What reasonable cause means

IRC § 6039F(c)(2) allows the IRS to abate the penalty for failing to file Form 3520 "if the failure is due to reasonable cause and not due to willful neglect." The phrase "reasonable cause" appears in many sections of the Internal Revenue Code, and the IRS interprets it the same way each time: the taxpayer exercised ordinary business care and prudence but still failed to file on time.

This is a fact-and-circumstances test. There is no checklist that automatically wins. But certain patterns work and others reliably fail.

What works

Reliance on a tax professional. You hired a CPA, gave them the relevant facts (including the foreign gift), and the CPA failed to advise you about Form 3520. Attach: engagement letter, copies of email correspondence showing you disclosed the gift, the CPA's signed declaration if you can get one. This works when you can show you actually disclosed the facts — not when the CPA never knew about the gift.

Serious illness or incapacity. You or a close family member were hospitalized or otherwise incapacitated during the filing window. Attach: hospital records, doctor's note, dates of incapacity. The dates need to overlap with the deadline period meaningfully.

Natural disaster or federal disaster declaration. Hurricane, wildfire, flood, declared federal disaster in your area during the deadline period. The IRS publishes deadline extensions automatically for declared disasters; reasonable cause is for cases not covered by the automatic extension.

Death in the family. Death of a spouse, parent, child, or sibling during the deadline period. Death certificate dated within the relevant window.

Identity theft or fraud preventing access to records. Documented identity theft (IRS Form 14039 already filed, police report, etc.) that delayed your ability to gather information.

First-time abatement. Not technically reasonable cause but worth mentioning — the IRS offers a one-time "first-time penalty abatement" if your prior 3 years of filings were clean. Form 3520 penalties are sometimes eligible for FTA.

What does NOT work

"I didn't know the form existed." Ignorance of the law is not reasonable cause for sophisticated taxpayers, and the IRS treats anyone who received over $100,000 from abroad as sophisticated by default.
"The instructions were confusing." Confusion is not reasonable cause unless you can show you sought clarification and got bad advice.
"I thought it was below the threshold." If the actual amount was over $100,000, your incorrect estimate is not reasonable cause.
"My foreign relative didn't tell me how much it was." You have a duty to determine the value within reasonable time of receiving the gift.

What the statement should include

The IRS does not publish a template. But your statement should be a one-page letter that hits these points in order:

Identification. Your name, SSN, the tax year of the gift, the Form 3520 being filed (or that was filed late).
Facts. What happened. What did you receive, when, from whom. Date of the gift, donor name and country.
Cause. Why the form was late. Be specific about dates. "I was hospitalized from March 28 to May 9, 2025" is much stronger than "I had health issues that year."
What you did when you discovered the failure. Did you file immediately upon learning? How did you learn? Showing you acted promptly once you knew matters.
Documentation. Attach what you have. Engagement letters, medical records, death certificates, etc.
Signature. Sign under penalty of perjury that the facts are true.

When to ask

There are two natural moments:

At the time of filing the late form. Attach the reasonable-cause statement to the Form 3520 you mail. This is the safest path — you ask before the IRS asks.
After the IRS assesses the penalty. You receive a CP15 or similar notice. You have 30 days to respond. File a written abatement request (you can also use Form 843, Claim for Refund and Request for Abatement, but a letter often works).

Either way, the substance of the request is the same.

Practical tip

Get a CPA or tax attorney to review the statement before you send it. The cost (often $300-500 for an hour of review) is small compared to a $50,000+ penalty. We do not draft these statements at 3520file — when the penalty is in play, you want a licensed professional in the loop.

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.

Reasonable Cause for Form 3520 Late Filing: How to Ask