Form 3520 vs Form 8938: Where They Overlap
Tax Research Desk
The basic distinction
- Form 3520 is event-based: it reports the receipt of foreign gifts, inheritances, or trust distributions.
- Form 8938 is point-in-time: it reports your balance of specified foreign financial assets at year-end, plus any time during the year when the balance exceeded a higher threshold.
A single foreign inheritance can trigger both: Form 3520 reports the receipt (the inheritance event), Form 8938 reports the resulting balance held in foreign accounts at year-end.
Form 8938 thresholds
Form 8938 reporting thresholds depend on your filing status and whether you live in the US or abroad:
| Filing status | Living in US | Living abroad |
|---|---|---|
| Single / MFS | $50K end of year or $75K any time | $200K end of year or $300K any time |
| MFJ | $100K end of year or $150K any time | $400K end of year or $600K any time |
Living abroad gets a much higher threshold. Most expats are well above the simple cases.
When both apply
A US person in Boston inherits $400,000 from a foreign relative in March. The money sits in a foreign bank account in their name through November while they arrange a US wire. At December 31, the foreign account is empty (money has all wired to the US).
This person's filings:
- Form 3520: YES. Receipt of $400,000 bequest from a foreign decedent. Due April 15.
- FBAR: YES. Foreign bank account balance exceeded $10,000 during the year. Due April 15.
- Form 8938: Depends on year-end balance and filing status. If December 31 balance was zero or below the threshold, Form 8938 not required. If money still sat in foreign accounts at year-end above the threshold, Form 8938 required.
Same person, different facts: At December 31 the foreign account still holds $100,000 (only partial wire to US). Now single filer in the US has year-end foreign balance of $100,000 > $50,000 threshold → Form 8938 required, attached to 1040.
What "specified foreign financial asset" means
Form 8938 covers:
- Foreign bank accounts.
- Foreign brokerage accounts.
- Foreign-issued stock or securities not held in a US brokerage.
- Interests in foreign partnerships, foreign trusts, foreign corporations (with caveats — investment interests, not direct ownership in active businesses).
- Foreign-issued life insurance or annuity contracts with cash value.
Form 8938 does not cover:
- Direct foreign real estate ownership (a house you own in Italy).
- Foreign currency held physically (cash in a safe).
- Foreign-issued tangible personal property (a Picasso you keep on the wall).
So if your foreign inheritance was a country house in Italy, you do not report it on Form 8938 (it is real estate, not a financial asset). You still report the receipt on Form 3520 because the inheritance threshold (>$100,000) was crossed.
Where Form 8938 fits in the return
Form 8938 is attached to your Form 1040 for the year. It is part of your normal tax return, e-filed (or paper-filed) with your 1040, not separately to Ogden.
Form 3520 is mailed separately to IRS Ogden even though it covers the same tax year.
So:
- Form 1040 + Form 8938 → e-file or mail together by April 15 (or October 15 with extension).
- Form 3520 → mail separately to Ogden by the same deadline.
Why both exist
Form 3520 was created in the 1990s to track foreign transfers in the moment they happen. Form 8938 was created in 2010 under FATCA to track foreign financial assets held by US persons on a balance-sheet basis. The two forms answer different questions:
- "Did you receive money from abroad this year?" (Form 3520)
- "What's your foreign financial-asset balance right now?" (Form 8938)
The IRS uses Form 8938 to cross-check whether assets reported on FBAR exist and whether large foreign-source income flows are being reported. It uses Form 3520 to identify wealth transfers that might involve gift tax (for the foreign donor), estate tax (for foreign estates with US-situs property), or undeclared offshore income.
Penalty comparison
| Form | Penalty | Notes |
|---|---|---|
| Form 3520 late/missing | 5% per month, capped at 25% of gift amount | Per filing |
| FBAR late/missing | $16,536 per account per year (non-willful) | Per account |
| Form 8938 late/missing | $10,000 initial + up to $50,000 if continued failure | Per filing |
Different penalty structures. Form 3520 is per-filing on the gift amount. FBAR is per-account. Form 8938 is per-filing on a tiered escalation.
Our app and Form 8938
Our cross-form check asks about your year-end foreign-financial-asset balance and your filing status. If your facts suggest Form 8938 is required, we flag it. We do not generate Form 8938 — it attaches to your 1040 and your normal tax software (TurboTax, FreeTaxUSA, H&R Block, etc.) supports it.
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.