It’s easy to watch your money slip away when you’re trying to transfer it overseas. Plenty of organizations collect taxes on transactions larger than certain amounts, and vendors skim fees off the top of what you’re trying to send. If you’re not careful, you could watch a large chunk of your money disappear in the time it takes to send it abroad. Fortunately, with a little research, it’s possible to reduce the amount of money you lose as it’s transferred across the globe.
Look for Services that Collect Flat Fees
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Many banks charge fees as a percent of what you want to transfer, which means the more you transfer, the more expensive it gets. For example, you could end up paying $100 on a $10,000 transfer if they charge a one percent fee on the total transaction. Instead, look for organizations that only charge a flat fee for any transfer. Instead, you might pay $10 whether you’re transferring $1,000 or $10,000. This way you will always know what the expenses are and can save significantly on larger transactions.
Understand American Tax Law
In America, you are expected to pay taxes on remittances shipped abroad if they exceed $14,000 per person. By planning strategically, you can potentially save hundreds to thousands of dollars in taxes, allowing you to live comfortably in the United States or send even more back home.
Your spouse can participate in sending money abroad, so between the both of you, you can send up to $28,000. If you’re not married, you can divide up the $14,000 across multiple people throughout the year. If you want to send $30,000 to your family, you could send $10,000 each to your mother, sister, and aunt to stay under the taxation requirement. By knowing your limits and dividing your gifts across multiple people, you can significantly reduce the taxes you owe at the end of the year.
Limit Remittances to Less Than $10,000 Per Transaction
The IRS and American banks have several fraud prevention triggers that flag any suspicious transactions to and from abroad. The biggest flag is purchases over $10,000. Anyone who sends or receives a transaction larger than $10,000 must report it to the IRS, whether it’s for a business or an individual.
The goal of this is to reduce illegal activity that could support drug cartels, terrorists, and scammers. Even if you’re just trying to send money to Mexico for your family, the transaction could get flagged and held up for several days. To prevent this, opt to send multiple small transactions instead.
You work hard to earn the money that you send back to your family, and they rely on you to provide them with as much as you’re able. Don’t let unnecessary fees and government taxes slow down your sending ability and take money from your family and children. Know before you send so everything you earn can go toward improving your life and your family’s life back home.