IRS Rules for Sending Money to a Foreign Bank Account

Americans who send money to foreign bank accounts have to follow the IRS’ rules for such actions. So, what are the rules, and how can you comply with them when you transfer money overseas?

There’s no IRS cap on how much money Americans can send to foreign bank accounts. That being said, if you send above a certain amount, you may have to pay taxes or report your actions to the IRS. Generally, sums over $16,000 sent to foreign persons’ bank accounts are taxable by the IRS. If you send over $10,000 to an overseas account you own, you’ll likely have to report that. Complying with the reporting requirements for international transfers is crucial, as failure to do so can result in steep financial penalties from the IRS.

Our skilled professionals are here to help Americans heed the IRS’ rules for international money transfers. To learn more about how the experienced tax accountants at US Tax Help can assist you, call us today at (541) 362-9127.

How Much Money Can You Send to a Foreign Bank Account at Once?

If you’re in the process of moving overseas and plan to send some of your money to a foreign bank account, you may be wondering how much you can send. Currently, the IRS imposes no limit on how much money Americans can send overseas at once. That being said, your bank might.

Americans aren’t restricted when sending money to a foreign bank account. While the IRS may monitor the amount of money you’ve sent abroad, and foreign banks may report large sums to the IRS according to the Bank Secrecy Act, the tax agency does not limit how much Americans can send.

However, individual banks may have their own limits on daily international money transfers. Some banks only allow account owners to send several thousand dollars a day to a foreign bank account. Generally speaking, the larger the sum, the longer it can take to reach your foreign bank account. If you plan to move large sums of money to a foreign bank account, it’s wise to consult a tax accountant for insight. While the IRS doesn’t restrict how much you can send with each transfer, your bank might.

Do You Have to Pay Taxes on Money Sent to a Foreign Bank Account?

Americans may have to pay taxes when sending money overseas to a foreign bank account. If the transfer is a gift to a foreign account owner, it may be taxed depending on the amount. The IRS may also tax international wire transfers sent for business purposes.

Generally, any amount over $16,000 sent to a foreign bank account that you do not own is considered a taxable gift. Because of that, if you want to send a large sum to a foreign person’s bank account, you may be taxed by the IRS. The IRS also tends to impose taxes on wire transfers sent for international business purposes. If you send funds to a foreign account that you own, you will likely not be taxed regardless of the amount.

That being said, it is still important to consult with a skilled tax accountant if you plan to transfer money to an overseas account. Whether or not you’ll be taxed on the transfer can be a complicated answer in certain situations. An experienced professional can help you understand your tax liability on international transfers, so you don’t experience any consequences from the IRS.

Do You Have to Report Money Sent to a Foreign Bank Account to the IRS?

Although you may not have to pay taxes on the money you’ve sent abroad, you might have to report it to the IRS. Generally, reporting international wire transfers is for informational purposes only. That being said, reporting foreign transfers is still important if the IRS requires it.

If you choose to send over $10,000 to a foreign account that you own, you will need to report it. According to the Foreign Account Tax Compliance Act (FATCA), any American taxpayer with over $10,000 in foreign bank accounts must report their holdings to the Financial Crimes Enforcement Network (FinCEN). You may also need to file Form 8938 with the IRS if your recent international transfer puts you over the threshold for reporting. Americans can ask their tax accountants for more information about the filing thresholds for IRS Form 8938. There may be additional filing requirements for transfers relating to foreign business accounts.

Complying with FATCA regulations is crucial, so hiring an experienced tax accountant is often necessary. Many Americans are unaware that the IRS continues to monitor their income and financial holdings in foreign accounts when they move overseas. Because of that, Americans may be unaware of the reporting requirements for some international transfers.

IRS Penalties for Failure to Report Money Sent to a Foreign Bank Account

If you’re required to report your international money transfer to the IRS, whether it was a gift or a transfer of sums to an account you own, you could face financial penalties. These penalties can be severe, so hiring a professional to help you report money sent overseas is important.

The IRS tends to impose financial penalties on Americans who fail to report certain amounts of money sent to foreign bank accounts. If you sent over $16,000 to a foreign bank account you do not own, and failed to report it or pay the taxes associated with the transfer to the IRS, you could face steep penalties. The penalty for ignoring gift tax liability is 5% of the total amount due for each month taxes are unpaid, up to 25%. Additional penalties can be imposed on taxpayers who continue to avoid paying a gift tax liability for funds sent to a foreign bank account.

Failure to abide by FATCA filing requirements can have a similar impact on Americans. Failure to file FinCEN Form 114 regarding foreign accounts exceeding $10,000 can result in a $10,000 penalty, or a penalty equal to 50% of the total amount in your foreign bank account.

Clearly, understanding the IRS’ rules for sending money to a foreign bank account is crucial for Americans. That’s why hiring an experienced tax accountant to help you navigate the reporting requirements is so crucial. Otherwise, you may face steep financial penalties that are easily avoidable with the right guidance.

Call Our Tax CPAs to Learn More about Sending Money to a Foreign Bank Account

If you plan to send money to a foreign bank account, and are unsure of the IRS’ rules regarding such matters, our experienced professionals can help. To learn more about the tax accountants at US Tax Help, call us today at (541) 362-9127.