I got an IRS letter about Form 3520. What does it mean?
The IRS sends several different letters about Form 3520. The letter number in the top-right corner tells you which one you have and what to do.
Letter 3520 is a letter. Form 3520 is a form.
Many people search for “Letter 3520” thinking the IRS just sent them a copy of the form. They didn't. Letter 3520 is IRS correspondence about Form 3520. Form 3520 is the information return you should have filed (or that the IRS believes you should have filed) for a foreign gift, inheritance, or trust transaction. Same number, different things.
First step before anything else
Find the letter or notice number in the upper-right corner. It will be a code like “CP15” or “Letter 3849.” Every other decision flows from that code. Then find the response deadline — usually 30 days from the notice date. Write both down.
The five most common Form 3520 letters
Civil Penalty Notice — proposes the Form 3520 penalty under IRC §6039F. 30-day response window. The most common entry point.
Form 3520 examination correspondence letter. Often used to open or advance an examination.
Form 3520 examination correspondence — typically used at the closing stages or with examination findings.
Used in Form 3520 examinations, sometimes for closing letters and adjustments.
The opening letter for a Form 3520 examination. Less common than CP15 but signals a formal review is underway.
The 30-day clock applies to all of them
Each penalty-proposal letter contains a written response window. CP15 is typically 30 days from the notice date. Examination letters often give 30 days as well. A statutory notice of deficiency (rarer in 3520 cases, but it happens) gives 90 days.
Missing the window converts a proposal into a final assessment. The highest-leverage action you can take in the first 48 hours is to (1) confirm the deadline and (2) book a consult with an international tax practitioner.
What the letter is proposing
Almost every Form 3520 penalty letter is proposing the penalty under IRC §6039F — 5% of the unreported gift or bequest per month, capped at 25%. On a $200,000 foreign gift reported one year late, the cap math lands at $50,000. On a $1,000,000 foreign inheritance, the cap is $250,000.
The cap is the headline, not the typical outcome. See our deeper page on the 25% penalty math for how the number is calculated and how it usually shrinks.
What the letter is NOT
- • Not a final bill. A proposed penalty notice can be challenged before it is assessed.
- • Not an income tax claim. The Form 3520 penalty applies even when no income tax was owed on the underlying gift.
- • Not a criminal charge. Form 3520 penalties are civil. Criminal exposure for non-filing alone is extremely rare.
- • Not something a general CPA typically handles. International tax practitioners and tax controversy attorneys handle Form 3520 cases.
What 3520 File can and cannot help with
3520 File is a filing tool for Form 3520 Part IV (the foreign gift / inheritance section). It generates the auto-filled PDF for you to mail to IRS Ogden, for $99 flat. It does not respond to IRS penalty notices, represent you before the IRS, or draft reasonable cause statements.
If you have another foreign gift coming in a future year, 3520 File will file it on time. For the notice already in your hand, get a practitioner.
Frequently asked questions
Letter 3520 is the name of a family of IRS correspondence letters used during Form 3520 examination. The letter and the form share a number — it is confusing on purpose. The letter is about the form, not a copy of it.
No. Letter 3520 is IRS correspondence. Form 3520 is the information return you (or the IRS) believes should have been filed for a foreign gift, bequest, or trust transaction. The letter is about whether you filed the form.
The most common are CP15 (the proposed civil penalty notice), Letter 3849, Letter 3850, Letter 6249, and the general Form 3520 examination opening letter. Some cases escalate to CP3219A (a 90-day statutory notice of deficiency).
Most penalty proposals give you 30 days. A statutory notice of deficiency gives 90 days. The exact deadline is on the letter itself.
No. Form 3520 is a reporting requirement, not a tax. The IRS can assess the penalty even though you owed no income tax on the underlying gift. The penalty is for not filing the form, not for owing tax.
The cap is 25% of the unreported amount (5% per month, maxed at 25%). The cap is the starting point in many notices. The actual outcome — after a reasonable cause response or appeal — is often much lower, sometimes zero.
Find an international tax practitioner
The notice itself needs a human. Three ways to find one:
- • The AICPA “Find a CPA” directory, filtered by international tax
- • The American Bar Association Tax Section practitioner directory
- • A search for “Form 3520 reasonable cause” on practitioner firm sites
For next year's Form 3520
If you have another foreign gift or inheritance coming, file Form 3520 on time. $99 flat, about 20 minutes.
3520 File does not respond to the notice you already have. It files Form 3520 Part IV correctly going forward.