Tax liability on foreign fund transfers to Vanguard MM
Tax liability on foreign fund transfers to Vanguard MM
My wife is an Italian citizen and US permanent resident (Green card holder). She asked her Italian bank to wire $50,000 to our Vanguard money market account. When she did this, the Italian bank teller told her a horror story of another bank client who wired money to a US bank, and had to include the amount transferred as income on their US tax return.
Does anyone have experience with this situation? I can't imagine that a simple transfer of funds would be considered income for tax reporting purposes, but I've been surprised be IRS rules before.
Does anyone have experience with this situation? I can't imagine that a simple transfer of funds would be considered income for tax reporting purposes, but I've been surprised be IRS rules before.
There is no obligation to do anything and no automatic or mandatory tax liability from the transfer.
1. Treasury reporting requirements are met by the bank.
2. The IRS has the right to request details regarding the origin of the funds, to determine if income tax is or was in the past due. This is not automatic and also not usual.
3. If the money is after tax income, supporting documentation to show this should be kept on file.
4. If the money was never subject to US income tax, supporting documentation should be kept on file.
1. Treasury reporting requirements are met by the bank.
2. The IRS has the right to request details regarding the origin of the funds, to determine if income tax is or was in the past due. This is not automatic and also not usual.
3. If the money is after tax income, supporting documentation to show this should be kept on file.
4. If the money was never subject to US income tax, supporting documentation should be kept on file.
You have to file a yearly FBAR if you have signature authority over a non-US bank account. You do not have to file anything when you transfer money to the US because that reporting is done by the bank. You do have to file with the treasury if you are carrying out a cash transfer $10K or greater not through a financial institution.555 wrote:So the individual doesn't have to do any reporting. Is that right? ]
Thanks for the info. What is FBAR?
Also what if the transfer goes via a forex place like xe.com or oanda.com?
Also what if the transfer goes via a forex place like xe.com or oanda.com?
Michael B wrote:You have to file a yearly FBAR if you have signature authority over a non-US bank account. You do not have to file anything when you transfer money to the US because that reporting is done by the bank. You do have to file with the treasury if you are carrying out a cash transfer $10K or greater not through a financial institution.555 wrote:So the individual doesn't have to do any reporting. Is that right? ]
My pleasure.555 wrote:Thanks for the info. What is FBAR?
Also what if the transfer goes via a forex place like xe.com or oanda.com?
There are three separate topics in this thread. One is authority or ownership of a foreign bank account. Another is treasury reporting requirements for transferring money. The third is tax liabilities.
FBAR is the Report of Foreign Bank and Financial Accounts. You have to fill it out if you have authority or ownership of a non-US accounts with a value greater than $10K. See here http://www.irs.gov/businesses/small/art ... 44,00.html
Transactions involving $10K or more in cash or similar financial assets usually need to be reported to the US Treasury. This includes transporting that amount to or from the US. When you transfer money to or from the US using a financial institution, the institution is reporting the transaction. A registered forex exchange like Oanda would technically be transferring funds into a bank account so that would be recorded by them or the corresponding bank.
Tax liability is subject to IRS tax code. When you receive money from any source into a bank account the deposit creates an audit trail and the IRS can at any time (within the statute of limitations) request you document the source to determine tax liability.
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See also http://www.irs.gov/businesses/article/0 ... 22,00.html for reporting receipt of non-US gifts or bequests, and http://www.mondaq.com/unitedstates/arti ... leid=97106 for newly extended FATCA reporting, beyond FBAR, for owning non-US accounts.