Form 3520: what to do when your UK family sends you money

Figures relate to tax year 2025 (US)

Your parents in Britain send you money toward a house. No US tax falls due on that gift, whatever its size. Yet once the year's gifts pass $100,000, the IRS still expects Form 3520, and the penalty for skipping it tracks the size of the gift.

That mismatch catches decent, careful people every year. So this guide explains the thresholds, the deadlines, the penalties, and the cases where a family loan or inheritance lands in the same place.

Key takeaways

• Foreign gifts are not taxable income, but large ones are reportable.
• The threshold is $100,000 a year from foreign individuals or estates, counting related donors together.
• Gifts from foreign companies have a far lower threshold, around $20,000 and indexed each year.
• The form is due with your return, including extensions, but it is filed separately.
• Penalties reach 25% of the gift, building up at 5% a month.

What is Form 3520?

Form 3520 is an information return for foreign gifts, inheritances and dealings with foreign trusts. It reports money rather than taxing it. Nothing on the form flows through to your Form 1040, and filing it creates no bill of any kind.

According to the IRS guidance on gifts from foreign persons (opens in a new tab), the duty falls on you as the recipient, not on the person sending the money. Your parents file nothing in America. They may have their own UK considerations, but the American paperwork is yours alone.

The gift is not taxed. The silence is what costs money.

When does the $100,000 threshold apply?

It applies to gifts and bequests from foreign individuals and foreign estates, measured across the whole calendar year. Once the total passes $100,000, you report every gift making up that total. A single transfer below the line may still count once you add the others.

The IRS counts related donors together, which surprises many families. If your mother sends $60,000 and your father sends $60,000, you have received $120,000 from related parties. So the reporting duty arrives even though neither gift reached the threshold alone.

Gifts from foreign companies or partnerships work differently. Their threshold sits near $20,000 and rises with inflation each year. That lower line catches payments from a family business more often than people expect.

Does an inheritance count as a gift?

For this form, yes. A bequest from a UK relative falls under the same $100,000 threshold as a lifetime gift. Receiving it creates no US income tax, even where the estate was large and the sums arrive over several months.

The estate itself may face UK inheritance tax, which is a separate matter settled in Britain. Our guide to US UK inheritance tax explains how the two systems meet. Your job as the beneficiary is simply to report what reached you.

What are the penalties?

For unreported gifts, the IRS charges 5% of the amount for every month that passes without a filing, to a ceiling of 25%. On a $200,000 deposit from family, that ceiling is $50,000. The penalty applies to a form that would have raised no tax at all.

Reasonable cause remains a defense, and the IRS now reviews those statements before assessing gift penalties automatically. That change helps, but it is no safety net. In our practice the cheapest outcome always comes from filing late voluntarily rather than waiting for a notice.

Trust penalties are harsher again. Missing a foreign trust filing can cost the greater of $10,000 or a percentage of the assets involved, so trust cases deserve advice before you file anything.

When is it due, and where does it go?

It is due with your income tax return, including extensions, so most expats have until 15 June or 15 October. The form travels separately, however. It goes to the IRS service center in Ogden, Utah, rather than with your Form 1040.

Per the IRS guidance on Form 3520 (opens in a new tab), each spouse reports separately unless you file a joint return. Sending it with your 1040 is a common error, because different teams handle the return and the form.

Does Form 3520 apply to money you send to Britain?

No. Form 3520 covers what you receive from abroad, not what you send. Sending money to family in Britain raises a different question, because US gift tax can apply to your own gifts above the annual exclusion, which is $19,000 per recipient for 2025.

Gifts to a non-American spouse have their own limit, far higher than the ordinary exclusion but still finite. It sits near $190,000 for 2025. Anything above these lines uses part of your lifetime exemption and needs Form 709 instead.

So the two forms sit on opposite sides of the same transaction. Form 3520 records what arrives from abroad, while Form 709 records what you give away.

