Do you have to pay taxes on a large money transfer? | finder.com

Do I have to pay taxes on a large money transfer?

Failing to file with the IRS could leave you on the hook for big fines — or even jail time.

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Avoid a minefield by understanding the tax implications of large transfers and knowing when you need to file.

Do I have to pay taxes on money transfers?

Possibly, but it depends on how large the transfer is and whether you’re the giver or the receiver. You’ll have to pay taxes on gifts you send if you’ve given more than $11.180 million in your lifetime, and you may have to pay taxes on transfers you receive as if they were income.

What’s the best way to send a lot of money overseas?

How can the IRS know what I’m transferring?

By law, banks report all cash transactions that exceed $10,000 — 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.

The Bank Secrecy Act allows the IRS and Department of Justice to investigate large transfers of money to identify illegal activity more easily. Numbering systems that are used to process money transfers make it easy for the government to track funds even if they’ve been sent to an overseas account.

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    What kind of IRS forms will I need?

    Depending on how much you’re sending and why, the IRS may require you to fill out any number of tax forms:

    Form NumberForm Name
    Form 114Foreign Bank and Financial Accounts (FBAR)
    File if, in the past year, you’ve had a foreign account valued at more than $10,000.
    Form 709Gift (and Generation-Skipping Transfer) Tax Return
    File if you’ve given away more than $15,000 in the past year
    Form 3520Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts
    File if you received a gift of more than $100,000 from a person in another country or if you received a gift of more than $15,797 from a foreign corporation or partnership.
    Form 8938Statement of Specified Foreign Financial Assets
    File if the total value of all your foreign accounts and combined assets was worth $50,000 or more on the last day of the year or $75,000 or more at any point in the last year. ($100,000/$150,000 for married couples filing joint returns.)
    Form 8300Currency Transaction Report
    If you own a business that sent $10,000 or more in cash payments, bank drafts, money orders, checks or traveler’s checks in the past year.

    Laws and legal documents when transferring large sums of money into the US

    What are the penalties for not filing?

    Those who fail to report can expect fines of up to 5% of the asset value involved or $10,000 a year for up to six years. For those who wait until an investigation is launched, the penalty increases to up to 50% or $100,000 — whichever is greater. That amount can be applied to every year you failed to report for up to six years. You could also face criminal charges and up to 10 years in prison.

    To ensure you’re in compliance with all laws, work with a reputable transfer company and go over your tax forms with a professional if you’ve sent or received more than $10,000 in the past year.

    How do I file my taxes online?

    What is the gift tax?

    The gift tax requires you to pay taxes on any large monetary gifts over a certain threshold. You can gift up to $11.180 million in your lifetime without owing this tax, but you’ll have to file a form if you’ve gifted more than $15,000 in the past year. If you’re married, both you and your spouse can give $15,000.

    Still, you can legally avoid filing for the gift tax in a number of ways. One is to reduce the amount of money sent to any one person. For instance, if you’re sending money to support a family, divide your total gift among the various members of the family to stay below the $15,000 individual limit. This is helpful when divvying up something like an inheritance, where the money will in fact be shared among family members.

    Given the complexities of tax laws, it’s wise to seek the help of someone who knows the laws to ensure you’re in compliance.

    What counts as a gift?

    If you give someone money and don’t expect any goods or services in return, it’s a gift. Tuition, medical expenses, gifts to political organizations and gifts to a spouse are exempt.

    If you’re helping your children with tuition or medical expenses, pay the school, hospital or insurance companies directly. The IRS will notice — and expect to be notified — of any checks or transfers you send directly to your dependents.

    Do I need to tell the IRS about foreign bank accounts?

    Yes. If you’re considering setting up an overseas account, you’ll need to report it to the IRS. Even if the account is to hold money temporarily before a bigger transaction or to share access with a child or family member as a joint account. Besides traditional income tax statements, US citizens with bank accounts offshore must file a Foreign Bank Account Report (FBAR) by mid-April of each year that an overseas account holds $10,000 or more. Whether the money is there for a day or a year, it must be reported.

    Be aware that some countries have limits on bank wire transfers — potentially on incoming and outgoing — so research the rules that apply to any country the money will travel through.
    Could you benefit from a tax shelter or offshore account?

    Bottom line

    If you’re receiving foreign income, sending large gifts or operating an overseas business, you’ll likely have to pay taxes on your transfers. Recoup some of that money by choosing a transfer provider that offers competitive exchange rates.

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    24 Responses

    1. Default Gravatar
      HopeMarch 13, 2019

      Hello, I’d like to know the tax implications of depositing in a US Bank Account of up to 20,000USD from the Philippines. Do I need to file some forms in BIR before making any move?

      • Avatarfinder Customer Care
        johnbasanesMarch 14, 2019Staff

        Hi Hope,

        Thank you for reaching out to Finder.

