Foreign Trust Owner and Form 3520-A

By ZM Ishmurzina

American expatriates who are owners of the foreign trust have to comply with strict IRS reporting requirements. Earlier we discussed general rules that the responsible parties of a foreign trust must follow. The form 3520 is not the only form that must be filed in regards to a trust with US expatriate tax returns.

This is an email from one of our clients, American expatriates living abroad. “I am more confused then ever after reading about forms 3520 and 3520-A. Do I really have to file both of them if I am the owner of the foreign trust?”

Let’s review the key requirements.

Does an owner of any portion of the foreign trust have any reporting requirements on behalf of the trust?

Per the IRC 6048(b) the owner of any portion of a trust is responsible for full trust compliance:

  • The trust must file a return for each year.
  • The trust must provide a return to each US person who is considered an owner of any part of the trust and who received distributions from the trust.

Which form the owner or trustee of the trust must file?

American expatriates who are owners or trustees of the trust may use Form 3520-A, Annual Information Return of Foreign Trust with a U.S. Owner. This form will be sufficient to satisfy the trust reporting requirements.

Which information must be provided on Form 3520-A?

  • Complete accounting of all trust activities and operations for the year
  • Income statement and balance sheet
  • Allocation of trust’s income among American expatriates (US owners) on form 3520-A
  • Name of the U.S. agent for the trust
  • Additional information required by the Secretary

How can American expatriates, owners of the trust, avoid these reporting requirements?

A trustee is usually responsible for all trust’s filing requirements. However, if a trustee fails to file Form 3520-A, an owner bears a full responsibility. The best way to ease the process is to appoint a US agent who will be authorized to act per IRC 6048(b). The agent will file Form 3520-A on behalf of the trust.

American expatriates who are not sure about foreign trust filing requirements or who failed to timely file all forms, must consult an expatriate tax specialist that provides international tax services. International tax experts at Artio Partners are here to help you.