Form 3520 in Canada: Which Registered Accounts Are Foreign Trusts?

Form 3520 is the form that turns an ordinary Canadian savings account into a foreign trust filing. For a US person north of the border, the question is not whether you have money in Canada — it is whether the wrapper around that money is a trust in American eyes. Get that wrong one way and you file a form you never owed. Get it wrong the other way and the opening penalty is the greater of $10,000 or 35 percent of what moved.

What is Form 3520, and who in Canada has to file it?

Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, does three jobs. US persons file it to report certain transactions with foreign trusts, ownership of a foreign trust under the grantor-trust rules of Internal Revenue Code sections 671 through 679, and receipt of certain large gifts or bequests from foreign persons. Like the FBAR and Form 8938, it collects no tax on its own. Its companion, Form 3520-A, is the trust’s return rather than yours — and because Canadian institutions do not file US information returns for retail accounts, the burden falls back on the US owner, who attaches a substitute Form 3520-A to their own Form 3520.

The reason Form 3520 bites so hard in Canada is that the registered-plan system is built out of trusts. RRSPs, RESPs, RDSPs and in many cases TFSAs are trust arrangements under Canadian law. Washington did not design its foreign-trust rules with a neighbour’s tax-sheltered savings accounts in mind, and softening the mismatch has taken three separate pieces of IRS relief.

Which Canadian accounts are exempt from Form 3520?

The Instructions for Form 3520 list the exceptions. Three do the heavy lifting for a household in Canada:

• RRSPs and RRIFs — exempt. Transfers to, ownership of, and distributions from an RRSP, a RRIF, or any other Canadian retirement plan within the meaning of section 3 of Revenue Procedure 2014-55 do not have to be reported on Form 3520. This is the cleanest answer in cross-border reporting.
• Tax-favored foreign trusts under Revenue Procedure 2020-17 — exempt, on conditions. The procedure exempts eligible individuals from section 6048 reporting for certain tax-favored foreign retirement trusts and non-retirement savings trusts, and removes the section 6677 penalties along with the filing.
• The proposed section 6048 regulations — available by election. The instructions permit reliance on proposed regulations section 1.6048-5 for tax years ending after May 8, 2024, covering tax-favored foreign trusts providing pension or retirement benefits, or medical, disability or educational benefits. Reliance is all-or-nothing: you and all related persons must apply them in their entirety and consistently from the first year. They remain proposed as of the December 2025 instructions, so the window is open.

None of this touches your other obligations — the IRS says in terms that these exemptions do not affect any other reporting requirement. A plan exempt from Form 3520 is usually still a foreign financial account for the FBAR and a specified foreign financial asset for Form 8938. Three forms, three regimes, one account.

Are RESPs and RDSPs caught by the foreign-trust rules?

Both commonly fit the Revenue Procedure 2020-17 description of a tax-favored foreign non-retirement savings trust, though neither is named in it. That definition asks for a trust operating exclusively or almost exclusively to provide medical, disability or educational benefits, tax-favored and information-reported locally, with contributions capped at $10,000 annually or $200,000 lifetime, and withdrawals conditioned on those benefits or carrying penalties.

The RESP margin is comfortable. The RDSP margin is arithmetic rather than law: its C$200,000 lifetime limit is tested against a US$200,000 threshold converted at the US Treasury Bureau of the Fiscal Service rate on the last day of the tax year. Recent exchange rates leave real headroom; a stronger loonie would leave much less. Re-check it annually rather than concluding once.

There is also a gate in front of both. The exemption reaches only an eligible individual — broadly, someone compliant, or coming into compliance, with US income tax return filing who has reported the plan’s contributions, earnings and distributions as income where US law required it. Someone who has never filed a US return has a compliance problem first and a reporting question second.

The relief nobody claims. Revenue Procedure 2020-17 also works backwards. An eligible individual already assessed a section 6677 penalty for a plan that qualifies can request abatement or refund on Form 843, writing “Relief pursuant to Revenue Procedure 2020-17” on Line 7 and explaining how they and the plan meet each requirement. Ordinary refund and limitations periods apply, so old assessments do not wait forever.

Is a TFSA a foreign trust for US purposes?

This is the question with no published answer, and it deserves an honest one rather than a confident one. Two things have to be established, in order.

First, is the particular TFSA a trust at all? Canadian law permits a TFSA to be established as a trust, an annuity contract, or a deposit. Most retail TFSAs are trust arrangements, but the answer lives in the plan declaration for your account, not in the account type.

Second, if it is a trust, does any exemption reach it? Revenue Procedure 2020-17 covers retirement trusts and non-retirement savings trusts providing medical, disability or educational benefits. A TFSA is general-purpose savings with no purpose restriction and no penalty for withdrawing to buy a boat. On the face of the definitions it fits neither category, and the proposed regulations track the same purpose-based categories.

