I need to file form 3520 this year, which has to be a paper file. May I still e-file my Federal returns?

[LisaBr · Accepted solution]

If you have to file Form 3520 this year (Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts), you can do that manually, by downloading the tax form itself and the instructions at the following internet links:

https://www.irs.gov/pub/irs-pdf/f3520.pdf      https://www.irs.gov/pub/irs-pdf/i3520.pdf

You can then use TurboTax to complete your tax return normally if you wish.  While Form 3520 must be printed and paper filed, by mail (it cannot be e-filed), there is no reason that this should interfere with your regular income tax return preparation and e-filing.  Form 3520 is a disclosure document, really, and there is never any actual tax due with it.

However, if you meet the conditions of having to file Form 3250 (receipt of more than $100,000 in value from a foreign source), then failure to file it can lead to a fine of up to 5% per month (maximum of 25%) of the amount received.

Form 3520 does not come as part of the TurboTax software package.  However, the form is easy enough to fill out by hand.  Also, hiring a professional local tax preparer to do it for you is an option as well.  The two things are really separate activities that need not interfere with each other.

[From:  https://ttlc.intuit.com/questions/3686254-i-need-to-file-form-3520-this-year-can-i-still-use-turbota...]

[daniel_in_seattle]

This information is accurate, but turbotax 2022 will refuse to e-file a 1040 return that references form 3520 in Part IV. As some others on the forum have pointed out, the review errors-out with the message: 

Your return contains one of the following unsupported forms: 3520, 3520-A, 5471, 8621, 8865

This is frustrating because 3520 gets mailed separately to the 1040, and because elsewhere on this site there are reports of people having problems e-filing in this situation, but also suggestions that e-filing should work

when mailing a paper 3520. 

I am going to give up and file by mail, but this is disappointing. Intuit needs to either fix the bug or update their documentation to reflect that this is a restriction of the e-file process. This shouldn't have to be a forum question.