Step 1: Don't panic, but move quickly

The Form 3520 late-filing penalty starts accruing the day after the deadline and stops accruing the day you file. Every day of delay potentially costs you 5% / 30 = ~0.167% per day, capped at 25%.

If you are one month late, you are at 5%. Three months late = 15%. Five months or more = 25% (the cap). Once you hit the cap, more time does not increase the penalty — but it does increase the risk of being caught before you file.

So the priority is: file as soon as possible, ideally within the next 30-60 days regardless of whether you can write a perfect reasonable-cause statement.

Step 2: Gather what you need

For each missed year of Form 3520:

Names of foreign donors.
Donor's country of residence.
Date of each gift / bequest / transaction.
Foreign currency amount.
USD amount at the historical spot rate for that date.
Description of the gift (cash, real estate, securities, etc.).
Donor's address if you can find it (helpful, not required for individuals).

If you do not have all the details, use what you have and document your best-faith effort to find the rest. The IRS is not as harsh on missing donor details as it is on missing gift amounts.

Step 3: Decide whether to attach a reasonable-cause statement

You have two choices when filing late:

File the late return without a reasonable-cause statement. The penalty will be assessed automatically (5%/month up to 25%). You can later request abatement after the IRS issues the penalty notice.
File the late return WITH a reasonable-cause statement attached. This is a pre-emptive abatement request. The IRS will read the statement before assessing.

Option 2 is usually better when:

You have a defensible reason for the delay (medical, family death, reliance on professional advice).
You have documentation to support the reason.
The reason is fact-specific and not "I didn't know about the form."

Option 1 is faster when you have a weak reasonable-cause case but want to start the statute-of-limitations clock immediately.

Step 4: File one return per missed year

You file a separate Form 3520 for each tax year the obligation existed and was missed. Mark each form clearly with the tax year at the top.

So if you missed 2022 and 2023 and 2024 Form 3520s, you file three separate Forms 3520 in three separate envelopes (or one envelope with three forms each individually signed and dated).

Each form mails to the same place: IRS Ogden, P.O. Box 409101.

Step 5: Use certified mail

Always certified mail with return receipt. For multiple-year late filings this is even more critical — you want clean evidence of when you came into compliance.

Step 6: Cross-check FBAR and Form 8938

If you missed Form 3520, you likely also missed FBAR and/or Form 8938 for the same year(s).

For missed FBARs: file electronically at BSA E-Filing. If you missed multiple years, you can use the Delinquent FBAR Submission Procedures (still available as of writing) — a no-penalty program for taxpayers who failed to file but report all foreign income on their Form 1040. Check the IRS website for current eligibility.

For missed Form 8938: file an amended Form 1040 (Form 1040-X) attaching Form 8938 for each year. Form 8938 late penalty starts at $10,000 per year + up to $50,000 if continued.

For a complete approach, you may want to use the Streamlined Filing Compliance Procedures — a more formal IRS program for taxpayers with significant unreported foreign assets. The Streamlined Procedures cover Form 3520, FBAR, Form 8938, and amended income tax returns all together. Requires a CPA's help. Significant penalty waiver in exchange for full disclosure.

What if the IRS already contacted you about it

If the IRS has already sent you a notice (CP15, CP136, or similar) about a missing Form 3520, the late-filing penalty may already be assessed. Your options narrow:

Respond to the notice within 30 days with the filing + reasonable-cause statement requesting abatement.
File Form 843 (Claim for Refund and Request for Abatement) if the penalty has already been paid.
Engage a tax attorney if the amount is large or if criminal exposure is in play (e.g., the IRS is investigating intentional non-disclosure).

Do not ignore IRS notices. The longer you wait, the worse the procedural options become.

What our app can do for late filings

Our app generates Form 3520 PDFs for any tax year. The questionnaire is the same regardless of the year — you enter the donor names, dates, amounts, etc., and we produce the form for that specific year.

For multiple-year late filings, run the workflow once per year. Each filing is $99 Standard / $149 Concierge. We do not draft reasonable-cause statements — that is a CPA's territory. We do mark the form clearly as a late filing if you select the option.

When to call a CPA instead

Use a CPA, not our app, when:

The late-filing penalty is substantial (more than $20,000-$30,000) and you need a reasonable-cause case.
Multiple foreign tax issues stack (Form 3520 + FBAR + Form 8938 + amended 1040s).
You suspect the IRS may pursue criminal charges (willful failure to file).
The Streamlined Procedures or other IRS compliance program is the right path.
You need representation in an audit or examination.

For straightforward late filings where you just want the form completed and mailed correctly, our app is faster and cheaper. We can complete a multi-year backlog (file one per year) in an afternoon.

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.

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