Form 3520-A, or the Annual Information Return of Foreign Trust With a U.S. Owner, is required for foreign trusts with at least one U.S. owner. The form serves as the foreign trust's annual information return, and its purpose is to provide the IRS with details about the trust's activities and operations during the tax year.
U.S. Owners of Foreign Trusts: A foreign trust with a U.S. owner must file Form 3520-A to satisfy the U.S. owner's annual information reporting requirements under the Internal Revenue Code.
What Is a Foreign Trust?
A foreign trust is a trust that is established in a foreign country and primarily subject to that country’s laws. In the United States, a foreign trust is generally defined as a trust created by a nonresident alien or foreign corporation or one of its residents. A US-based trustee is required if the trust contains any US source income and/or assets.
To determine whether a trust is foreign or not, we can ask the following two questions:
- Does a US person or persons substantially control the trust?
- Does the US court system have jurisdiction over the administration of the trust?
If the answer to both questions is no, then that trust will likely be considered a foreign trust.
Learn more about Form 3520-A filing requirement here: Foreign Trust Reporting: A Tax Guide for Expats