Many people transfer funds to several different parts of the world through Western Union’s website, mobile application or by visiting the worldwide agent locations in-person. Fund transfers and funds received were never as easy as now. People can even transfer monetary gifts, business investments and salaries through Western Union but there are a few transactions on which taxes are applicable.
This article is all about tax payments when someone transfers funds through Western Union.
Is Money Received from Western Union Taxable?
In some countries you have to pay taxes upon the amount received from Western Union. But if the amount sent is a monetary gift, then you will be exempted from all kinds of taxes.
However, every citizen of the United States is bound to pay taxes even if he lives in some other country and earns money in any foreign currency. In the US, tax is based on citizenship, if you are a US national then it does not matter where you reside. You have to pay a certain amount as tax on transfers received that count as any kind of income (not gift).
Factors that decide if money transfers are taxable
For more clarity, you should know that there are a few factors that decide whether the money transfer is taxable or not.
- If an amount is sent as a gift in the United States then you will be exempted from tax. However, there is a limit of amount to be gifted and that is $11.58 million and once you reach the limit you will have to pay taxes. Any other amount whether it is big or small sent as a monetary gift will be tax-free. The Monetary gift includes Cash, gift cards and certificate of deposits.
- Taxes need to be paid on transfers if you are getting paid by a company or a person against any activity that generates income.
- Senders who are US citizens have to pay taxes on the entire amount if the amount exceeds $16000 while transferring funds overseas.
- Incomes that are taxable in the US include wages, Interest payments, Dividends and Rental Income.
Are Taxes paid by the receiver or sender?
Both the sender and receiver have to pay taxes but it depends upon the factors mentioned above. In addition, every US citizen whether he sends money overseas or lives in a country other than the United States of America will have to pay taxes. If a receiver or recipient is receiving an amount against any activity or service, such that he or she is generating an income then he has to pay taxes for that. On the other hand if a person is sending monetary gifts to someone and it exceeds the limit then tax will be applicable otherwise gifts via money transfer are not taxable.
Reference Links:
https://www.finder.com/irs-taxes-on-large-money-transfers
https://www.ustaxhelp.com/do-i-have-to-pay-tax-on-money-transferred-overseas/
https://www.hrblock.com/expat-tax-preparation/resource-center/income/foreign/foreign-income-taxes
