Form 3520 late filing: penalty and how to ask for abatement

You found out about Form 3520 after the deadline. Most people do: the form owes no tax, no software mentions it, and the bank never said a word. Here is what the penalty is, what changed in 2024, and what to send.

The penalty

For gifts and bequests reported in Part IV, section 6039F sets the penalty at 5% of the gift amount for each month (or part of a month) the form is late, up to 25%.

Gift	2 months late	5 months or more
$120,000	$12,000	$30,000
$200,000	$20,000	$50,000
$500,000	$50,000	$125,000

Two things make this worse than it looks. The penalty is on the gift, not on any tax. And first-time abatement does not apply to it: that program covers income-tax return penalties, not information returns.

What changed in October 2024

For years the IRS assessed this penalty automatically the moment a late Form 3520 arrived, and taxpayers had to fight it afterwards. In October 2024 the IRS Commissioner announced that the Service would stop automatically assessing penalties for late-filed Forms 3520 reporting foreign gifts, and would instead review a reasonable cause statement attached to the form before assessing. The Internal Revenue Manual was updated in late November 2024.

What this means in practice:

• If you attach a reasonable cause statement, a person reads it first.
• "Reasonable cause" is still a legal standard: ordinary business care and prudence, not willful neglect.
• No statement attached means nothing to review, and the old automatic outcome is likely.

What a reasonable cause statement must say

The IRS wants facts, dated, in the first person. A good statement covers:

1. What was received, from whom, when, and how much. Match the Part IV table exactly.
2. Why you did not know. The gift was not taxable; you used consumer tax software, which does not include this form; the bank or wire service gave no notice. Say what you relied on.
3. When and how you found out, and what you did next. The gap between learning and filing should be short.
4. Why this was not willful neglect. The funds went into an account in your own name, were used for a disclosed purpose, were never hidden; you have no history of late information returns.
5. A request: that no §6039F penalty be assessed, or that any assessed penalty be abated, for reasonable cause.
6. A signed declaration under penalties of perjury, and the attachments you enclose (the form, and copies of the wire records if you have them).

Attach the statement directly behind Form 3520 and mail the two together to Ogden. See mailing address and deadline.

When to stop and get help

The Late Filer packet drafts the statement from your answers and flags the cases where a self-help template is the wrong tool:

• You already received a CP15 or similar penalty notice. Then you are in a response window with its own deadline; a CPA or tax attorney should look at it.
• More than one year is late, or there are foreign trusts, foreign accounts you never reported, or amounts well above $1 million.
• The money was not a gift: a loan, an investment, or compensation changes the analysis entirely.

Filing late, step by step

1. Run the checker to confirm you had to file for that year.
2. In the wizard, mark the filing as late and write, in your own words, why.
3. Buy the Late Filer packet ($149). It includes the filled form, cover letter, checklist and the reasonable cause statement skeleton with your facts filled in.
4. Sign the form and the statement, mail them together by certified mail, keep every receipt.

Self-prepared information return. Not tax or legal advice. Not affiliated with the IRS. Penalty figures per IRC §6039F; policy change per IRS announcement of October 2024.