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cashier's check - money order
Just wanted to get everything straight about taxes for my next quarterly. So, I know you should pay for whatever is deposited into your bank account, but how do cashier's check work for rent? Do I include that in my total amount as well, or is it like cash and doesn't leave a paper trail. Sorry if this is a totally dumb question, but I just wasn't sure.
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Re: cashier's check - money order
I'm not sure I understand your question. Did you get the cashier's check from your bank or from someone at a convenience store or something?
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Re: cashier's check - money order
^ I think she is asking whether cashier's checks are like regular checks in that the latter are drawn on an a checking account, and hence leave a paper trail, while the former do not.
The real question is whether the amount deposited in her account from cashier's checks can be tracked as income by the IRS, or if she is safe leaving that income out from her total income in estimating her quarterly taxes. Right?
Do you want the real answer or the real odds answer?
The cashier's check obviously counts as income, and should be declared. It does leave a paper trail in your checking account since it shows up as an income line-item, and you don't want to go through a field audit with discrepancies in your declared income and your checking accounts.
Of course, your chance of being audited, depending on your tax bracket, is really very low. Usually 2% or less, unless you are filing a Schedule C, where that number rises slightly. That's if you want to play the odds game.
The best advice is usually: Declare all your income, take every legal deduction and offset you can, and pay the resulting tax.
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Re: cashier's check - money order
::) This is so stupid. Obviously the government is going to notice if you paid rent or not. Claim it.
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Re: cashier's check - money order
Which is why i said this might be a dumb question. But thanks for confirming & letting me know it was a "stupid" question.
If you made $3000 a month, deposited $2000 and kept $1000 to pay for miscellaneous items in cash, I don't see how the government would decide you're not paying rent. Rent usually costs anywhere from $400-1000.
I just wanted to know if cashier's check purchased at the grocery store could leave a paper trail. And this cashier's check could be purchased for anything, not just rent.
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Of course, your chance of being audited, depending on your tax bracket, is really very low. Usually 2% or less, unless you are filing a Schedule C, where that number rises slightly. That's if you want to play the odds game.
Since I'm still new at this, I thought filing a Schedule C was required to show your deductions?
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Re: cashier's check - money order
Wouldn't they notice no money came out of your account for rent? They'd notice..HEY she's living somewhere... but she has not claimed her rent. I wonder why... let's check this out! Rent, wether paid in cash or not, is something they're going to notice is either being claimed or not. Just because you paid it by money order doesn't gonna mean mr. IRS isn't gonna notice you live somewhere rent free magically.
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Re: cashier's check - money order
In addition to what Lysondra said about rent, if you only declare the money you deposit in your bank and you never take any withdrawals, they're going to wonder where you get your money from for food and clothing.
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Re: cashier's check - money order
^^^ to elaborate on eagle2's comment, the IRS has assembled a database which includes typical 'costs of living' for every zip code area in the USA. This means that if, for example, you file as a single person who cannot be claimed as a dependent on someone else's tax return (i.e. parents), then the IRS is going to figure that based on your zip code address the typical rent costs X, typical utility bills cost Y, typical groceries cost Z etc. If the amount of income claimed on the person's tax return falls short of explaining how they were able to deposit A amount of dollars in a savings account while still covering the typical 'costs of living' in that person's zip code area, the IRS will definitely wonder where the additional money appeared from as if by magic.
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I just wanted to know if cashier's check purchased at the grocery store could leave a paper trail. And this cashier's check could be purchased for anything, not just rent.
The long answer is that everything involving 'paper' also potentially involves a paper trail - which is certainly available for review if the IRS is given sufficient cause to want to investigate. The short answer is that IRS cash transaction reporting requirements do require that the 'seller' of money orders / cashier's checks etc. send in a cash transaction report if a person attempts to purchase more than $1000 worth of money orders / cashier's checks on the same day. Also, even if a person is careful about limiting the amounts of their money order / cashier's check transactions to avoid the $1000 'cash transaction' reporting threshold, the IRS requires 'sellers' of money orders / cashier's checks etc. to send in 'suspicious activity' reports if a pattern of frequent / repetitive cash to money order / cashier's check transactions becomes apparent. All of these reporting requirements actually stem from the Terrrorist Anti-Money Laundering treaty, but these automatic reports are extremely useful to the IRS in turning up money laundering by non-terrorists as well !
