Form 3520-A and Who the US Thinks Owns the Trust

If the IRS treats you as the owner of a foreign trust under the grantor trust rules, Form 3520-A is the trust's return but your exposure. The trust is the nominal filer; you are the person the penalty lands on if it does not file, and you are the person who must produce a substitute return in its place. The substitute does not run on the trust's deadline — it runs on yours, which is the point almost every published guide to this form gets wrong.

Key takeaways

• Ownership is decided by the grantor trust rules — sections 671 through 679 — not by the trust deed and not by who receives money.
• The trust files Form 3520-A. You must make sure it does. If it does not, you file a substitute attached to your own Form 3520.
• Two clocks. The trust's return is due on the 15th day of the third month after its tax year end. A substitute is due on your Form 3520 date, which is later if you live outside the United States.
• *You should also receive something*: a Foreign Grantor Trust Owner Statement, the input to your own return.
• A trust with no US agent risks more than a penalty. The IRS may redetermine the amounts you take into account.

Who the IRS treats as the owner of a foreign trust

This decides everything else, and the trust deed does not answer it. The definition in the Instructions for Form 3520-A is circular on purpose: "An owner of a foreign trust is the person that is treated as owning any of the assets of a foreign trust under the grantor trust rules." The last phrase does all the work.

Two provisions do most of the deciding. The first is familiar: the grantor who can get the property back, or whose spouse can benefit, is treated as owner. The second catches people who planned around the first. Section 679 — which the IRS notes "applies specifically in the context of foreign trusts" — treats a US person who transfers property to a foreign trust as owner of the portion attributable to that property if there is a US beneficiary of any portion of the trust.

One consequence is stated wrongly often enough to isolate. Excluding yourself and your spouse from all benefit does not switch off section 679. It triggers on the existence of a US beneficiary; nothing in it requires that you can benefit. A US settlor carefully excluded from a UK family trust with a US-resident child among its beneficiaries is still, for US purposes, the owner. If you are unsure which side of the line you are on, that question has its own piece: is a settlor-interested UK trust a US grantor trust?

There is a second trap for anyone who settled a trust before becoming American. Under the 5-year section 679(a)(4) pre-immigration look-back, a nonresident alien who transfers property to a foreign trust and then acquires a US residency starting date within five years of that transfer is treated as having made the transfer on the residency starting date — the date determined under section 7701(b)(2)(A), not a green-card issue date and not the day you landed. It applies to section 6048 as well as to ownership, so the consequence is a Form 3520 filing obligation dated to that day, not merely a label, and only the portion attributable to your transfer is caught. Section 679 also contains a second, unrelated five-year rule at section 679(c)(3) on when a beneficiary counts as a US person — so "the five-year rule" is never safe to say here without naming which.

There is also a carve-out no guide seems to mention. The instructions define a grantor as any person treated as owning any part of the trust's assets under sections 671 through 679, "excluding section 678" — the provision that treats a beneficiary holding a withdrawal power as owner of that portion. So a person with a withdrawal power can be an owner without being the grantor, which changes who signs what.

Why the trust files, and why the penalty lands on you

Form 3520-A is required of the trust by section 6048(b), and the trustee signs it. The About Form 3520-A page states it directly: "A foreign trust with at least one U.S. owner files this form annually."

That sounds like somebody else's problem. It is not. The instructions make each US owner responsible for ensuring the trust files a complete and accurate return and furnishes the required annual statements — and the penalty for the trust's failure is charged to the US owner, under section 6677. It is the greater of a fixed dollar amount or a percentage of the gross value of the portion you are treated as owning, so exposure scales with the trust rather than with any tax ever at stake. Further amounts apply if the failure continues after the IRS gives notice, the total is capped at the trust's gross value, and a reasonable-cause defence is available where the failure was not willful neglect. We deliberately do not restate the amounts: read them in the current instructions, the only version that governs your year.

That is the oddity at the heart of this form. You carry the consequence of a filing you cannot make, by an entity you may not control, administered by trustees with no US filing history and no reason to acquire one. The substitute return is the IRS's answer.

The two clocks, and the one everybody misreports

Here is where most published guidance goes astray. Search for this form and you will be told, correctly, that Form 3520-A is due by the 15th day of the third month after the end of the foreign trust's tax year — mid-March for a calendar-year trust — with an extension available on Form 7004. You will then be told that if the trust does not file, you file a substitute. What you will usually not be told is that the substitute runs on a different clock.

The Instructions for Form 3520 say it in one sentence: "If you are the U.S. owner of a foreign trust, the due date for filing a substitute Form 3520-A is the due date of your Form 3520." The 3520-A instructions repeat it: a substitute attached to a US owner's Form 3520 "is due the same day as Form 3520."

So the substitute runs on your Form 3520 dates, which are not the trust's:

• the 15th day of the fourth month after your tax year end — 15 April for a calendar-year individual;
• the 15th day of the sixth month — 15 June — if you live outside the United States and Puerto Rico;
• extended no further than the 15th day of the tenth month — 15 October — where you properly filed for an extension of your income tax return, and you should check Box 1k on Form 3520 to say so.

