Updated August 7, 2026. Quick answer: money inherited from abroad is generally not taxable income to a U.S. recipient. 🔴 But above a threshold it is reportable — and the penalty for not reporting is calculated on the gift itself, not on any tax, because there usually is no tax. That is the whole trap: people correctly conclude they owe nothing and incorrectly conclude there is nothing to file.
The threshold that triggers a filing
Form 3520 must be filed if, during the tax year, you are a U.S. person who received:
More than $100,000 from a nonresident alien individual or a foreign estate (including foreign persons related to that nonresident alien individual or foreign estate) that you treated as gifts or bequests…
A separate, lower and inflation-adjusted threshold applies to amounts received from foreign corporations or foreign partnerships — the instructions point to the section 6039F threshold, published annually. ⚠️ This page does not print that figure, because it changes each year and the IRS publishes the current one.
Note the aggregation. The test reaches amounts from persons related to the same nonresident alien or foreign estate — so three transfers of $40,000 from a parent and two siblings abroad are not automatically three separate small gifts.
Why nothing is owed, and something is still due
A gift or bequest is not income to the person receiving it. That is why the reflex — “I checked, foreign inheritances are not taxed” — is correct as far as it goes. Form 3520 is an information return. It reports the receipt; it does not compute a tax on it.
🔴 The penalty, however, is measured against the gift. The instructions state it plainly:
…a penalty equal to 5% of the amount of such foreign gifts applies for each month for which the failure to report continues (not to exceed a total of 25%).
Twenty-five per cent of an inheritance on which no tax was ever owed is the number that makes this worth ten minutes of attention.
🔴 The due date is not the one you assume
Form 3520 is generally due on the 15th day of the 4th month following the end of your tax year — for a calendar-year individual, usually the same day as the income tax return. With an extension of time to file the income tax return, it is due no later than the 15th day of the 10th month.
But the instructions add a warning that catches people who assume the two travel together:
Note: This may differ from and is not tied to the due date of the U.S. person’s income tax return.
And there is a separate rule for people abroad: a U.S. citizen or resident living outside the United States and Puerto Rico whose place of business or post of duty is also outside them — or who is on military or naval duty outside them — has the due date moved from April 15 to June 15, with a statement attached showing the condition is met.
⚠️ Form 3520 is filed separately from your return, to a different address, and a separate Form 3520 is required for each foreign trust.
What the instructions say about reasonable cause
The statutory standard exists and the instructions state it: “No penalty will be imposed if the taxpayer can demonstrate that the failure to comply was due to reasonable cause and not willful neglect.”
They are equally explicit about what does not count. For the foreign-trust penalties, the instructions say that “the fact that a foreign country would impose penalties for disclosing the required information is not reasonable cause”, and neither is “reluctance on the part of a foreign fiduciary or provisions in the trust instrument that prevent the disclosure”.
⚠️ This page states that the standard exists; it does not tell you how to argue one. A late filing with real money at stake is work for a tax professional who can see your facts, and Clear Money Guide does not sell tax help and is not paid if you hire anyone.
The practical order
1. Establish who the money came from — an individual, an estate, a trust, or an entity. The category decides the threshold and which part of the form applies.
2. Add up the year, including related givers, rather than looking at single transfers.
3. Diarise the date separately from your return. The instructions warn that the two are not tied.
4. Keep the paperwork from the foreign side — the death certificate, the estate documents, the bank records showing the transfer. An information return that is questioned is answered with documents, not recollection.
⚠️ A foreign trust is a different and much heavier regime than a simple bequest, with its own forms and penalties. If what you received came from a trust rather than an estate or an individual, treat this page as the beginning of the question rather than the answer.
Sources
Quoted from the Instructions for Form 3520 (Rev. 12-2025), catalog number 23068I, dated 7 October 2025 — who must file, when and where to file, and penalties — retrieved from the IRS on 7 August 2026: i3520.pdf · About Form 3520. The section 6039F entity threshold is deliberately not printed — it is inflation-adjusted annually and the IRS publishes the current figure.
Related: the final tax return · cheques payable to someone who has died.