outside the US and Puerto Rico with your place of business or post of duty outside them too, it moves to June 15, and you attach a statement saying so. If you extend your income tax return, Form 3520 goes to October 15 (Instructions for Form 3520).

2025 Form 3520	Due (IRS, Gifts from foreign person)
Calendar-year filer, no extension	April 15, 2026
Living and working outside the US and Puerto Rico	June 15, 2026
Income tax return extended with Form 4868	October 15, 2026

October 15 is a hard stop. The IRS says Form 3520 “cannot be extended beyond the 15th day of the 10th month,” even for a filer abroad who gets the discretionary extra two months on the 1040. If you extended, check box 1k and enter the form number of the extended return, or the 3520 can be treated as late.

• It’s filed separately from your income tax return, at the Internal Revenue Service Center, P.O. Box 409101, Ogden, UT 84409.
• A substitute Form 3520-A you attach as a trust owner is due with your Form 3520, not on the trust’s own date, the 15th day of the 3rd month. Who files Form 3520-A and why its date comes first works through that split.

What are the Form 3520 penalties?

For the trust parts, the greater of $10,000 or 35% of the amount transferred or distributed, and the greater of $10,000 or 5% of the trust assets you own when the Form 3520-A side fails. For gifts, 5% of the gift for each month it goes unreported, up to 25%. None of these depends on whether any tax was owed.

• After the IRS mails a notice, a trust failure that runs more than 90 days adds $10,000 for each 30-day period, but once the IRS can work out the gross reportable amount, the total is cut back so it doesn’t exceed that amount (IRC 6677(a)).
• Section 6677 penalties skip the deficiency procedures (IRC 6677(e)), so the IRS can assess them without first issuing a notice of deficiency.
• On a late gift report, the IRS “may determine the income tax consequences of the receipt” as well as charging the penalty (Instructions for Form 3520; the statute is IRC 6039F(c)).
• If a complete Form 3520 isn’t filed on time, the assessment period for tax related to Parts I to III stays open until 3 years after the information is reported (section 6501(c)(8), as the instructions put it).
• Reasonable cause and not willful neglect is a defence under both sections. Under section 6677(d), a foreign country’s penalties for disclosure don’t count as reasonable cause, and the instructions add that a foreign trustee’s reluctance to share information doesn’t either.

What if I already missed a Form 3520?

File it now, on its own, with a reasonable-cause statement. The IRS’s delinquent international information return submission procedures say late Forms 3520 and 3520-A are filed according to their own instructions, and that “for Form 3520 and Form 3520-A reasonable cause statements will be considered prior to a penalty being assessed.” Write “Reasonable Cause Statement attached” on top of the first page.

That route is for people who aren’t under civil examination or criminal investigation and haven’t been contacted by the IRS about the missing returns. Penalties can still be assessed. If your returns are also wrong, the late 3520s go into a streamlined package instead, which the IRS says must include required information returns “(e.g., Forms 3520, 5471, and 8938)” (IRS, Streamlined Foreign Offshore Procedures). The streamlined filing compliance procedures guide covers that fork.

The Form 3520 guides on this site

• Is a TFSA a foreign trust? The two positions on the TFSA, with the penalty math for each.
• Is an FHSA a foreign trust? Why only the trusteed kind can be.
• Cross-border RESP planning Trust reporting, grants and withdrawals for an RESP.
• Who files Form 3520-A The trust’s own return, the substitute, and the earlier date.
• Form 3520 penalty abatement How a late-filing penalty gets argued down.
• The IRS penalized me for a late Form 3520 on my TFSA The routes once a penalty is assessed, and their clocks.
• RRSP, TFSA and RESP in a streamlined filing How each account is reported when you’re catching up.

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.