Form 3520-A: the trust annual information return

What Form 3520-A covers

Form 3520-A is the Annual Information Return of Foreign Trust with a US Owner. Where Form 3520 reports the settlor's transactions with the trust, Form 3520-A reports the trust's own financial position: the trust's assets and liabilities at year end, its income and expenses during the year, any distributions made to US beneficiaries, and the names and addresses of the US persons with an interest in the trust. It is effectively the trust's own tax information return, prepared from the trust's annual accounts.

Who files it and when

The foreign trust is technically responsible for filing Form 3520-A. In practice, because the Cook Islands trustee is a foreign entity with no direct IRS obligation, the responsibility falls on the US owner under the grantor trust rules. If the trustee does not file, the US owner must file it or face the penalties for the missing filing.

The due date is March 15, one month earlier than the personal return due date of April 15. This earlier deadline catches many settlors by surprise, particularly when the trustee's annual accounts are not yet complete by March. An extension to September 15 is available on Form 7004.

What happens when the trustee does not file

The US owner is responsible. This means the US owner must either ensure the trustee files, or prepare and file the form themselves using information from the trust accounts. In practice the CPA handling the settlor's foreign trust filings prepares Form 3520-A from the trust accounts provided by the trustee, and files it on the settlor's behalf as the deemed owner. Confirm at onboarding with both the trustee and the CPA exactly who is responsible for ensuring Form 3520-A is filed each year, and that the trustee's account preparation timeline is compatible with the March 15 deadline.

The penalty regime

The penalty for failure to file Form 3520-A is the greater of $10,000 or 5 percent of the gross value of the trust's assets. On a substantial trust, 5 percent of assets is a large number and it applies per year of non-filing. This penalty is separate from and in addition to any penalty for failure to file Form 3520. A settlor who misses both forms in the same year faces both penalties simultaneously.

The 5 percent of assets figure means the Form 3520-A penalty scales with the trust portfolio in a way the Form 3520 penalty does not. For a large trust, the annual cost of missing this filing dwarfs the cost of the filing itself by a significant margin.

General information only. Confirm current requirements and your specific filing obligations with a CPA with Cook Islands trust experience. The March 15 due date and the extension process should be confirmed annually.