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We would like to transfer money from our oversea back to a

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U.S. bank and use the...
We would like to transfer money from our oversea back to a U.S. bank and use the money to payoff our mortgage. What are the tax consequence on the money transfer from oversea bank?
Submitted: 7 years ago.Category: Tax
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11/3/2010
Tax Professional: Richard, Tax Attorney replied 7 years ago
Richard
Richard, Tax Attorney
Category: Tax
Satisfied Customers: 56,009
Experience: 29 years of experience as a tax, real estate, and business attorney.
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Hi there. Simply transferring money from one account to another does not create tax liability. The bank is required to disclose the transfer, but it does not create a tax liability.

 

 

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The information given here is not legal advice. As all states have different intricacies in their laws, the information given is general only. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.

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Customer reply replied 7 years ago

I still need a few clarification:

 

(1) Is the bank disclosure included in the annual interest report? If the money transfered from oversea bank is more than $300K, will IRS question where the money come from?

(2) If we have the money transfer in 2010 and use it payoff our mortage in 2010, when we fill our 2010 1040 return, do we need disclose anything related to the money transfer?

 

 

Tax Professional: Richard, Tax Attorney replied 7 years ago

1) No, it's not a tax issue. Although a $300,000 wire transfer will be disclosed and possibly result in some attention, it will not result in tax to you.

 

2) You need make no disclosure on your 1040. The financial institutions involved int he wire transfer will file the requisite disclosures.

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Customer reply replied 7 years ago

Thanks.

 

More questions:

(1) Only the U.S. bank (the receiving bank) is required the disclosure, right? Will the oversea bank (non-U.S.) also need send any disclosure to IRS?

(2) Normally, if the money draw IRS attention, what actions normally will IRS take?

 

Tax Professional: Richard, Tax Attorney replied 7 years ago

You're welcom...1) That is correct; 2) The IRS is not going to take any action just due to a transfer. A transfer of money does not trigger a tax. It really is more of a Homeland Security issue...the government simply wants to know when money comes into this country for security purposes. A one-time transfer is not going to cause that much scrutiny. If you want, you could transfer it directly to your lender which clearly shows where the money is going.

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Customer reply replied 7 years ago

How about my question # XXXXX?

 

I also heard that U.S is worldwide tax. Will IRS question where my oversea money come from?

 

Regard to your above question: do you mean tranfer the money from my oversea bank account to the mortage lender? If so, will my U.S> bank has no need to report the money transfer simply it is not even go through the U.S. bank?

Tax Professional: Richard, Tax Attorney replied 7 years ago
The IRS is concerned with taxing income. If you are simply transferring it from one account to another, it does not result in income. On the other point...yes, just get a payoff amount and have your overseas bank wire the money to pay off the loan. Then, although the bank receiving the money from an overseas bank is going to disclose it, there is no question that the money is coming into the U.S. for some terroristic activity.
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Customer reply replied 7 years ago

Thanks for your patience.

 

One more and maybe the last one. :-)

 

Will IRS question how we get the money in our oversea bank account? will IRS consider it as our oversea income and therefore tax it. Additionally, I heard it is better to transfer the money from a third party (such as our relative) to our U.S. account to avoid the tax issue, does it make sense to you? do the third party transfer result in gift tax?

Tax Professional: Richard, Tax Attorney replied 7 years ago
All I can tell you is what typically happens. Typically a transaction like this is not going to raise any eyebrows whether or not it comes from a relative or not. I would recommend you not move it first to your relative and then back because you don't want to either trigger gift taxes issues such as paying tax or using up lifetime exemptions. You have to remember that billions of dollars get wired in every day, so yours is not going to stand out.
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Customer reply replied 7 years ago

What if the money in our oversea bank is transferred from a third party oversea account and the third party has nothing to do with U.S. (never live in U.S. nor a U.S> citizenship), and then we transfer the money from our oversea bank to payoff the loan, does it trigger any gift tax?

Tax Professional: Richard, Tax Attorney replied 7 years ago
It does not trigger gift tax to you...the donee does not pay gift tax. Whether or not the non-U.S. citizen is subject to gift tax would depend upon the gift tax rules of their country.
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Customer reply replied 7 years ago
Thank you!
Tax Professional: Richard, Tax Attorney replied 7 years ago
My pleasure! Glad to help and you take care!
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