A teacher in Kuala Lumpur still has a personal pension in London from her old job. Then a colleague mentions Form 3520 and a penalty that starts at 10,000 dollars, and she spends the week worrying about a form she had never heard of. Questions like hers are what Jorge Rivas, EA handles for American expats, including international school teachers.
The short answer is calmer than the worry. Form 3520 foreign pension reporting is required only when the IRS treats the plan as a foreign trust and no exemption applies. Many employer pensions are excluded by law, Canadian RRSPs and RRIFs are exempt, and many personal plans are exempt under Revenue Procedure 2020 17 if they meet all six of its conditions.
Why Does the IRS Treat a Pension as a Foreign Trust?
A pension outside the US is usually held by a provider or trustee for the member, which can make it a foreign trust under US tax law. Section 6048 of the tax code sets the foreign trust reporting rules. US persons, including citizens and green card holders, must report money put in, money taken out, and ownership, with no minimum balance.
Form 3520 is the main return for these foreign pension reporting requirements, and Form 3520 A reports on the trust itself. For many expats, the hardest part is not the paperwork. It is not knowing whether any of this applies to them at all.
Which Foreign Pensions Are Exempt From Form 3520?
Employer funded pensions
The IRS instructions exclude certain employer arrangements under sections 402(b), 404(a)(4), and 404A of the tax code. A traditional employer pension abroad often fits one of these.
Canadian RRSPs and RRIFs
These are exempt under Revenue Procedure 2014 55.
Personal plans that meet six conditions
Rev. Proc. 2020 17 exempts what it calls tax favored foreign retirement trusts. A plan generally qualifies only if it meets all six of these conditions:
- It is generally exempt from tax in its home country.
- It reports to the local tax authority every year.
- It accepts contributions only from income earned by working.
- Contributions are capped by a percentage of earned income, an annual limit of 50,000 dollars or less, or a lifetime limit of 1,000,000 dollars or less.
- Withdrawals are generally tied to retirement age, disability, or death.
- If it is an employer plan, it is open to a wide range of employees on fair terms.
The procedure lists no approved plans, so UK SIPPs, Swiss Pillar 3a accounts, Irish PRSAs, and Australian superannuation are each checked on their own rules.
Proposed 2024 regulations would widen the exemption, but they are not final and can be relied on only if applied in full.
How to Check Whether a Plan Qualifies
The plan’s own rules show who contributes, the limits, and when money can be withdrawn. The provider can be asked to confirm in writing whether the plan reports to the local tax authority.
Compare those facts with each condition. If the plan passes all six, keep the documents on file as support for not filing. With them in hand, a review with an Enrolled Agent like Jorge can end in a definite answer rather than a guess.
Foreign Pension Types at a Glance
| Pension type | Usual reporting position | What to check next |
|---|---|---|
| Employer funded workplace pension | Often excluded under the employer exceptions | Funding and plan structure |
| Canadian RRSP or RRIF | Exempt under Rev. Proc. 2014 55 | Separate account reporting |
| Personal plan meeting all six conditions | Exempt under Rev. Proc. 2020 17 | Plan rules kept on file |
| Personal plan failing any condition | Reporting may be required | Filing, or relief for missed years |
Common Mistakes With Overseas Pension Reporting
Assuming an exemption ends all reporting
An exemption covers only the two trust forms. The IRS instructions say it does not change any other reporting obligation, so FBAR and Form 8938 may still apply to the same foreign retirement account. Those reports have their own thresholds, explained on Jorge’s FBAR and FATCA compliance page.
Filing after October 15
For people who live and work abroad, the form is due June 15, with a statement attached confirming eligibility. An income tax extension moves it to October 15. Extra time on the income tax return until December 15 does not extend this form, so filing everything together in December makes it late. When Jorge prepares an expat return that includes foreign trust forms, October 15 is the date that controls the schedule.
How to File Form 3520 for a Pension That Does Not Qualify
Which parts to complete
Part I reports money put into a foreign trust, Part II reports being its owner, and Part III reports money received from it. A pension held abroad can need all three in one year. Part II must be filed every year, even with no contributions or withdrawals, and it asks for the trust’s EIN and the value of its assets at year end.
If the trust has no EIN, the owner can apply at IRS.gov/EIN, or by phone at 267 941 1099 when the trust is based outside the US.
A loan of cash or marketable securities from the plan is treated as a distribution, so it belongs in Part III even when nothing is formally withdrawn.
