1. Forgetting to aggregate gifts from related donors

If your foreign father gives you $60,000 and your foreign mother gives you $50,000 in the same year, the IRS aggregates them as a single $110,000 gift under the family-attribution rules. You cross the $100,000 threshold and must file. People often look only at the largest single gift and conclude they are under the threshold.

Fix: Add up everything you got from related foreign donors in the same year. If the total exceeds $100,000 (individuals) or $17,339 (corporations / partnerships, 2024 number), you file.

2. Using the wrong exchange rate

The right exchange rate is the spot rate or Treasury daily rate on the day you received the gift, not the day it was sent, not December 31, not today. People often use the year-end rate because it is easier to find — that can be hundreds of basis points off.

Fix: Use a historical rate from OpenExchangeRates, the Treasury daily rates, or your bank's record of the wire's settlement-date exchange rate.

3. Reporting the gift as taxable income

A foreign gift on Form 3520 is informational reporting only. You do not owe income tax on a gift. Some filers panic and report the gift on Form 1040 as income — that is wrong and inflates your tax bill.

Fix: Form 3520 sits alongside your 1040 but does not flow into it. The gift is reported because the IRS wants to know about it, not because it is taxable.

4. Confusing Form 3520 with FBAR or Form 8938

Form 3520 reports the receipt of a foreign gift or inheritance. FBAR reports the holding of money in a foreign bank account. Form 8938 reports the balance of foreign financial assets. These are three different forms with three different thresholds and three different deadlines.

Fix: If you got $150,000 from a foreign aunt and parked it in a US bank account, you file Form 3520 only. If you parked it in a foreign bank account and the balance went over $10,000, you also file FBAR. If it stayed in a foreign brokerage at year-end above the Form 8938 threshold, you also file Form 8938.

5. Filing under the wrong part

Form 3520 has four parts (I-IV). Filers sometimes mark Part I or Part III by accident when their situation is actually Part IV (most common case for gifts and inheritances).

Fix: If you received a one-time gift or inheritance from a foreign individual or estate and no foreign trust is involved, you file Part IV only. The other parts apply only when a foreign trust is in the picture.

6. Forgetting wet pen signature on the printed form

Form 3520 requires a wet (pen) signature on the printed form mailed to the IRS, even when the data was entered electronically. Some filers print, sign electronically again, and mail — that is not a valid wet signature.

Fix: Print the form, take an actual pen, sign on the signature line and date it. Then mail.

7. Not signing in two places

Form 3520 has two signature lines: one for "Signature of person(s) required to sign" on page 1, and a certification statement near the end. Both need signatures. Many filers sign one and miss the other.

Fix: Sign both. If filing jointly, both spouses sign both.

8. Mailing to the wrong address

Form 3520 goes to IRS Ogden, P.O. Box 409101. It does not go with your 1040. It does not go to your normal IRS service center.

Fix: Mail to Internal Revenue Service Center, P.O. Box 409101, Ogden, UT 84409. Nothing else.

9. Skipping certified mail

Form 3520 is the form most often penalized for "lateness" without the IRS even saying so. If you mailed first-class and the IRS does not process it for months, you have no proof you mailed on time.

Fix: Always use USPS certified mail with return receipt. Keep the receipt in your tax records.

10. Filing one year and not the next

People sometimes file Form 3520 once after a big inheritance and never check again. But if the foreign relative continues to send gifts (e.g., a foreign-resident grandparent sending $50K every year for five years), each year's filing requirement is independent. Year 1's filing does not cover years 2-5.

Fix: Annual check. If you received more than the threshold from any foreign source in any tax year, you file that year, period.

How our app prevents most of these

Our question flow aggregates donors, locks the historical FX rate from OpenExchangeRates, picks the right part of the form based on your facts, walks you through both signature locations, prints to the right address, and emails you an annual reminder for recurring filers. The most common mistakes are mostly the result of doing this once a year on paper — software smooths them out.

3520file is software, not a CPA firm or law firm. We prepare IRS Form 3520 based on the facts you provide. For advice on your specific situation, talk to a tax attorney or CPA. The above is plain-English explanation, not tax advice.

10 Common Form 3520 Mistakes That Trigger Penalties (2026 Edition)