The result is a genuine split in practice. Some preparers file Forms 3520 and 3520-A protectively, on the view that a $10,000 minimum penalty is worse than an unnecessary form. Others take a documented position that a given TFSA is not a trust and do not file. What nobody should do is assume the question away — and it is worth reading alongside the separate income-tax problem in our TFSA and US tax explainer, because a TFSA holding Canadian funds raises the PFIC question underneath.

When is Form 3520 due, and what does missing it cost?

The deadlines are close cousins of the income tax return without being tied to it. For a calendar-year individual, Form 3520 is generally due the 15th day of the fourth month after year end; a US citizen or resident living and working outside the United States gets June 15 with a statement attached; and if you extended your income tax return, it is due no later than the 15th day of the tenth month — October 15 for a calendar-year filer. It is mailed separately to the IRS in Ogden, Utah, not stapled to the 1040.

Form 3520-A runs on its own clock, and this is the trap. It is due the 15th day of the third month after the foreign trust’s year end, and extending your income tax return does not extend it — that takes Form 7004 under the trust’s employer identification number. A substitute Form 3520-A attached to your Form 3520 is due the same day as the Form 3520 itself.

The section 6677 penalties are why the form gets attention at all. The initial penalty is generally the greater of $10,000 or:

• 35 percent of the gross value of property transferred to a foreign trust, where a US transferor failed to report the creation of or transfer to the trust;
• 35 percent of the gross value of distributions received, where a US person failed to report them; or
• 5 percent of the gross value of the trust assets treated as owned, where a US owner failed to ensure the trust filed.

More is added if the failure continues past 90 days from an IRS notice, though the total is capped at the gross reportable amount. No penalty applies where the taxpayer shows reasonable cause and not willful neglect — but a foreign country’s secrecy rules, a trustee’s reluctance and restrictive trust terms are expressly not reasonable cause. There is a quieter cost too: where a complete Form 3520 is not filed on time, the assessment period does not expire until three years after the information is actually reported. An unfiled Form 3520 keeps the year open.

What this means for cross-border clients

• Inventory the wrappers, not just the balances. How each plan was established decides the reporting question. Pull the plan declarations before filing season, not during it.
• Treat the RRSP answer as settled and everything else as a question. RRSPs and RRIFs sit inside a named exemption. RESPs and RDSPs sit inside a description they usually match. TFSAs sit outside both.
• Check the eligible-individual gate first. If you are behind on US returns, the compliance path comes before the reporting analysis — the IRS streamlined filing compliance procedures exist for exactly this situation.
• Diarise two dates, not one. October 15 for an extended Form 3520; the 15th day of the third month, extendable only by Form 7004, for a Form 3520-A.
• Do not let an exemption travel. Being outside Form 3520 says nothing about the FBAR, Form 8938, Form 8621 or Canada’s own T1135. Each form asks its own question.

Canada built its savings system out of trusts because a trust was the convenient legal container. The United States built its foreign-trust rules to find money hidden offshore. A family in Calgary saving for a child’s tuition sits in the overlap by accident — and the cost of that accident is counted in forms rather than tax, provided the forms get filed.

Frequently asked questions

Do I have to file Form 3520 for my RRSP?

Generally no. The Instructions for Form 3520 list transfers to, ownership of, and distributions from a Canadian RRSP, a RRIF, or any other Canadian retirement plan within the meaning of section 3 of Revenue Procedure 2014-55 among the transactions that do not have to be reported. That exemption is specific to section 6048 trust reporting. It does not remove the RRSP from the FBAR or Form 8938, where a registered plan is generally still reportable.

Is a TFSA a foreign trust that requires Form 3520?

There is no clean published answer, which is why practice varies. First, is your particular TFSA a trust rather than a deposit or annuity contract? Canadian TFSAs are commonly established as trusts, but not always. Second, if it is a trust, does an exemption reach it? Revenue Procedure 2020-17 covers tax-favored foreign trusts providing retirement, medical, disability or educational benefits, and a TFSA is general-purpose savings that does not fit those categories. Many preparers file protectively; others take a documented position that no trust exists. Have the plan documents reviewed rather than guessing.

Are RESPs and RDSPs exempt from Form 3520 reporting?

Often, but on conditions. Revenue Procedure 2020-17 exempts eligible individuals from section 6048 reporting for tax-favored foreign non-retirement savings trusts — trusts operating exclusively or almost exclusively to provide medical, disability or educational benefits, with contributions limited to $10,000 or less annually or $200,000 or less on a lifetime basis, and withdrawals conditioned on those benefits or carrying penalties. An RESP is education-directed with a C$50,000 lifetime limit per beneficiary and an RDSP is disability-directed with a C$200,000 lifetime limit, so both commonly fit the description. The exemption is only available to an eligible individual who is compliant with US return filing.

