Family money often arrives with a simple explanation: help with a down payment, financial support, or an inheritance.
For someone living in the United States, the next question should be more specific: Who provided the money, what was the transfer, and does it create a U.S. reporting obligation?
Calling a transfer a gift does not resolve those questions.
Separate income tax from reporting
A genuine gift or inheritance from a foreign person is generally excluded from the recipient’s gross income. However, a U.S. person may still need to report it on Form 3520.
For gifts or bequests from a nonresident alien individual or a foreign estate, reporting generally applies when the applicable aggregate exceeds $100,000 during the tax year. Gifts from related foreign donors must be aggregated under the relevant rules.
The donor’s U.S. tax status matters. Living in Korea, or sending funds from a Korean bank, does not by itself establish that someone is a foreign person for these purposes.
Look at the whole year’s transfers
Consider an illustrative example: a U.S. taxpayer receives $70,000 from a nonresident alien parent and another $50,000 from that same parent later in the year. The relevant total is $120,000, rather than two separate transfers below $100,000.
This is why I would organize transfers by donor and year before deciding whether reporting is required. Reviewing each wire in isolation can miss the larger picture.
Keep a clear record of what happened
Save the transfer confirmations and documents supporting the source and purpose of the funds. For an inheritance, retain the estate or inheritance documents as well.
Also identify whether money came from an individual, an estate, a company, or a trust. The $100,000 rule is not a universal threshold: foreign corporations, partnerships, and trusts have different rules.
Do not leave it until the return is finished
Form 3520 is filed separately from the income tax return. Late or incomplete foreign-gift reporting can lead to substantial penalties. Certain gifts from covered expatriates have special tax rules, and foreign assets may create additional reporting obligations.
Before accepting a large transfer, assemble the facts and ask for a review. A short conversation while the documents are readily available is easier than reconstructing the transfer months later.
WiseBeing Tax & Accounting helps taxpayers review U.S. tax and reporting questions involving overseas family transfers. Contact us to discuss your situation.