Call Now (800) 681-1295

Form 3520 or 3520-A Required to Report Foreign Pensions?

Table of Contents

    U.S. taxpayers who possess a foreign pension plan should be aware that the Internal Revenue Service (IRS) requires that most sources of foreign income be reported. When a taxpayer purposely or mistakenly fails to adhere to reporting requirements for foreign pensions, they may be subject to various tax penalties imposed by the IRS. If you are concerned about whether you should use Form 3520 or Form 3520-A to report your foreign pension, you should contact our dual-licensed California tax attorneys and CPAs today. Whether you need assistance with your personal tax returns or preparing returns for your business, our firm is here to resolve your tax issues. The Tax Law Offices of David W. Klasing understands that foreign pension reporting could be a complicated matter, and we are here to discuss whether you should use Form 3520 or Form 3520-A to report your income.

    Differences Between Form 3520 and 3520-A for Reporting Foreign Pensions

    The United States has tax laws that allow them to tax U.S. persons on income that is earned outside of the country. A taxpayer is considered a U.S. person if they are a citizen of the United States, a resident of the United States (green card), a domestic corporation or partnership, or many other people or legal entities. For U.S. persons who are holders of a foreign pension plan, also known as a foreign trust, they will need to learn when they are required to use Form 3520 or Form 3520-A to report their income.

    Generally, U.S. persons who own a foreign trust will be taxed on all income resulting from the trust. Additionally, if a taxpayer is a beneficiary of a foreign non-grantor trust, they must report their share of income from the trust.

    Form 3520 is used when a taxpayer has to make an annual return to report transactions with foreign trusts or if they received a foreign gift. Specifically, a taxpayer must file a Form 3520 when the following occurs:

    • A taxpayer establishes a foreign trust or transfers money or assets to a foreign trust, or makes a loan to a foreign trust
    • A taxpayer receives dividends from a foreign trust or takes a loan from their foreign pension plan
    • The taxpayer makes use of property in a foreign trust or pension plan without compensation
    • The taxpayer is the U.S. owner of the foreign trust according to grantor trust rules
    • Large gifts and bequests (in excess of $100,000 in a calendar year) from foreign people were received by the taxpayer

    Form 3520-A

    Additionally, if a U.S. person is considered an owner of a foreign pension plan due to the grantor trust rules, they must make sure that the foreign trust submits a Form 3520-A to the IRS. The U.S. person who owns the trust must take the following actions:

    • Complete a Form 3520-A and attach it to a Form 3520 that is timely filed with the IRS
    • Provide the IRS with the needed annual statements to ensure they are not held liable for the foreign trust’s failure to file

    Exceptions for Filing Forms 3520 or 3520-A for Foreign Pensions

    There are some exceptions regarding the filing of Forms 3520 and 3520-A. For example, taxpayers do not have to file these forms if they possess a Canadian registered retirement savings plan (RRSP) or a Canadian registered retirement income fund (RRIF). There may also be other foreign retirement trusts that are exempt from reporting with Form 3520 or 3520-A. You should consider working with an experienced California International Tax Attorney as soon as possible if you are concerned about whether you must file under Form 3520 or 3520-A.

    It is important to note that the above filing exceptions do not affect reporting requirements stemming from Form 8938 needed to report foreign financial assets.

    When to File Forms 3520 and 3520-A to Report a Foreign Pension

    If you are subject to tax liability for your foreign pension plan, you should know when you are required to file and other details that could help you avoid a tax penalty. Taxpayers who must file a Form 3520 must ensure that it is submitted to the IRS by April 15th or by the 15th day of the fourth month following the end of the filer’s tax year.

    For taxpayers who are U.S. citizens residing in Puerto Rico or a foreign country, the filing deadline for Form 3520 is the 15th day of the sixth month at the end of their tax year.

    Alternatively, Form 3520-A needs to be submitted by the 15th day of the 3rd month after the end of the trust’s tax year. In some cases, a six-month extension could be filed if the taxpayer files a Form 7004.

    As mentioned, failing to file Form 3520 or Form 3520-A could result in a variety of tax penalties.

    BBB Rating

    Consult with Our Skilled Dually Licensed California International Tax Attorneys and CPAs for Form 3520 Foreign Reporting Requirements

    If you need help handling your foreign tax liability, you should contact the experienced California tax lawyers and CPAs at the Tax Law Offices of David W. Klasing today. The combined legal staff at our firm has decades of experience handling complex foreign reporting requirements, and we will work to help you achieve your tax goals. If you would like to schedule a confidential legal consultation to speak about your foreign reporting issues, call the Tax Law Offices of David W. Klasing at (800) 681-1295. You could also use our website to schedule your consultation.

    Questions and Answers about Offshore Voluntary Disclosure Initiative (OVDI)

    Questions and Answers about FBAR Compliance and Disclosure

    Questions and Answers About Foreign Tax Audits

    We Are Here for You

    Regardless of your business or estate needs, the professionals at the Tax Law Offices of David W. Klasing are here for you. We are open for business and our team will help ensure that your business is too. Contact the Law Offices of David W. Klasing today to discuss your business with one of our professionals.

    In addition to our main office in Irvine, the Tax Law Offices of David W. Klasing has unstaffed (conference room only) satellite offices in Los Angeles, San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland, Carlsbad and Sacramento. During the COVID-19 pandemic, our staff are working from home, but have full virtual meeting capability.

    Our office technology allows clients to meet virtually via GoToMeeting. With end-to-end encryption, strong passwords, and top-rated reliability, no one is messing with your meeting. To schedule a reduced rate initial consultation via GoToMeeting follow this link. Call our office and request a GoToMeeting if you are an existing client.

    Tax Help Videos

    Representing Clients from U.S. and International Locations Regarding Federal and California Tax Issues

    tax lawyers

    Main Office

    Orange County
    2601 Main St. Penthouse Suite
    Irvine, CA 92614
    (949) 681-3502

    Our headquarters is located in Irvine, CA. Our beautiful 19,700 office space is staffed full-time and always available for our clients to meet with our highly qualified and experienced staff of Attorneys, Certified Public Accountants and Enrolled Agents. We also offer virtual consultations and can travel to meet with clients in one of our satellite offices.

    Outside of our 4 hour initial consultation option, we do not charge travel time or travel expenses when traveling to one of our Satellite offices, or surrounding business districts, where it is necessary to meet personally with taxing authority personnel, make court appearances, or any in person meeting deemed necessary for the effective representation of a client. To make this as flexible, efficient, and convenient as possible, David W. Klasing is an Instrument Rated Private Pilot and Utilizes the Firms Cirrus SR22 to service client’s in California and in the Southwest by air. Offices outside these areas are serviced via commercial jet airlines. None of these costs are charged to our clients.

    Satellite Offices

    (310) 492-5583
    (760) 338-7035
    (916) 290-6625
    (415) 287-6568
    (909) 991-7557
    (619) 780-2538
    (661) 432-1480
    (818) 935-6098
    (805) 200-4053
    (510) 764-1020
    (408) 643-0573
    (760) 338-7035
    (602) 975-0296
    New Mexico
    (505) 206-5308
    New York
    (332) 224-8515
    (512) 828-6646
    Washington, DC
    (202) 918-9329
    (702) 997-6465
    (786) 999-8406
    (385) 501-5934