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If you’re planning to send a large money transfer to the US, a money transfer service can help you save on fees — but your recipient will still need to report the transfer to the US government.
Yes. No matter where you’re from, if you’re sending more than $10,000 to in the US, both you and your recipient will need to abide by US laws put in place to both protect both your money and the interests of the government.
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.
US law requires banks and money transfer companies to report:
Taxes aren’t the only thing that can eat into your transfer – compare exchange rates and fees through our partner companies to find the best deal.
If you’re sending someone in the US a foreign gift of money or other property, they’ll need 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 are generally not subject to income tax. However, if you are required to submit Form 3520, you’ll be subject to stiff penalties if you fail to do so.
The recipient of the transfer is solely responsible for reporting the amount they 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 or the following:
Laws are in place to protect US citizens 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.
To prevent the US government from delaying or cancelling your money transfer, you and your recipient will need to provide proof of a government-issued photo ID – a driver’s licence or passport, for example – and proof of your address.
If you already own an account with the bank or money transfer company, you may not need to provide ID each time you send money. However, online money transfers may have stricter rules when it comes to proof of ID and could ask for additional documentation or to verify your identity by phone.
To avoid the penalties that come with a failure to report a large money transfer to the US, it may be worth it if your recipient speaks to a tax lawyer to make sure that everything is above board and complies with the laws of all countries involved.
Anyone receiving a large money transfer to the US almost always needs to report it to the IRS. Failing to do so could lead to a fine, or worse.
It may be tempting to think you 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 overall cost of the taxes you may owe.
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