I would also add that within the last couple of years, the IRS has instituted information sharing with college bursars offices, student grant / loan agencies, state motor vehicle departments, state property deed departments etc. The IRS also has 5 second access to bank statements, investment statements, credit card statements, retirement fund statements, credit reports etc. if given a reason to make an inquiry. As such, even if the IRS is NOT receiving automatic reports of earnings via employee W-2's from employers or 1099-misc forms re self-employed earnings, the IRS IS receiving lots of information automatically in regard to the total amount of money that a person is spending / saving / investing. It's a fairly simple matter for IRS computers to total up spending reports, look up local 'cost of living', and estimate how much after tax income is actually required to pay for that level of spending / saving / investing. If the total shows a big discrepancy versus the amount of income declared on that person's tax return, the IRS is definitely likely to start asking questions.
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Re: cashier's check - money order
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Wouldn't they notice no money came out of your account for rent? They'd notice..HEY she's living somewhere... but she has not claimed her rent. I wonder why... let's check this out! Rent, wether paid in cash or not, is something they're going to notice is either being claimed or not. Just because you paid it by money order doesn't gonna mean mr. IRS isn't gonna notice you live somewhere rent free magically
I never mentioned that "no money" would be coming out of the account. It's not like I would deposit money into my account and never withdraw anything. I see you magically came up with that all on your own which doesn't gonna mean you get it.
Thank you Melonie for the help. Yes, the amount deposited would cover a typical cost of living. But it would be deposited into a checking account for spending usage, not a saving account. It's just the extra cash would simply not be deposited at any bank. It would simply be spent in itself.
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everything involving 'paper' also potentially involves a paper trai
That's what I was looking for. Thanks again, always great advice. :)
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Re: cashier's check - money order
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Originally Posted by
PinkLove
I never mentioned that "no money" would be coming out of the account. It's not like I would deposit money into my account and never withdraw anything. I see you magically came up with that all on your own which doesn't gonna mean you get it.
Thank you Melonie for the help. Yes, the amount deposited would cover a typical cost of living. But it would be deposited into a checking account for spending usage, not a saving account. It's just the extra cash would simply not be deposited at any bank. It would simply be spent in itself. That's what I was looking for. Thanks again, always great advice. :)
You're not getting it either. You're not taking specific amounts at the beginning or end of every month or when rent is due. Which means they'll notice nothing is being taken out for rent's sake as it doesn't match up. If shit doesn't match up, it gets audited.
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Re: cashier's check - money order
Okay, then what are the cases with women who have sugar daddies? If a man paid their rent, or gave them a gift of $1000 a month, how do they deal with that? If you have to claim that money as well, then I would see why there couldn't be a way around it.
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Re: cashier's check - money order
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Yes, the amount deposited would cover a typical cost of living. But it would be deposited into a checking account for spending usage, not a saving account. It's just the extra cash would simply not be deposited at any bank. It would simply be spent in itself.
again it all boils down to the 'paper trail' of spending versus a corresponding paper trail of earnings. I'll again throw out a recent example from New York. It seems that a couple of dancers were doing what you describe - banking enough money to cover rent plus 'cost of living' plus credit card spending, but shoving 'extra cash' under their mattresses so to speak. Eventually these girls decided to go out an purchase a nice car, using some of their 'mattress money' for the down payment. The NY Dep't of Motor Vehicles reported the title registration to the IRS, along with the name of the buyer, the name of the finance company etc. This raised red flags at the IRS, which in turn generated information requests from the IRS for bank statements, credit card statements, credit reports etc. The IRS added up the bank account withdrawls, the credit card payments, the rent payments, the local 'cost of living' etc. and came to the conclusion that the money used for the down payment on the new cars could not have appeared on previous year's tax returns. The IRS then arrived at an 'estimated' income level that WOULD have provided for the down payment money, applied this 'estimated' income level to the girls' past three years worth of tax returns, and sent them both a 'deficiency notice' for unpaid taxes in excess of $100,000 for those three years. Since the girls did not have authoritative proof like an employer W2 or 1099 independent contractor earnings reports which could conclusively show that the IRS's 'estimated' income level was higher than the amount of money that they actually did earn, they had no choice but to pay the hundred grand !
To be blunt, exotic dancers work in an 'adult entertainment' industry, which is already subject to an increased level of scrutiny by the IRS. Exotic dancers also work in a 'cash business', which is subject to additional scrutiny by the IRS. And the IRS knows perfectly well that it is a simple matter for exotic dancers to shove money under their mattress so to speak. Thus when it comes to exotic dancers interacting with the IRS, much boils down to 'plausibility'. If the IRS arrives at the conclusion that the dancer has made an honest effort to properly report her income and properly pay taxes, they will generally agree with the income numbers the dancer has reported. However, if the IRS finds ANY reason to believe that the dancer is 'playing games' - even if it is only in one area of their taxes / finances - then the IRS is probably going to look upon all of the dancer's income declarations, tax deductions, and tax payments with suspicion.