Valuing the gift in dollars

Use the exchange rate on the day each gift arrives, not an annual average. The IRS publishes yearly rates for convenience, but a single large transfer deserves the spot rate. Keep a screenshot or the bank’s own conversion as evidence.

Property gifts follow the same principle at market value. If your parents transfer a share of a UK house rather than cash, you report what that share was worth on the day it changed hands.

Multiple currencies need care too. Where a relative sends euros or dollars from a UK account, report the dollar value that reached you rather than the amount that left.

How do you report a family gift?

The work is mostly record-keeping rather than calculation. You describe each gift, its date and its dollar value, and you identify the donor. The sequence below keeps the paperwork straightforward:

1. List every gift received from abroad during the calendar year.
2. Group gifts from related donors, such as both parents, into one total.
3. Convert each amount into dollars using the rate on the day it arrived.
4. Check whether the total passes $100,000, or about $20,000 from a company.
5. Complete Part IV of Form 3520 with the dates, amounts and donors.
6. Mail it separately to Ogden by your return deadline, including extensions.
7. Keep the bank records and any letter from your family with your tax file.

A short note from the donor helps more than people expect. It confirms the money was a gift rather than a loan or a payment for something, which is the question an examiner would ask first.

A worked example

Take an illustrative example. An American in London buys a flat in 2025. Her parents in Yorkshire each transfer the equivalent of $70,000 toward the deposit, in March and April.

Neither transfer reaches $100,000 on its own. But her parents count as related donors, so the IRS sees $140,000 in total. She therefore reports both gifts in Part IV, and she owes no tax on any of it.

The money then sits in her UK account while the purchase completes. That balance takes her past the FBAR threshold, so she files that too. One gift created two reporting duties and no tax bill.

What about foreign trusts?

Trusts are the harder half of this form, and British families use them often. Parts I to III cover transfers to a foreign trust, ownership of one, and distributions you receive. Unlike gifts, trust distributions can carry real US tax.

If you count as the owner of a foreign grantor trust, the trust generally files Form 3520-A as well, with an earlier deadline in March. A place in a family trust you have never touched can bring these rules into play, so check before assuming otherwise.

Common mistakes and traps

Most problems here come from treating the gift as a private family matter rather than a reportable event. These are the ones we see repeatedly:

• Counting each parent separately and missing the combined threshold.
• Filing the form inside the tax return instead of mailing it to Ogden.
• Assuming an inheritance is outside the rules because nobody was paid.
• Treating an informal family loan as a gift, or the reverse, without documenting either.
• Forgetting the FBAR once the money lands in a UK account.
• Ignoring a family trust because no distribution has yet been received.

Where the account reporting was also missed, our guide to Form 8938 and the other international forms sets out which ones apply to you.

What if you missed a previous year?

File the late form with a clear reasonable cause statement attached. Explain what happened, why the form slipped, and what you have done since. Filing voluntarily before the IRS writes to you carries far better odds than waiting.

Where other filings slipped in the same years, look at the position as a whole first. A gift form on its own is straightforward, but it may sit alongside missing returns or FBARs that need a different route entirely.

Form 3520 also keeps the assessment window open while it remains unfiled, which is the strongest argument for catching up. Filing the form starts that clock running.

How US UK Tax Accountants helps

We check every transfer from family against both thresholds, then prepare and file the form correctly. Our Form 3520 service covers gifts, inheritances and trust reporting, with a fixed fee agreed in writing first.

In our practice most of this work is preventive. A five-minute check before the money moves usually removes the problem entirely, and it costs a fraction of a late-filing conversation.

Check before the money moves

If your family is planning to help with a deposit, a quick review tells you whether Form 3520 applies. Tell us who is sending what, and when. You can book a consultation and hear back within one working day.

Last reviewed 12 September 2026 by the US UK Tax Accountants Tax Team. This article is general information, not personal tax advice — speak to a qualified US/UK tax adviser about your own position.

For the neighbouring question, Charitable giving across two tax systems: how to get relief in Britain and America walks through it in detail.