Quick distinction

Schedule B is part of Form 1040. Part III of Schedule B asks two yes/no questions about foreign financial accounts and foreign trusts. It is the IRS's first-line cross-check for foreign-asset filings.
Form 3520 is a separate informational return reporting foreign gifts, bequests, and trust activity.

Schedule B does NOT report a gift amount. It just flags that you have foreign exposure, prompting deeper review.

Schedule B Part III, lines 7a-8

Line 7a: "At any time during [year], did you have a financial interest in or signature or other authority over a financial account (such as a bank account, securities account, or brokerage account) located in a foreign country?"

Line 7b: "If 'Yes,' are you required to file FinCEN Form 114 [FBAR] to report that financial interest or signature authority?"

Line 8: "During [year], did you receive a distribution from, or were you the grantor of, or transferor to, a foreign trust? If 'Yes,' you may have to file Form 3520."

How these interact with Form 3520

Line 8 directly references Form 3520. If you check "Yes" to Line 8, the IRS expects to see a Form 3520 filing for the same year. Failure to file Form 3520 while answering "Yes" on Schedule B is a near-certain audit trigger.

Conversely, if you file Form 3520 reporting trust activity, your Schedule B Line 8 must be "Yes." Inconsistency between forms is exactly what the IRS cross-checks.

What Schedule B does NOT capture

Schedule B Line 8 only references foreign trust transactions. It does not ask "Did you receive a gift from a foreign individual?" — that question is exclusively on Form 3520 Part IV.

So a recipient of a $200,000 inheritance from a foreign aunt (no foreign trust involved):

Does NOT check Yes to Schedule B Line 8 (no trust transaction).
DOES file Form 3520 Part IV (gift from foreign individual).
May or may not check Yes to Schedule B Line 7a (only if they hold a foreign account).

This trips people up — they assume Schedule B will catch the foreign-gift case. It does not.

A worked example

Sarah's 2025 facts:

Inherited $300,000 from her foreign-resident uncle. Direct wire to her US bank account.
No foreign trust involved.
No foreign bank or brokerage account in her name.

Her filings:

Form 1040 — filed normally.
Schedule B Part I/II — only if she has more than $1,500 in interest or dividends.
Schedule B Part III Line 7a — NO (no foreign account).
Schedule B Part III Line 8 — NO (no foreign trust).
Form 3520 Part IV — YES. Mailed to Ogden separately.

If she fails to file Form 3520 but answers Line 8 "No" (correctly), the IRS does not have a paperwork trail flagging the missing form. The IRS might still find it (FATCA reporting from the foreign bank, BSA-reported wires, etc.) but Schedule B itself does not surface the issue.

A different example

Marcus inherited $200,000 from a foreign decedent via a Cayman testamentary trust. The trust distributed $200,000 to Marcus during 2025.

His filings:

Form 1040 — filed normally.
Schedule B Part III Line 8 — YES (received a distribution from a foreign trust).
Form 3520 Part III — YES (distribution from foreign trust, not Part IV gift line).

Now Schedule B Line 8 directly cross-checks with Form 3520. The two must align.

Schedule B's other role

Schedule B Line 7a (foreign account question) also tees up FBAR consideration. If yes, Line 7b asks whether FBAR was required. If yes to 7b, the IRS expects to see FinCEN 114 in the BSA system for the same year.

So Schedule B is the spine that connects the three foreign-related disclosures:

Line 7a/b ↔ FBAR
Line 8 ↔ Form 3520 (trust-related parts)
Form 3520 Part IV (gifts) lives outside this connection — that one is independent

Bottom line

For a typical foreign-gift recipient (no foreign trust, no foreign account), Schedule B does not change. You answer Part III honestly (usually No to both), file Schedule B normally with your 1040, and file Form 3520 separately to Ogden. The two forms do not interlock for the gift case.

For a foreign-trust recipient, Schedule B Line 8 is the bridge — and you must keep it consistent with Form 3520.

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.

Form 3520 vs Schedule B: Two Reports, One Account