Do I file Form 3520 or 3520-A for my foreign trust?
Often both, by different filers and for different things. Two forms, two filers: one reports the US person's own transactions with the trust, the other reports the trust's own year. The US owner is responsible for seeing that both happen, which is the part that catches people out, because the second concerns a trust run by someone else, usually abroad, who has no interest in the question. So the practical task is not only preparing a return but obtaining the trust's year from a trustee who has never been asked for it. Start that conversation with the trustee early. Everything on the trust's side depends on records only the trustee holds.
Is a foreign pension or education plan a trust for 3520 purposes?
Frequently yes, and this is the biggest source of unexpected filings here. Many foreign retirement, education and family arrangements meet the definition of a trust for these purposes even though nobody involved would describe them that way, and the client's own name for the arrangement carries no weight. The way to settle it is to read the plan documents and establish what the arrangement actually is and what interest the client holds in it. If it is a trust, then its creation, the contributions and the withdrawals are all events with a reporting side, and the analysis is worth writing down once so the same conclusion can be reused each year.
Does creating a foreign trust have to be reported in the year it is set up?
Creation is a reportable event in its own right, as are transfers into the trust, so the year of settlement and the years of funding matter separately from any year in which money comes out. This is where old arrangements cause trouble: the trust was settled long ago, nothing was filed, and the events that were reportable at the time have been buried by everything since. The way through is a dated history, covering the settlement, each transfer in, and each distribution and loan out, and then separating the one-off events from the recurring ones. Built once, that history answers most of the questions a later examination will put.
Is a loan from my foreign trust a reportable event?
Yes, loans are reportable events alongside distributions, and treating an advance as merely borrowing is how people persuade themselves there is nothing to file. The difficulty is usually evidential rather than technical, because family advances are made informally, repaid in part, and documented after the fact if at all. What is needed is a ledger reconstructed from records on both sides, each advance matched to its repayment where one exists, and the outstanding balances characterised. Then adopt a rule for the future, that nothing leaves the trust without a note made at the time, because the cost of this work is almost entirely the cost of reconstruction.
The foreign trustee will not file 3520-A, where does that leave me?
Responsible, unfortunately. The US owner is the one answerable for seeing that the trust's own year is reported as well as their own transactions with it, and a trustee abroad declining to help does not shift that. What it does change is the shape of the work. You assemble the trust's year from whatever the trustee will release, prepare the statements the owner and the beneficiaries need, and document what you asked for and what you received. Then put an arrangement in place with the trustee about what will be provided and by when. A trustee who will not file will often still send accounts if the request is specific enough.
What has to go to the beneficiaries from the trust's annual return?
The trust's annual return has to support statements for its US owner and for its beneficiaries, so the return is not a self-contained filing: it produces documents other people rely on for their own returns. In practice that is where trustee cooperation is tested, because a covering letter recording an amount is not a statement. What the beneficiaries need is the character of what was distributed and the trust's own figures behind it. Ask the trustee for that breakdown as part of the year-end routine rather than as a special request, and specify the form it should take, so the statements can be issued without reconstruction.
Do dual citizens have to file US taxes if they live abroad?
Yes. US filing follows citizenship, not residence or where the income arose, and the obligation continues for as long as the citizenship does. Two further obligations travel with it and are keyed to account balances rather than income, so they can apply in a year with no US tax at all: the foreign bank account report to FinCEN, and the specified foreign asset statement with the return. Most people who discover a problem discover it there. See two returns as a dual citizen.
What is the difference between FBAR and Form 8938?
They overlap but are not the same report. The FBAR goes to FinCEN and covers foreign financial *accounts*; Form 8938 goes to the IRS with the return and covers a wider class of specified foreign financial *assets*, with thresholds that vary by filing status and whether you live abroad. Many people must file both for the same accounts, and satisfying one does nothing for the other. See filing both.
