How Holiday Gifts and Cross-Border Transfers Shape U.S. Tax Filing

(UNITED STATES) With the holiday season underway and 2025 tax thresholds taking effect, U.S.-based immigrants and visa holders are being reminded that foreign gifts and cross-border transfers can trigger reporting duties that affect their U.S. tax filing—even when no tax is due.

Accountants say the most common mistake is assuming small family remittances are invisible to the Internal Revenue Service; they’re not. Yearly totals that cross certain lines or funds that move through foreign accounts can lead to reporting obligations. The IRS treats most monetary support to relatives abroad as gifts, and regulators have stepped up matching of banking data with tax records, prompting fresh caution as families send year-end help to loved ones.

What counts as a gift (and what doesn’t)

Officials stress that a gift is any transfer where the giver expects nothing in return.

• This covers money sent to parents for living costs, a lump sum for a sibling’s wedding, or paying a niece’s tuition overseas.
• It does not cover moving your own funds between accounts you own in different countries.

2025 gift-tax thresholds and filing rules

• The annual gift tax exclusion for 2025 is $18,000 per recipient.
• Married couples can combine exclusions for $36,000 per recipient.
• When a gift to any one person exceeds the exclusion, the giver must file Form 709.

Filing Form 709 typically reduces the giver’s lifetime exemption, now $13.61 million in 2025, so most families still owe no tax. The IRS guidance for gift tax, including exclusions and lifetime limits, is available at IRS Gift Tax.

Reporting duties for recipients of foreign gifts

For households receiving funds from abroad, the reporting burden flips to the recipient.

• Gifts from a foreign individual or estate: If total gifts exceed $100,000 in a calendar year, the recipient must file Form 3520.
• Gifts from a foreign corporation or partnership: A lower threshold applies—around $19,570 for 2025.

These are generally reporting-only events; recipients don’t pay U.S. tax on the gift itself. However, penalties for non-filing can be steep.

Failure to file can lead to fines of up to 25% of the gift’s value, a punishment that surprises many first-time filers who assumed “no tax” meant “no forms.”

The IRS provides instructions and the filing portal for recipients at About Form 3520.

How banking and remittance reporting affects you

Financial institutions typically report international transfers over $10,000. This threshold was built to detect crime, but it also captures legitimate family support when amounts are high or frequent.

• Reporting doesn’t make a transfer improper, but it puts transactions on record.
• Advisers note special scrutiny points:
  • F-1 students without work permission who receive large regular deposits may face verifying questions.
  • H-1B professionals sending frequent high-value remittances should keep pay stubs and bank receipts showing funds came from lawful U.S. earnings.
• If transfer activity appears to conflict with visa status, questions can surface during future immigration or benefits applications.

Recordkeeping is a simple defense:
– Maintain statements, transfer confirmations, and proof of family ties.
– These help explain the origin or purpose of funds during an audit.

Foreign accounts: FBAR and FATCA filings

Anyone with signature authority or a financial interest in foreign bank or investment accounts must consider two separate filings:

1. FBAR — FinCEN Form 114
   • Due when the combined value of foreign accounts tops $10,000 at any time in the year.
   • File electronically through FinCEN’s resources for FBAR reporting at the Treasury/FinCEN site: Report of Foreign Bank and Financial Accounts.
2. FATCA — Form 8938
   • Attached to the annual tax return.
   • Thresholds generally start at $50,000 for single filers living in the U.S.

Many newcomers assume these rules apply only to U.S. citizens, but resident aliens and many long-term visa holders also fall within scope once they meet presence and income tests. IRS information for FATCA is provided at About Form 8938.

Charitable donations vs. personal gifts

Tax-deductible giving is often confused with family gifts.

• Donations to qualified U.S. charities can reduce taxable income if the donor itemizes.
• Personal gifts to relatives or friends don’t qualify.
• Giving to foreign charities seldom counts unless the organization has a registered U.S. arm.

Advisers urge donors, especially during December’s year-end rush, to:
– Verify the charity’s status,
– Get receipts, and
– Confirm eligibility before claiming deductions.

Transfers from covered expatriates (new 2025 rule)

Starting January 1, 2025, gifts from certain “covered expatriates” (former Americans who gave up citizenship or long-term residency) may face a separate transfer tax under Internal Revenue Code Section 2801.

• The recipient is responsible for reporting and payment.
• The tax rate can reach 40% on amounts above the annual exclusion ($19,000 for 2025).
• This applies in addition to any Form 3520 reporting.

While relatively rare, this rule can affect families where elders abroad once held U.S. status but later expatriated.

Special note for Indian diaspora transfers

• Under India’s Liberalised Remittance Scheme, residents can send up to $250,000 per financial year abroad, with PAN-based reporting and tax collection at source.
• When those funds land in the U.S. as foreign gifts, the U.S. recipient may need to file Form 3520 if totals exceed the threshold—even though no U.S. tax is due.
• In India, gifts above ₹50,000 to a recipient from a non-relative can be taxable to that recipient.

Advisers recommend aligning documentation across borders (bank memos, gift letters, education or property records) so amounts, dates, and reasons match on both sides.

Timing and enforcement

Banks report large transfers continuously, but IRS review of foreign gifts often surfaces during tax season when returns are processed and information returns are compared with individual filings.

• The IRS also relies on FBAR and FATCA filings to flag unreported accounts.
• Discrepancies can lead to letters months after filing deadlines.

Immigrants and visa holders who rely on family support can avoid stress by filing on time and maintaining a clear paper trail. Preparing now—while year-end gifts are being planned—helps ensure the correct forms align with January bank statements.

Practical steps to reduce risk

Tax professionals recommend these basic actions:

1. Keep documentation for transfers above modest levels.
2. Use bank wires or licensed remittance platforms rather than cash.
3. Don’t split one large gift into many smaller transfers to dodge reporting; regulators may treat this as structuring.
4. For households moving more than $50,000 across borders in a year, consider a short consult with a tax professional.
5. Visa holders should avoid activity that looks like business income if their status doesn’t allow it.

Patterns that resemble sales or services can complicate both tax and immigration filings.

Where to find the official forms and guidance

• Givers: review IRS instructions for About Form 709.
• Recipients: see About Form 3520.
• FBAR: file through FinCEN’s system at Report of Foreign Bank and Financial Accounts.
• FATCA: review About Form 8938.

Accountants say most penalties result from missing or late forms—not bad intent—so the safest path is to file when a threshold was crossed and attach brief explanations when appropriate.

The big picture: foreign gifts and cross-border transfers rarely create a U.S. tax bill by themselves, but they often create a filing duty. The rules exist to document large movements of money, not to punish family generosity. With updated 2025 thresholds, clearer enforcement around bank reporting, and new attention to transfers from covered expatriates, this season’s giving can still flow smoothly—so long as the paperwork follows close behind.