Many people seek to transfer money from a foreign country back to the U.S. for many different reasons. Some have an inheritance from a relative that lived abroad, and others simply have income from working in another country. Either way, those people need to be well-informed about the tax implications from bringing that money home to the States. No one wants to be on the bad side of the IRS, and today we’ll give you the facts you need to make sure you never are.
First, you need to know that there are no taxes for simply transferring money from a foreign bank. The only charges incurred during the transfer would be bank charges such as transfer fees or fees for conversion of currency. The IRS will however still require you to claim the monies as income and pay your taxes as you normally would. Be sure to claim the funds correctly. Incorrect filing of taxes could result in an audit. For inheritances, there is not an inheritance tax at the Federal level, but some states do have them. The only extra Federal tax you might incur for an inheritance is an estate tax, but that only applies of the value of the estate is greater than $1,500,000.
Next, we’ll talk about methods of transfer. The best way to do so would be to have the money converted into U.S. dollars and have it transferred via SWIFT to your U.S. bank. This is mostly because foreign banks tend to give better exchange rates than you would get if converting your money in the U.S. This varies depending on what country the money is coming from and also which bank you are using in that country. Also, you should make sure whether or not your U.S. bank is linked to SWIFT. Some regional banks and credit unions do not link to SWIFT, so you would require the services of an intermediary bank which would carry its own fees for the transaction. Most large banks in the U.S. are linked to SWIFT so the likelihood is that you won’t have any problems.
An alternate method of transfer, which is also the slowest option, is to have the foreign bank send the money by way of a bank check or bank draft. Once again, this should be converted to U.S. dollars by the foreign bank before processing the draft or check so that you will get the best exchange rate. The benefit is that most U.S. banks will accept checks or drafts without charging any additional fees. This would be a good choice if your bank in the U.S. is not linked to SWIFT, because it would save you the fees that an intermediary bank would charge.
Regardless of which method you choose, remember that foreign bank accounts held by U.S. citizens have to be declared on yearly income tax, so be sure to report all monies correctly. Also, be aware of the policies of both the foreign bank and your U.S. bank to make sure your transfer is made correctly and without incident.