Reporting Foreign Inheritance to IRS: Form 3520 Requirements Explained

The Rule Most People Discover Too Late

Inheriting money from a relative who lived outside the US does not trigger income tax. Foreign inheritances are not taxable income, and the IRS is not trying to tax the inheritance itself.

But there is a separate reporting requirement that has nothing to do with tax. If you are a US person — citizen, permanent resident, or anyone meeting the substantial presence test — and you receive a bequest or inheritance from a non-resident alien individual or a foreign estate that exceeds $100,000 in a single calendar year, you must disclose it on IRS Form 3520, Part IV.

Form 3520 is informational; no income tax is due on the inheritance itself. But failing to file can trigger penalties that are anything but informational.

How the $100,000 Threshold Works

The threshold is cumulative within a calendar year and includes all amounts received from the foreign estate or from related foreign persons. The IRS aggregates transactions: if you receive $60,000 from a foreign estate and $50,000 from a relative who you have reason to know is acting on behalf of the deceased, the combined $110,000 crosses the threshold and requires disclosure.

For gifts or bequests from foreign corporations or partnerships, the threshold is much lower — approximately $20,116 for 2025/2026 (inflation-adjusted annually).

The form must be filed with your annual federal tax return, which means it follows the same April 15 deadline (with extensions available through October 15).

The Penalties for Not Filing

Here is where the stakes become real. The penalty for failing to file Form 3520 starts at 5% of the gross value of the inherited assets for each month the failure continues, up to a maximum of 25% of the total inheritance.

On a $500,000 inheritance, the initial monthly penalty is $25,000. After five months of non-filing, the maximum penalty of $125,000 applies. Reasonable-cause relief may be available in qualifying cases.

Reasonable-cause relief exists, but whether it applies depends on the facts. Consult a tax professional before filing late.

What to Report

Form 3520, Part IV asks for:

• The name and address of the foreign estate or foreign person who transferred the assets
• A description of the property received (cash, securities, real property, etc.)
• The fair market value of the inheritance as of the date of receipt
• Your relationship to the transferor

You do not need to provide the foreign estate's tax identification number if it does not have one, but you must explain why in the relevant section.

What If You Have Already Missed the Deadline

If you received a large foreign inheritance in a prior year and did not file Form 3520, do not attempt a "quiet disclosure" by simply filing the form late without explanation. The IRS actively audits late-filed foreign information returns, and quiet disclosures can be treated as willful non-compliance — escalating the situation from civil penalties to potential criminal exposure.

Instead, consider the IRS Streamlined Filing Compliance Procedures, which allow taxpayers who can certify their failure was non-willful to come into compliance with reduced or eliminated penalties. For more complex situations, the IRS Voluntary Disclosure Program (VDP) provides a structured path to resolve outstanding obligations.

Both programs require professional tax counsel experienced in international reporting — this is not a DIY exercise.

The FBAR Connection

If the foreign inheritance includes foreign bank accounts, there is a second reporting requirement. The FBAR (FinCEN Form 114) must be filed if you have a financial interest in or signature authority over foreign financial accounts with an aggregate balance exceeding $10,000 at any point during the calendar year.

The moment you inherit a foreign bank account — or gain signature authority over one as executor — you may trigger FBAR filing obligations. The deadline is April 15 with an automatic extension to October 15, and the filing is done electronically through FinCEN's BSA E-Filing System, not with your tax return.

Civil penalties for non-willful FBAR violations can start at $10,000. Willful violations can reach the greater of $100,000 or 50% of the maximum account balance.

Separating Tax from Reporting

The critical distinction that confuses most people: the inheritance is not taxable, but it must be reported. These are completely separate obligations. You can owe zero tax and still face six-figure penalties for failing to file the informational return.

If you are navigating a foreign inheritance alongside an international estate settlement, the International Estate toolkit includes the complete IRS compliance checklist — Form 3520, FBAR, and Form 8938 (FATCA) filing requirements — so nothing slips through the cracks during an already complex process.