When is Form 3520 due if I live in Canada?

For a calendar-year individual, generally the 15th day of the fourth month after year end. A US citizen or resident living and working outside the United States has that extended to June 15 with a statement attached. If you obtained an extension to file your income tax return, Form 3520 is due no later than the 15th day of the tenth month, which is October 15 for a calendar-year filer. Form 3520 is mailed separately to the IRS in Ogden, Utah rather than attached to the return.

What is the penalty for failing to file Form 3520?

Under section 6677 the initial penalty is generally the greater of $10,000 or 35 percent of the gross value of property transferred to a foreign trust, or 35 percent of distributions received, depending on which part of the form was missed. A US owner who fails to ensure the trust files may face the greater of $10,000 or 5 percent of the gross value of trust assets treated as owned. Additional penalties apply if the failure continues more than 90 days after IRS notice, and the total is capped at the gross reportable amount. No penalty applies where the taxpayer shows reasonable cause and not willful neglect.

Your savings account, their foreign trust.

We help US persons in Canada and Canadians in the US sort the registered accounts that need reporting from the ones that do not — as one of the only firms registered as a Portfolio Manager in Canada and an RIA in the United States, fee-only and fiduciary.

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Related reading: our cross-border tax planning service, the FBAR in Canada explainer, Form 8938 in Canada, T1135 foreign reporting on the Canadian side, and our PFIC and cross-border investing guide.

Sources

• Instructions for Form 3520 (Rev. December 2025) — Internal Revenue Service — https://www.irs.gov/instructions/i3520
• Instructions for Form 3520-A (Rev. December 2025) — Internal Revenue Service — https://www.irs.gov/instructions/i3520a
• About Form 3520 — Internal Revenue Service, page last reviewed April 29, 2026 — https://www.irs.gov/forms-pubs/about-form-3520
• Rev. Proc. 2020-17, 2020-12 I.R.B. 539 — Internal Revenue Service, March 2020 — https://www.irs.gov/pub/irs-drop/rp-20-17.pdf
• Rev. Proc. 2014-55, 2014-44 I.R.B. 753 — Internal Revenue Service, October 27, 2014 — https://www.irs.gov/irb/2014-44_IRB
• Transactions With Foreign Trusts and Information Reporting on Transactions With Foreign Trusts and Large Foreign Gifts, proposed regulations including §1.6048-5 — Federal Register, May 8, 2024 — https://www.federalregister.gov/documents/2024/05/08/2024-09434/transactions-with-foreign-trusts-and-information-reporting-on-transactions-with-foreign-trusts-and
• Foreign trust reporting requirements and tax consequences — Internal Revenue Service — https://www.irs.gov/businesses/international-businesses/foreign-trust-reporting-requirements-and-tax-consequences
• Registered Education Savings Plans contributions (C$50,000 lifetime limit) — Canada Revenue Agency — https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/registered-education-savings-plans-resps/resp-contributions.html
• RESP — Accumulated income payments (Part X.5 additional tax of 20%, 12% in Quebec) — Canada Revenue Agency — https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/payroll-deductions-contributions/special-payments/resp-accumulated-income-payments.html
• RDSP limits, transfers and rollovers (C$200,000 lifetime limit) — Canada Revenue Agency — https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/registered-disability-savings-plan-rdsp/rdsp-limits-transfers-rollovers.html
• Treasury Reporting Rates of Exchange — Bureau of the Fiscal Service, U.S. Department of the Treasury — https://www.fiscal.treasury.gov/reports-statements/treasury-reporting-rates-exchange/
• Streamlined filing compliance procedures — Internal Revenue Service — https://www.irs.gov/individuals/international-taxpayers/streamlined-filing-compliance-procedures

© 2026 Lucas Wennersten · 49th Parallel Wealth Management, LLC · From the Desert to the Tundra™. For educational purposes only. Not financial, tax, or legal advice, and not a recommendation to buy or sell any security. The Form 3520 and Form 3520-A rules, exemptions, deadlines and penalties referenced were drawn from the IRS and Canada Revenue Agency sources listed above and were current as of September 21, 2026; they change without notice and their application depends entirely on individual facts. Whether a particular Canadian registered plan is a foreign trust for US purposes, and whether any exemption applies to you, are fact-specific determinations that turn on the plan documents and on your own filing history. Proposed regulations are not final law and reliance on them carries conditions. Individual circumstances differ and should be discussed with a qualified cross-border tax advisor. Verify all figures against the linked primary sources before relying on them.