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weekend_warrior · Jan 5, 2015, 08:23 AM

Hi there,

I'm looking at sending a large amount of money (over 20K) to my father in Canada from me in the US. He is NOT a U.S. citizen but I am.

Is there some sort of paperwork I need to fill out?

Is there a gift tax or something?

I want to make sure I'm doing it all legal but the IRS doesn't seem to make this easy to figure out!

Thanks in advance for the info.

ebaines · Jan 5, 2015, 08:45 AM

I can't answer any questions about whether your father would owe taxes in Canada on this gift, but as for your tax liability: you may give an individual up to $14K as gifts in a calendar year without any tax consequences - that limit is called the annual gift exclusion. If you are married both you and your wife can give him up to $14K each - so if you're married you have no gift tax issues at all since you are within the $28K annual exclusion for married couples, and you can skip reading what follows.

If you are single and give him $20K you must fill out a gift tax form (Form 709)and submit to the IRS, although assuming this is the first time you've made such a large gift to anyone you won't actually owe any tax. The reason for the form is to track the remaining portion of your lifetime exclusion from gift and estate tax - if over your lifetime you make gifts that exceed the annual exclusion by a total of $5.43 million or more, then you will start to owe gift taxes. Also when you pass away your estate will have to use a reduced value for the estate tax exclusion. So by exceeding the annual exclusion amount by $6K you reduce your lifetime exclusion by $6K. Bottom line is although it's unlikely that you'll any taxes it's a bit of a paperwork hassle - you'd be better off splitting the $20K gift into smaller gifts over two or more years.

AtlantaTaxExpert · Jan 5, 2015, 08:48 AM

The advice ebaines gives is golden.

I have only one addition: if the money is to be used in part to pay medical bills, you should pay those bills directly. Such direct payments are NOT considered to be part of the gift, and could get you below the $14K reporting threshold.

weekend_warrior · Jan 6, 2015, 07:27 AM

Ok thank you both for the answers.

I was was thinking I might be able to avoid the gift tax since my dad is not American and not living in the US but doesn't sound like that's the case.

Ill probably just just stay below the 14K then and be on the safe side.

AtlantaTaxExpert · Jan 6, 2015, 09:19 PM

Glad to help!