        If you are planning on making a bank to bank transfer from the Philippines, the bank would provide you the regulations on sending large amounts. They will also provide the necessary documents that you need to fill up to ensure that we are within the legalities of the transfer. Hope this helps!

        Cheers,
        Reggie

    2. Default Gravatar
      josephOctober 10, 2018

      I just applied for the green card after I married to a US citizen and now I would like to take $50,000 to the country. I already have US bank account.
      Is there any implication with the tax office? Last thing I want to pay tax on money saved up and already taxed at overseas.

      • Avatarfinder Customer Care
        JoshuaOctober 14, 2018Staff

        Hi Joseph,

        Thanks for getting in touch with finder. I hope all is well with you. :)

        I could not give you a straightforward answer to your question, Joseph. This is because there are just different factors that determine whether a particular amount of money is taxable or not.

        First, you would need to determine the source of the funds. If it is an income you earn, then tax would likely incur. You also need to check the tax law of the US and the country where the money will be coming from. Next, since you are sending a large amount of money, you would need to report it to the IRS using the right form.

        Tax law can be very complicated. It would be helpful if you directly speak to a tax specialist.

        I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.

        Have a wonderful day!

        Cheers,
        Joshua

    3. Default Gravatar
      JuanOctober 8, 2018

      What do I need to know if I am buying an apartment in South America?

      • Avatarfinder Customer Care
        JoshuaOctober 13, 2018Staff

        Hi Juan,

        Thanks for getting in touch with finder. I hope all is well with you. :)

        There are a few things you need to know before you buy an apartment in South America. First is to check the local real estate laws of the country where you are going to buy an apartment. Meet their legal requirements. From there, you can start looking for an apartment. Assess your needs, budget, and preference to simplify the whole buying process. Finally, seek professional help to obtain personalized expert advice.

        I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.

        Have a wonderful day!

        Cheers,
        Joshua

    4. Default Gravatar
      MSeptember 21, 2018

      If I receive money on monthly basis at western union, less than $900 every time, so I have to claim that on taxes? Btw, I take that cash and never deposited In my bank account.

      • Avatarfinder Customer Care
        JoshuaSeptember 24, 2018Staff

        Hi M Abouz,

        Thanks for getting in touch with finder. I hope all is well with you. :)

        If you are receiving an income from overseas, you might need to declare that to the IRS. However, there is a maximum amount of money that you can receive without getting taxed. Speak to a tax professional to get more details about the tax implication of your money transfer.

        I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.

        Have a wonderful day!

        Cheers,
        Joshua

    5. Default Gravatar
      SkipAugust 27, 2018

      Through a mess up of the company I work for, NJ child support was overplayed. That overpayment was ‘returned’ to me and now I must return it back to the company. It is a large enough transfer above 20,000. Will I get zapped by taxes, like the gift tax or something?

      • Avatarfinder Customer Care
        JoshuaSeptember 2, 2018Staff

        Hi Skip,

        Thanks for getting in touch with finder. I hope all is well with you. :)

        Generally, taxes are charged when you made an income from a transaction. In your case, you will be returning money to the company. For this reason, it might not be considered as an income. However, since you are going to send money that exceeds $15,000, you might be charged with gift tax and you will need to file a gift tax return. (To learn more about gift tax, please go to this page.)

        Of course, there are other factors I’m not aware of that might affect the status of the money. It would be a good idea to check with the tax office or speak to a tax specialist to learn more.

        I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.

        Have a wonderful day!

        Cheers,
        Joshua

    6. Default Gravatar
      AristoAugust 2, 2018

      Hello, I like to help my sister to buy a her a house in Turkey and send him 40k.

      What kind of forms do I need to fill?

      Do I have to pay taxes to IRS?

      Can I also send 14k to my dad? And 14k to my mom in a one tax year?

      Thank you so much.

      • Avatarfinder Customer Care
        JoshuaAugust 11, 2018Staff

        Hi Aristo,

        Thanks for getting in touch with finder. I hope all is well with you. :)

        Since you are sending money to your sister, you will most likely need to fill the IRS form 709. It is the form used to report gifts subject to the gift tax. Please note, as our guide mentioned, filing a gift tax return doesn’t necessarily mean that you’ll pay the gift tax. Technically, you can gift up to $5.25 million in your lifetime without owing this tax.

        Regarding your second question, it depends on different factors whether you need to pay taxes to the IRS or not.

        For your third question, yes, you can send 14K to your mom and dad provided that you met all the government requirements.

        Since tax laws are highly complicated, it would be wise to seek the expert help of someone who is familiar with the laws to ensure you’re in compliance.

        I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.

        Have a wonderful day!

