Question

Family loan from foreign country

Forum|Forum|2 years ago
April 21, 2024
1 reply
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I am a non Us citizen, but with tax resident status in the US. I am going to request a loan to a family member outside the US. for a little over $115 K. Does this loan gets any tax implications for me? do I need to report it in the US?

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M

maglib

Employee

@cespirit to be clear you are borrowing money from overseas and will owe interest on that debt.

If that is the case the interest you pay must be reported on a 1099 if they have a US ITIN number or SSN otherwise on a 1042-S annually and you must withhold generally 30% in taxes (dependent on tax treaties with the country) on the interest and remit those funds to the IRS for the lender. This may require the lender to have to file a tax return within the US. The interest must be at market rates and if not, you must impute interest and still withhold taxes.The Form 1042-S, along with the transmittal Form 1042-T, must also be filed with the IRS.

If the money is a gift, there is no interest reporting.

For either You will be required to report the foreign money received on Form 3520 Distributions from a FGN TRUST if the amount exceeds the filing threshold which is 100k, and that is total of all fgn source funds if they exceed then every transaction $5k or more must all be reported.

If a gift is in excess of $18,567 for 2023 (indexed for inflation), you must separately identify each gift and identify the donor.

Form 3520 is filed separate from your tax return and due 15^th day of the fourth month following the end of the U.S. person's tax year

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