That last one is a cap, not a grant. The IRS is explicit that the Form 3520 date "cannot be extended beyond the 15th day of the 10th month", and that the discretionary further two-month extension some taxpayers abroad obtain for their income tax return "does not apply to the Form 3520 due date." An income tax return legitimately filed in December does not drag the Form 3520 — or a substitute attached to it — along with it.

So a US person living abroad whose trustees have gone quiet is not late in March. They have until June, and longer with an extension. Guides that put the owner on the trust's clock send that reader into a panic filing they did not need to make — or, worse, into assuming the window has closed.

One caution in the other direction: the 3520-A instructions warn that "An extension of time to file an income tax return does NOT extend the time to file Form 3520-A." The trust's own extension goes in on Form 7004 under the trust's employer identification number, which assumes a foreign trust that has one.

The failure mode to watch for is a preparer who handles your Form 3520 competently and assumes the 3520-A rides along behind it. It does not. The trust's return is due on the trust's date; only a substitute, filed because the trust did not, moves onto yours. Two forms, two filers, two calendars — the assumption our calculators and calendars are built on.

What you should be receiving: the Owner Statement

A document flows the other way, and chasing it is the most useful thing you can do early in the year.

Pages 3 and 4 of Form 3520-A are the Foreign Grantor Trust Owner Statement. A copy must be furnished to each US person treated as an owner under the grantor trust rules, and included with the trust's Form 3520-A, no later than the 15th day of the third month after the end of the trust's tax year. The IRS says each US owner "should receive" one.

That date sits before your own deadline for a reason: the statement carries the trust income you report on your personal return, because a trust you are treated as owning is transparent to you. Page 5 is the separate Beneficiary Statement, for a US beneficiary who received a distribution, and it is not completed for an owner — if that is your position instead, see what happens when a US-resident beneficiary receives from a trust.

If no statement arrives, you are not excused. You are on notice.

When the trustee will not file: the substitute Form 3520-A

This is the realistic outcome for most privately administered foreign trusts, and it is a designed route rather than a workaround. The instructions are unambiguous: if the trust fails to file, the US owner "must complete and attach a substitute Form 3520-A" to their Form 3520 by that form's due date "in order to avoid being subject to the penalty for the foreign trust's failure to timely file Form 3520-A."

The mechanics are specific and easy to get wrong:

• Tick the "Substitute Form 3520-A" box at the top of the form you attach to Form 3520.
• You sign it, not the trustee. A substitute "must be signed and dated by the U.S. owner", and your name and taxpayer identification number go on the Title line of the signature box.
• You prepare the Owner Statement yourself. The form's instruction is that the trustee — "or U.S. owner if a substitute Form 3520-A" — prepares a separate statement for each US owner.
• Complete Part II of your Form 3520, with the trust's EIN on line 2b, even if there were no transactions involving the trust during the year.

What makes a substitute difficult is not the form. It is being asked to produce a balance sheet and an income statement for a trust whose records sit in another currency, under another accounting convention, kept by someone who does not report to you. That is reconstruction work, and the result depends on how early it starts — which is why our fixed-fee engagements front-load it into the winter rather than the week before a deadline.

The US agent, and the consequence that is not a penalty

Part I of Form 3520-A has lines for a US agent, widely treated as optional administrative detail. It is not quite. A trust "will not be treated as having a U.S. agent unless the U.S. agent's name, address, and TIN are entered on lines 3a through 3g of Part I" — an informal arrangement does not count — and the consequence of having none is distinct from any penalty: "If a foreign trust with a U.S. owner does not have a U.S. agent, the IRS may redetermine the amounts required to be taken into account with respect to the foreign trust by the U.S. owner."

Without an agent, in other words, the IRS can substitute its own view of your numbers and you argue from behind. Appointing one has legal consequences for the trustees as well as for you, so it belongs in a conversation with the trust's advisers and a US professional together — not in a box ticked at filing time. UK trustees usually have a parallel domestic obligation to weigh at the same moment: see trust registration for US-connected trusts.

If you are already late

Missed years are common, and the position is better than it was. The National Taxpayer Advocate records a change the IRS made in late 2024: for the trust portion, the IRS "will begin reviewing any reasonable cause statements taxpayers attach to late-filed Forms 3520 and 3520-A" before assessing any section 6677 penalty.

That is narrower than the headlines suggested. Penalties have not stopped; what changed is sequencing. The lesson is the opposite of waiting — the statement has to be written properly and filed with the return, because it is now the thing read first. Where income tax returns and other information returns are also outstanding, the right route may instead be one of the IRS offshore compliance procedures, dealing with the whole position at once. That turns on why the filings were missed: a judgement call, not a form-selection exercise. The wider Form 3520 picture, including gifts and distributions, is in our guide to foreign trusts and Form 3520 for US persons in the UK.

Where we fit

Form 3520-A sits at the awkward join between a US owner, a foreign trustee, and two sets of advisers who have never spoken. Most of the value is in sequencing: establish ownership first, chase the Owner Statement second, and only then decide whether you are waiting for the trust's return or building a substitute.

At Next Tax Source this work is prepared by cross-border specialists and reviewed and signed by a licensed professional — an IRS Enrolled Agent who is also ACCA-qualified — so the US position and the trust's own position are read together. The full scope is on our US–UK private client tax page, or book a consultation if you are holding an Owner Statement, a blank form, or a silence from your trustees.