        Cheers,
        Joshua

    7. Default Gravatar
      RuruJuly 21, 2018

      Does a permanent resident exempt also from the gift tax below $14,000? Also when it said in a year, does that mean the limit reset at the end of the year?

      • Default Gravatar
        daveSeptember 7, 2018

        Can a Permanent Resident ( Cdn. Citizen) choose to transfer funds from a US bank to a Cdn. Bank without penalty?

      • Avatarfinder Customer Care
        JoshuaSeptember 10, 2018Staff

        Hi Dave,

        Thanks for getting in touch with finder. I hope all is well with you. :)

        Penalties do happen when you don’t abide by the law. If you are going to transfer a huge amount of money from the US, you still need to report the transfer to the IRS. You probably need to fill out the necessary IRS forms mentioned above.

        To learn more about the legal implications of sending a large amount of money, you may directly get in touch with the IRS or talk to a tax specialist.

        I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.

        Have a wonderful day!

        Cheers,
        Joshua

      • Avatarfinder Customer Care
        JhezJuly 27, 2018Staff

        Hello Ruru,

        Thank you for your comment.

        The donor is generally responsible for paying the gift tax which can be for permanent resident and has an annual exclusion if below $14000. A tax year is counted from January 1 to December 31, and you are required to file federal income tax returns by April 15. I hope this helps.

        Regards,
        Jhezelyn

    8. Default Gravatar
      GeorgeJune 11, 2018

      I am not sure if this is the right place to ask but maybe someone can point me in the right direction. I live in a border town with Mexico and discovered that western union allows you to send currency to Mexico at a significantly favorable rate. Usually 5 to 10 percent more than what the local exchange booths will sell you dollars for.

      For example, today i wired myself $7500 USD and received $154,275 MXN (exchange rate $20.57 MXN for $1 USD). Once i returned to the US I exchanged the currency at $19.15 MXN for $1 USD. So, i received $8,056.13 USD.

      The issue was that at the exchange booth on the US side I was told that these kind of transactions are legal and that they wont be able to exchange currency for me again and that I should research the law on the IRS website.

      My questions to you guys are:

      Is this really illegal ?

      Are there any websites I should research or laws I should be familiar with if I plan to continue this endeavor?

      Any information is appreciated guys. Thanks!

      • Avatarfinder Customer Care
        JoshuaJune 12, 2018Staff

        Hi George,

        Thanks for getting in touch with finder. I hope all is well for you. :)

        I understand your concern. It is important to ask the exchange booth what makes your transaction illegal and if they can point you to the specific place to confirm their claim. Since we are not tax or legal experts, you might want to ask a local tax office where you can get a more personalized answer.

        I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.

        Have a wonderful day!

        Cheers,
        Joshua

    9. Default Gravatar
      SpencerMay 14, 2018

      I’m selling my UK property for £350,000, I live in Florida and want to transfer the money to my US account.
      Do I need to file any paperwork before I transfer the money or do I just declare it on next years tax form in US?
      I should have paid the capital gains in the UK and I can offset this on my US tax’s.

      • Avatarfinder Customer Care
        JoshuaMay 14, 2018Staff

        Hi Spencer,

        Thanks for getting in touch with finder. I hope all is well for you. :)

        If you’re receiving more than $10,000, you’ll need to abide by US laws put in place to both protect your money and protect the interests of the government. In most cases, you would probably need to report the money you received using the Form 3520 — Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts.

        As the recipient of the transfer, you are solely responsible for reporting the amount you received during the current tax year with your annual tax filing.

        Please note that we are not tax experts and so you still need to seek professional advice.

        I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.

        Have a wonderful day!

        Cheers,
        Joshua

    10. Default Gravatar
      LouMay 6, 2018

      If I receive a $23,000 money transfer from Portugal to my US bank account, how much do I pay the IRS?

      • Avatarfinder Customer Care
        JeniMay 6, 2018Staff

        Hi Lou,

        Thank you for getting in touch with finder.

        Since 2013, US citizens have been allowed to transfer up to $14,000 in US currency overseas as a gift without having to file a gift tax return. If you are married, both you and your spouse can give $14,000 to the same person. Further, if your giftee is married, both you and your spouse can each give $14,000 to each person in the married couple.

        The means that the maximum amount a married couple can gift another couple without filing for the gift tax is actually $56,000. Once you go over the $14,000 threshold (or couple limits, considering your circumstances) you are responsible for filing a gift tax return. Filing a gift tax return doesn’t necessarily mean that you’ll pay the gift tax. Technically, you can gift up to $5.25 million in your lifetime without owing this tax.

        As a friendly reminder, while we do not represent any company we feature on our pages, we can offer you general advice. Please check out this link to read more about gift tax.

        I hope this helps.

        Have a great day!

        Cheers,
        Jeni

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