For migrant workers who live in the United States, one of their biggest concerns is gift tax. As of 2016, you can send up to $14,000 with no fear of being taxed. If you exceed that amount, you may have to add tax to your funds depending on who you send money to and in which situation.
Gift Categories with Different Tax Implications for the Sender
Tax requirements for sender depend on who is receiving the money.
A dependent child: If you’re transferring money home to support one, or more, children, you’re not taxed (even if the amount exceeds $14,000) because the money aids the minor.
Family: If you’re sending more than $14,000, at any one particular time, to support your family, America does tax you since “family support” falls under the Gift or Inheritance category. You can avoid this tax, by dividing the funds among the number of family members you’re supporting. For instance, you can divide your gift of $30,000 maong four family members, so that each receives $7,500, You’re below $14,000, so don't have to pay tax.
Your own account:If you’re depositing funds in a separate account that you’ve opened in another country, you need to annually report this account to the U.S, once it exceeds $10,000. This is so, even if you received more than $10,000 in just one day. You’d be filing, what’s called, a FinCEN 11 and would need to hand it in to the US Department of Treasury no later than June 30.
Note that some accounts (of individuals, companies and government entities) are exempt. See the Report of Foreign Bank and Financial Accounts (FBAR) for more information.
Receiving the Gift Money in the Philippines
Not only does the U.S rarely tax this money, but the Philippines, too, waives tax on these incoming funds. According to the Philippines Bureau of Internal Revenue Website, the category of individuals who are exempt from income tax include people who “reside abroad, either as an immigrant or for employment on a permanent basis,” as well as “citizens of the Philippines who work and derive income from abroad and whose employment thereat requires them to be physically present abroad most of the time during the taxable year.”
Remittance plays such an important part in the GDP of the Philippines that these workers are accorded a special title: they’re known as Overseas Filipino Workers (OFW).
In all cases, recipients of this remittance have to file forms that prove to the Commissioner of BIR that their income comes from OFWs. The Filipino reception is not taxed on this income but only on income from sources within the Philippines.
Sending Large Amounts of Money
In addition to gift tax, you should also be mindful of sending large amounts of money. Never do this anonymously, since the U.S. may suspect you of money laundering or of terrorist-related activities. The Bank Secrecy Act is just one of the various policies that the government has enacted to investigate when large sums of money change hands. Your remittance could be held up indeterminately, and you may receive more pain than pleasure from your intended gift. Your best bet is to consult a financial advisor before sending your gift - or break your gift into small portions. You’d be minimizing your tax requirements at the same time.