Question

Tax on Gifts from overseas?

Hi, Are the gifts, in form of cash, taxable in the US?

Like say you're a H-1B visa holder or on a spouse visa and on your way to green card, or are a green card holder and you're gifted over 10,000 US Dollars per Month or over 100,000 Dollars per year. Would that money be taxed considering you don't have any source of foreign income and the money is just a gift from your relatives? Also the donor is not a US visa holder of any kind.

Answers

The donor will not be subject to U.S. tax if he/she is neither a citizen of the U.S., conducting business in the U.S, or the gift was not U.S-based property (such as real estate). He/She will be subject to the tax law in their own country which, given the amount of the gift, they will probably have to pay some form of gift tax.

Here are the reporting requirements for you from the IRS website:

Reporting Requirements

You must file Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts, if, during the current tax year, you treat the receipt of money or other property above certain amounts as a foreign gift or bequest. Include on Form 3520:

Gifts or bequests valued at more than $100,000 from a nonresident alien individual or foreign estate (including foreign persons related to that nonresident alien individual or foreign estate);

or

Gifts valued at more than $13,258 (adjusted annually for inflation) from foreign corporations or foreign partnerships (including foreign persons related to the foreign corporations or foreign partnerships).

You must aggregate gifts received from related parties. For example, if you receive $60,000 from nonresident alien A and $50,000 from nonresident alien B, and you know or have reason to know they are related, you must report the gifts because the total is more than $100,000. Report them in Part IV of Form 3520. Treat gifts from foreign trusts as trust distributions you report in Part III of Form 3520.

File Form 3520 separately from your income tax return. The due date for filing Form 3520 is the same as the due date for filing your annual income tax return, including extensions. You file an annual Form 3520 for all reportable foreign gifts and bequests you receive during the taxable year. See the Instructions for Form 3520 for additional information.

Under a new law effective June 17, 2008, gifts from individuals who ceased to be a U.S. citizens or green card holders (lawful permanent residents) on or after June 17, 2008 may be subject to special rules. Refer to the 2008 Instructions for Form 3520 for additional information.

#1

While there is no tax, you must file IRS form 3520 to create a paper trail.

#2

In the US, a gift is NEVER taxable to the recipient.

#3

A non-resident alien cannot be compelled to file a US gift tax return or pay a US gift tax.

The US resident or citizen recipient of a gift or gifts from one or more non-resident aliens may need to file a Form 3520 http://www.irs.gov/pub/irs-pdf/f3520.pdf return to report the gift(s) if the aggregate amount exceeds $100,000 in any calendar year. Here's a link to the instructions for Form 3520: http://www.irs.gov/pub/irs-pdf/i3520.pdf

No tax is due with Form 3520 but there are SEVERE penalties for failure to file or for filing late. The filing deadline is the same as your tax return's filing deadline, including any extensions.

Additionally, if you had signatory control over any foreign accounts with an aggregate value equal to or greater than $10,000 at any point during the calendar year, even if only momentarily, you must file a TD F 90-22.1 http://www.irs.gov/pub/irs-pdf/f90221.pd… report. This report is filed separately from your tax return or Form 3520 and is due by June 30 of the following year. Again, although no tax is due with this report, severe penalties apply for failure to file or for late filing. See the form itself for specific instructions and the mailing address for the report.

#4

It might be possible that any qualified gifts according to the IRS rules you would be receiving any taxable income amounts. But some forms will have to filed for this purpose.

And the giver has to make sure that they follow all of the necessary rules that they have to meet for the country that they are a citizen of and also make sure that they are filling out and filing ALL of the required necessary forms that they are supposed to do for the paper trail of tracking the gifts amounts correctly from the giver to the receiver.

Hope that you find the above enclosed information useful. 08/27/2011

#5