Sending Money to Parents in China: Do You Owe Tax? 1% Remittance Tax, Gift Tax Form 709 and Form 3520 (2026)

Sending Money to Parents in China: The 1% Remittance Tax, Gift Tax Form 709 and Form 3520 Explained (2026)

This article is for families in the U.S. who send money to parents in China or receive gifts from them. Related reading: the 1% remittance tax https://yclcpa.com/en/insights/remittance-tax-1pct | gift tax Form 709 for immigrant families https://yclcpa.com/en/insights/immigrant-gift-tax-form-709-709na | Form 3520 for foreign gifts https://yclcpa.com/en/insights/form-3520-foreign-gifts

Bottom Line

When you send money to parents in China, keep three sets of rules apart. The 1% remittance tax applies only to transfers funded with cash, money orders or similar physical instruments. Gift tax depends on the 2026 annual exclusion of $19,000 per recipient, and amounts above it must be reported on Form 709. Form 3520 covers large gifts you receive from foreign persons. A PERM suspension does not change your tax filing status. Note: the §4475 regulations are still proposed and are not final as of October 21, 2026.

Background

The One Big Beautiful Bill Act, signed on July 4, 2025, added §4475: under the statute, a 1% tax applies to remittance transfers sent from the U.S. abroad starting January 1, 2026. On April 10, 2026, Treasury and the IRS released proposed regulations (IR-2026-48); as of October 21, 2026, they remain proposed, no final version has been seen, and details may change. Separately, CNBC reported that on October 8, 2026, the Department of Labor announced a suspension of PERM labor certifications for Microsoft, Adobe, Cognizant, Infosys, Capgemini, Tata, Wipro and HCL (no new applications accepted), which has drawn close attention from work-visa families.

Old vs. New: The Three Rules Side by Side

- 1% remittance tax (§4475): depends on how you pay. Applies: you give the remittance provider cash, a money order, a cashier's check or a similar physical instrument; the proposed regulations (not final) add traveler's checks. Does not apply: funds drawn from an account at a qualifying financial institution, or paid with a U.S.-issued debit or credit card. The sender is the taxpayer, and the remittance provider collects the tax.

- Gift tax and Form 709: depends on how much you give. The donor is responsible; for 2026 the exclusion is $19,000 per recipient, or $38,000 per recipient for a married couple combined. Amounts above that must be reported on Form 709, which does not necessarily mean tax is due right away; the 2026 basic exclusion amount is $15,000,000. Tuition and medical expenses paid directly are generally not taxable gifts.

- Form 3520: depends on how much you receive. A U.S. person who receives gifts or bequests totaling more than $100,000 in a year from a nonresident alien individual (including related persons) must report them in Form 3520 Part IV. Money you send to your parents generally does not fall under this rule.

Self-Check Checklist

- If you pay a remittance company at the counter with cash or a money order: the transfer may be subject to the 1% remittance tax, so check whether your receipt shows it was collected.

- If you pay from a bank account or with a U.S.-issued debit or credit card: under the statute, the 1% remittance tax does not apply.

- If you give the same parent more than $19,000 in total during the year: evaluate Form 709.

- If your parents transfer more than $100,000 to you from China in a year: evaluate Form 3520, and keep FBAR and Form 8938 in mind.

- If you hold a work visa and your employer is affected by the PERM suspension: look at your residency tests, not the employer list.

Simplified Example

This is a simplified illustration; actual outcomes depend on individual facts.

A U.S. citizen (a U.S. resident for gift tax purposes) in 2026:

- Pays $5,000 in cash at the counter to send to parents: the 1% remittance tax is about $50. The same amount drawn from a bank account is not covered under the statute.

- Transfers $30,000 each to father and mother: each exceeds the $19,000 exclusion by $11,000, for total taxable gifts of $22,000, which must be reported on Form 709; this generally uses lifetime exemption, with no tax due that year. Any part paid directly to a hospital for medical expenses generally does not count.

- Receives a one-time transfer of $150,000 from the father in China: Form 3520 is required; if it is not filed on time without reasonable cause, the penalty can be 5% per month up to 25%, or about $37,500.

Action Plan and Timeline

- From October 21, 2026: confirm your payment method before sending money, and keep remittance receipts and source-of-funds records.

- December 31, 2026: gifts accumulate by calendar year, so check the running total for each recipient before year-end.

- April 15, 2027: 2026 Forms 709 and 3520 are generally due; extensions are available (the Form 3520 extension runs to October 15, 2027 at most).

- Residency status: a PERM suspension does not change the analysis. Apply the green card test or the substantial presence test (at least 31 days in the current year and at least 183 weighted days over three years). A year in which your status changes may be a dual-status year, which is filed differently.

- Immigration cases: for whether your PERM case is affected, consult an immigration attorney.

How YCL Can Help

- Determining whether your payment method triggers the 1% remittance tax, and reviewing how tax already paid is handled.

- Preparing Forms 709 and 3520, and evaluating FBAR and Form 8938.

- Residency determinations for work-visa and green card families, with compliance planning for multi-state and cross-border filings.

- Multi-state CPA serving clients nationwide, in English and Chinese.

FAQ

Q: If I send money to my parents from a bank account, do I owe the 1%?

A: Under the §4475 statute, transfers drawn from an account at a qualifying financial institution are not covered. Confirm with your remittance provider whether the account qualifies; the related regulations remain proposed as of October 21, 2026.

Q: With PERM suspended, do I still file as a resident this year?

A: That depends on the green card test and the substantial presence test, not on whether PERM is suspended.

Q: If my parents send me money from China, do I owe income tax?

A: According to the IRS, a foreign gift is an amount you treat as a gift and exclude from gross income, so it is not taxable income in itself; but amounts above the threshold must be reported on Form 3520. If the form is late or incomplete, the IRS may determine the income tax consequences itself and impose penalties, so keep proof of the gift and the source of funds.

Book a Consultation and Disclaimer

Book a consultation: https://yclcpa.com/en/book . Email: info@yclcpa.com | YCL Tax, Accounting & Advisory · multi-state CPA serving clients nationwide

Disclaimer: This article is general information only and is not individualized tax, legal or immigration advice. The §4475 regulations are currently proposed and not final as of October 21, 2026; the final rules may change.

Sources: 26 U.S.C. §4475 https://www.law.cornell.edu/uscode/text/26/4475 | IRS IR-2026-48 https://www.irs.gov/newsroom/treasury-irs-issue-proposed-regulations-on-the-new-remittance-transfer-tax-established-under-the-one-big-beautiful-bill | Federal Register proposed regulations https://www.federalregister.gov/documents/2026/04/13/2026-07085/excise-tax-on-remittance-transfers | IRS gift tax FAQ https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes | IRS Gifts from foreign person https://www.irs.gov/businesses/gifts-from-foreign-person | IRS green card test https://www.irs.gov/individuals/international-taxpayers/us-tax-residency-green-card-test | IRS substantial presence test https://www.irs.gov/individuals/international-taxpayers/substantial-presence-test | CNBC https://www.cnbc.com/2026/10/08/microsoft-adobe-green-card-labor-suspension.html