Tax Issues

Foreign Gift Reporting and Penalties

Have you ever received a gift from foreign person? What about gift money from parents overseas? Or an inheritance from a foreign relative? Did you know that, depending on the type and nature or the gift, you may have to report it to the IRS? If you don’t, you may be looking at a steep penalty.

This article will provide you with all you need to know about reporting foreign gifts.

Who is Required to Report Foreign Gifts?

Any U.S. citizen receiving an overseas gift from a non-U.S. citizen may be required to report foreign gifts. This includes people with a U.S. person status and those with an F-1 visa.

Why Does the IRS Require the Reporting of Foreign Gifts?

When a foreign relative or another foreign person sends a gift to a U.S. citizen, they are not subject to U.S. tax or reporting. Therefore, the recipient is required to report the gift to the IRS via form 3520.

Foreign Gift Reporting Requirements

The requirements for reporting foreign gifts vary according to whether the gift was received by an individual or entity. These are as follows.


Individuals must report gifts received worth over $100,000 or gifts received over the tax year valued at more than $100,00 combined.


Entities must report gifts received worth over $16,388 or gifts received over the tax year valued at more than $16,388 combined.

When reporting taxable international gifts, it is not necessary to reveal the name of the giver to the IRS if they would rather remain anonymous.

What Penalties Could I Be Facing for Not Reporting Foreign Gifts?

People that do not report foreign gifts to pay tax on money received from abroad are faced with an initial penalty of at least $10,000, or, depending on the circumstances, the following may apply.

·      35% of the value of any property transferred to a foreign trust If the U.S. citizen did not report the transfer or the creation of the trust.

·      35% of the value of the distributions received from a foreign trust if the citizen did not report the receipt of funds.

·      5% of the value of the foreign trust assets owned by the U.S. citizen under grant trust rules if the citizen did not report ownership.

The U.S. citizen may also be subject to an additional 5% or $10,000 penalty(whichever is greater) if they fail to file a form 3520 on foreign assets and do not provide the necessary documentation to the IRS and other U.S. beneficiaries or if they include incomplete or incorrect information on section6048 (b) of the form.

You can avoid penalties by filing on IRS Offshore Voluntary Disclosure or by following Streamlined Filing Procedures for compliance.

Do I Need an Attorney to Represent Me If I Fall Behind on Filing Foreign Gifts?

The process for Filing Foreign Gifts is complicated. If you want to make sure you don’t end up paying more than you need to and that you stay out of legal trouble, it’s advisable to have a reliable attorney on your side.

Fros tLaw has years of experience dealing with tax controversy issues. With offices all over the country, we can meet at a location that works best for you. We will see to it that you remain compliant and on the right side of the law.

If you have tax issues, do not hesitate to reach out to Frost Law for the assistance you need.

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