When the trust does not file Form 3520 A
If the trust files Form 3520 A, the owner attaches a copy of its Foreign Grantor Trust Owner Statement. Many foreign trusts never file, and then the owner can attach a substitute version to their own return by its due date, which protects against the penalty for the trust’s failure.
Where to send it
The current instructions direct filers to mail the form to the Internal Revenue Service Center, P.O. Box 409101, Ogden, UT 84409, separate from the income tax return. Each foreign trust needs its own form, and only a complete form with every attachment counts as on time.
Spouses filing a joint income tax return can file one joint form when both are owners or beneficiaries of the same foreign trust.
What If a Filing Was Missed?
Finding a missed form years later is stressful, especially with penalties that start at 10,000 dollars. The IRS does have formal ways back into compliance, and the right one depends on the facts.
What the penalties are
For an unreported contribution or withdrawal, the penalty is generally the greater of 10,000 dollars or 35 percent. For the trust’s annual return, it is the greater of 10,000 dollars or 5 percent of the trust assets treated as owned. More can apply if the problem continues 90 days after an IRS notice, and a missing form keeps the IRS deadline to assess related tax open until 3 years after the information is reported.
Ways to fix missed years
If the plan meets the six conditions and a penalty was already charged, the 2020 procedure allows Form 843 for penalty abatement, with its required relief statement on Line 7.
If the failure had reasonable cause, the IRS Delinquent International Information Return Submission Procedures allow late filing with a reasonable cause statement. For Form 3520, the IRS asks filers to write “Reasonable Cause Statement attached” at the top of the first page. Relief is not automatic, since the IRS may assess penalties before reviewing the statement.
For wider problems, such as unfiled returns or FBARs, the Streamlined Foreign Offshore Procedures may fit. They generally cover the most recent 3 years of tax returns and 6 years of FBARs. Eligible taxpayers avoid information return penalties, but only non willful conduct qualifies. Where willfulness could be an issue, a tax attorney is the better first call.
What if the IRS has already sent a letter?
The delinquent submission procedures close once the IRS has made contact about the missing forms, or during an examination or criminal investigation. The notice then needs a direct response. A letter feels alarming, but it starts a process, and an Enrolled Agent can represent the taxpayer through it.
Why Work With an Enrolled Agent on Foreign Pension Reporting?
An Enrolled Agent is federally licensed by the IRS and can represent taxpayers before the IRS on any tax matter. Jorge has focused that license on international tax for Americans living overseas. He is an IRS e File Authorized Provider and is listed in the IRS Tax Professional Directory, so his credentials can be checked directly with the IRS.
His practice serves international school teachers, missionaries and ministry workers, and expat professionals and business owners, each with its own mix of overseas income and retirement savings.
Get a Clear Answer on Your Form 3520 Foreign Pension Reporting
A pension abroad should not stay a source of worry. Jorge reviews the plan against the employer exceptions and the six conditions, confirms the right deadline, and, if years were missed, sets out which fix fits: Form 843, a reasonable cause filing, or the Streamlined procedures. The work is fully remote, by video call and secure document portal, for expats in more than 15 countries.
Book the free 15 minute consultation through the contact page at jorgerivas.pro, call (803) 467 5815 or (843) 353 0571, or email Jorge.Rivas@RatliffCPAFirm.com. Have the plan rules and latest statement ready. The goal of that call is simple: to leave knowing exactly where the pension stands and what, if anything, needs to happen next.
Frequently Asked Questions
Does a foreign pension have to be reported to the IRS?
Not always on Form 3520. Many employer plans, Canadian RRSPs and RRIFs, and qualifying personal plans are exempt, though FBAR and FATCA reporting may still apply.
Is a UK workplace pension reportable?
Often not, if the employer funds it and it fits the exceptions. A SIPP needs its own check.
Does an exempt pension still need an FBAR?
It may. The exemption covers only the trust forms, and FBAR has its own threshold.
What is the deadline for Americans living abroad?
Generally June 15, with a statement attached. An extension moves it to October 15, and no later.
What happens if a pension was never reported?
Penalties can apply, starting at 10,000 dollars. Depending on the facts, Form 843, a reasonable cause filing, or the Streamlined procedures may resolve it.
Is Australian superannuation treated as a foreign trust?
It can be. Each fund is checked against the six conditions on its own rules.
Is Form 3520 A also required?
Possibly, when a US person owns a foreign trust and no exemption applies. A substitute version can be attached if the trust does not file.