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If you’re planning to transfer more than $10,000 USD to the States, a money transfer service can help you save on fees. Be aware that your recipient will need to report the transfer to the US government.
Yes. No matter where in the States your recipient lives, if they’re receiving more than $10,000 USD while in the US, they’ll need to abide by US laws put in place to both protect both their money and the interests of the American government.
By law, banks report all cash transactions exceeding $10,000 USD — and any transaction of any amount that alerts their suspicions. Money transfer businesses, which often solely send money between countries, sometimes have reporting thresholds as low as $1,000 USD.
US law requires banks and money transfer companies to report:
Taxes aren’t the only thing that can eat into your recipient’s money – compare exchange rates and fees through our partner companies to find the best deal.
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When US residents receive foreign gifts of money or other property, they have to report it on Form 3520 — Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts.
US citizens and residents are required to use Form 3520 for:
Form 3520 is considered an “information return,” rather than a tax return, because foreign gifts generally are not subject to income tax. However, there are stiff penalties for failing to submit Form 3520 when it’s required.
The recipient of the transfer is solely responsible for reporting the amount received during the current tax year with their annual tax filing.
The penalties for failing to file Form 3520 on time are equal to the greater of $10,000 USD or the following:
Laws are in place to protect both recipients and the government from fraudulent activity. By monitoring transactions in and out of the US, authorities are able to:
Since 9/11, the US government has put even more stringent laws in place. For example, the Patriot Act allows the government to track money more carefully due to terrorism.
International money transfers that won’t break your business
To prevent the US government from delaying or cancelling your money transfers, your recipient will need to provide proof of identity in the form of government-issued photo ID — a driver’s license or passport, for example — and proof of their address.
If the person receiving the money already owns an account with the bank or money transfer company the funds are sent to, they may not need to provide ID every time they receive a transfer. However, online money transfers may come with stricter rules when it comes to proof of ID and could ask for additional documentation or to verify the recipient’s identity by phone.
To avoid the penalties that come with a failure to report large sums of money into the country, it may be worth it to speak to a US tax lawyer to make sure that everything is above board and complies with the laws of all countries involved.
Sending large money transfers to the United States almost always need to be reported to the IRS, failing to do so could lead to a fine or even worse. It may be tempting for your recipient to think they can slip through the cracks and save money, but the fines far outweigh the benefits. Instead, learn how to save money on your next transfer to help offset the taxes your recipient may end up owing.
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