The direct answer
If you received a reportable foreign gift or inheritance and missed Form 3520, don't ignore it. The usual path for someone the IRS has not yet contacted is to file the late Form 3520 for each missed year through normal filing procedures, with a written reasonable-cause statement explaining why it was late.
A penalty may or may not apply. Nobody can promise relief in advance — but leaving the form unfiled keeps the problem open.
First, confirm a form was actually required
Before you worry about penalties, check each year:
- Were you a U.S. citizen or resident that year?
- Did gifts and bequests from a nonresident alien or foreign estate, plus those from foreign persons related to them, total more than $100,000 that year? (Or did purported gifts from a foreign company exceed the much lower corporate threshold?)
- Was it really a gift — not a loan, not your own money, not tuition paid directly to a school?
Many people discover they were under the threshold, or that some transfers don't count. See Multiple foreign gifts: how does the $100,000 threshold work?
How the penalty works
| Part of Form 3520 | Penalty for failing to report on time (per the Form 3520 instructions) |
|---|---|
| Part IV — foreign gifts and bequests | 5% of the amount of the foreign gift for each month the failure continues, up to 25% in total |
| Part III — distributions from a foreign trust | The greater of $10,000 or 35% of the gross value of the distributions |
For foreign gifts, the IRS may also determine the income tax consequences of the money — in other words, it may not accept that it was a gift. For both parts, no penalty applies if the failure was due to reasonable cause and not willful neglect. (In its discussion of the foreign-trust penalty, the instructions add that a foreign country's penalty for disclosing the information is not reasonable cause; this guide does not extend that statement to the foreign-gift penalty.)
What "reasonable cause" means — carefully
Reasonable cause is decided on the facts and circumstances of each case. IRS guidance calls for the explanation to be in writing, with an affirmative showing of all the facts you are relying on. As practical guidance (not an IRS rule): there is no magic phrase, and a statement that simply says "I didn't know" may not be enough by itself.
Practical guidance, not an IRS checklist — a useful statement usually explains, factually:
- what you received, from whom, and when
- why the form wasn't filed (for example, what you understood at the time and whether you relied on a preparer)
- when and how you learned about the requirement
- what you did once you learned about it, and how quickly
Filing late if the IRS hasn't contacted you
The IRS's delinquent international information return submission procedures describe the approach for taxpayers who are not under a civil examination or criminal investigation and who have not already been contacted by the IRS about the delinquent returns:
- File the late Form 3520 for each missed year through normal filing procedures (Form 3520 is filed separately from your tax return).
- Attach a reasonable-cause statement to each late form for which you are asserting reasonable cause.
- Include the declaration "Under penalties of perjury, I declare…" in the statement.
- Write "Reasonable Cause Statement attached" at the top of the first page of the Form 3520.
The IRS says reasonable-cause statements attached to Forms 3520 and 3520-A will be considered before a penalty is assessed. That is a review, not a guarantee of relief.
If the IRS has already contacted you, if you are under examination, if a foreign trust is involved, or if there is also unreported income (for example, interest on gift money held abroad that was never reported), the situation is different. Talk with a CPA or tax attorney before filing anything.
A worked example
In 2023, Jason, a U.S. citizen, received $250,000 from his parents in Hong Kong, who are nonresident aliens. He didn't know about Form 3520. In 2026 a friend mentions it. Jason confirms he was over $100,000 in 2023 and under it in 2024 and 2025. The money was always in his U.S. account and its interest was reported each year. He hasn't heard from the IRS.
Jason's likely path: prepare a 2023 Form 3520 Part IV listing the gifts, attach a factual reasonable-cause statement with the penalties-of-perjury declaration, mark the first page as described above, mail it, and keep proof of mailing. Because the potential penalty on $250,000 could reach $62,500 (25%), he has a professional review the statement first. Whether a penalty is assessed is up to the IRS.
Common mistakes
- Waiting for the IRS to find it
- Reporting an old gift on the current year's form instead of the year it was received
- Filing without a reasonable-cause statement
- Overstating or inventing facts in the statement — it is signed under penalties of perjury
- Fixing Form 3520 but ignoring related FBARs or unreported interest for the same years
Records to gather
- Bank and wire records for every gift, by year
- Evidence the money was a gift (messages or letters from the givers)
- Proof of the givers' status (not U.S. citizens or residents)
- Your tax returns for the years involved
- Anything showing when and how you learned about Form 3520
When professional review makes sense
For a late Form 3520, almost always. The penalty is based on the size of the gift, so the stakes can be high, and a well-documented reasonable-cause statement matters. Professional help is especially important for multiple years, large amounts, foreign trusts, IRS notices already received, or any unreported income.