Foreign Gift Reporting
Foreign Gift Reporting: When a U.S. person receives a gift from a foreign person, they may be required to report the gift to the IRS on form 3520. Not all gifts from foreign persons have to be reported. Rather, only gifts that meet the threshold requirement for reporting have to be disclosed.
The threshold requirements will vary depending on whether it is a gift from a foreign individual or a gift from a foreign entity.
We will summarize the foreign gift reporting rules:
A Brief Introduction to Form 3520 Foreign Gifts
The form 3520 is filed at the same time a person’s tax returns filed.
If a person files for an extension for their US tax return, the form 3520 filing goes on extension as well.
If the taxpayer also has a form 3520-A filing requirement, the due date is different and a separate extension form must be filed on form 7004 (which is different than form 4868 which is the form used to extend the time to file a US tax return).
Even if the filer does not have a tax return filing requirement (because possibly they are below the income levels for having to file tax return) they still must file a form 3520 if they meet the threshold requirement for foreign gift reporting.
Gift From a Foreign Individual
When a U.S. person receives a gift from a foreign individual the threshold requirement it Is generally $100,000.
In other words, if the US person receives a gift or a series of gifts from the same foreign individual in the U.S. tax year diving annual aggregate total exceeds $100,000, and the gift is reported on form 3520.
Unlike a gift from a foreign entity, the reporting requirements for reporting a gift from a foreign individual are relatively straightforward.
Aside from some additional background information about the filer, the person filing the form 3520 must simply identify:
- The date or dates of the gift
- The FMV value of the gift (in USD)
- The type of gift.
Gift From a Foreign Corporation or Partnership
When a person receives a gift from a foreign entity, the rules are different.
The threshold requirement for reporting is much lower, and in 2019 it was $16,388. Therefore, if a US person received a gift from a foreign entity that exceeded $16,388, then form 3520 Is required.
The reporting requirements for receiving a gift from a foreign entity are more detailed and require the following information to be disclosed on form 3520:
- Date of Gift
- Name of Foreign Donor
- Address of Foreign Donor
- Identification Number
- Corporation or Partnership
- Description of Property
- FMV (Fair Market Value of the Gift)
If you do not timely file form 3520 with the IRS you maybe subject to fines and penalties, although these penalties may be avoided, reduced, or minimized.
Foreign Gift, Trust, and Inheritance Tax Specialist Team
Our firm specializes exclusively in international tax, and specifically IRS offshore disclosure, including help clients with late reporting of Forms 3520 and 3520-A.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.
Each case is led by a Board-Certified Tax Law Specialist with 20-years experience, and the entire matter (tax and legal) is handled by our team, in-house.
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Our lead attorney is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
Recent Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
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Generally, experienced attorneys in this field will have the following credentials/experience:
- 20-years experience as a practicing attorney
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