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Re: cashier's check - money order
No, I understand that if you purchase something huge as a car, it would definitely send a red flag. I wouldn't spend it on anything large like that.
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Re: cashier's check - money order
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Originally Posted by
PinkLove
Okay, then what are the cases with women who have sugar daddies? If a man paid their rent, or gave them a gift of $1000 a month, how do they deal with that? If you have to claim that money as well, then I would see why there couldn't be a way around it.
There are caps to gifts and some gifts do indeed have to be claimed. Unless you can prove someone else is paying your rent and it doesn't exceed the gift giving cap and you can get the gifter to admit they're paying it then you're in the clear.
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Re: cashier's check - money order
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Originally Posted by
PinkLove
No, I understand that if you purchase something huge as a car, it would definitely send a red flag. I wouldn't spend it on anything large like that.
Rent is one of those huge red flag things, though. $12000 a year gotta go somewhere.
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Re: cashier's check - money order
^^^ well, retailers are also covered by the same IRS 'cash transaction' reporting requirement. I believe the federal reporting limit is $10,000 and my NY state reporting limit is $3,000 (with many other states having low reporting thresholds as well). Thus a large screen TV purchase would potentially be enough to generate a 'cash transaction' report.
Bottom line is that between tuition payments, car purchases, home / condo purchases, big ticket retail purchases etc. anybody who is attempting to operate in 'mattress mode' is going to be locked out of these sort of purchases. Similarly, because of automatic reporting of interest and dividend earnings from financial institutions, anybody who is attempting to operate in 'mattress mode' is also going to be locked out of building up sizeable bank account balances, CD's, stock and bond investments, retirement accounts etc.
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Re: cashier's check - money order
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Re: cashier's check - money order
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Originally Posted by
PinkLove
Okay, then what are the cases with women who have sugar daddies? If a man paid their rent, or gave them a gift of $1000 a month, how do they deal with that? If you have to claim that money as well, then I would see why there couldn't be a way around it.
If your SD pays your rent directly to your landlord -- which is really the best way of handling that -- it lowers the risk to you. The $1,000 et. al. gifts should be kept in cash and not deposited. This also lowers the risk.
The risk doesn't go to zero for the reasons Melonie explains. When there is a dramatic difference between the cost of living and claimed income, it alerts the IRS to the likelihood that you are not claiming all income or payments made on your behalf (which are also taxable).
In most cases, the federal government is much more concerned about terrorist or drug activity associated with the concealment of large volumes of cash. The regulations governing cash-like transactions are in place to deter those two activities, and not really to go after those who are concealing income to avoid taxation. I honestly believe they would have never been adopted by Congress for "invasion of privacy" reasons if it weren't for the terrorist/drug angle.
In addition to the examples Melonie describes, Western Union and other institutions that handle currency transfer have increasingly strict ID and reporting requirements as the cash amounts transferred increase. If you send a lot of cash by wire, you have to be aware of this or risk being turned down at the terminal. For example, you have to provide a government-issued ID with a picture at amounts exceeding $1,000 and you have to present two forms of government ID at amounts of $2,000 or higher.
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Re: cashier's check - money order
Also, when the IRS does investigate/audit, they do a "cost of living" analysis and base what you SHOULD have paid your taxes on compared to what you DID pay your taxes on.
So, if you claim Single/HoH...and that you live in x zip code...they're going to know about how much you pay to live where you do. If you claim that you made $20,000...that could trip the audit flag because they KNOW that you could not claim Single/HoH and support yourself with $20,000/year. That living in your zip code means that you pay *around* $12,000/year in rent...so where is that money? Especially if you are not getting any kind of government assistance, etc. If you have credit cards, car payment, etc...they can pull this information easily. Easily seeing how much your monthly payments are...and use that in their calculations.
Just do the right thing and avoid any audits chances and claim every penny you walk out of the club with. If you want to save money, learn how to effectively invest your money in tax shelters (if possible) and make the most of your deductions.
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Re: cashier's check - money order
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Originally Posted by
Lysondra
Wouldn't they notice no money came out of your account for rent? They'd notice..HEY she's living somewhere... but she has not claimed her rent. I wonder why... let's check this out! Rent, wether paid in cash or not, is something they're going to notice is either being claimed or not. Just because you paid it by money order doesn't gonna mean mr. IRS isn't gonna notice you live somewhere rent free magically.
what if you actually live with someone rent free? not everyone has rent.
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Re: cashier's check - money order
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Originally Posted by
Lysondra
There are caps to gifts and some gifts do indeed have to be claimed. Unless you can prove someone else is paying your rent and it doesn't exceed the gift giving cap and you can get the gifter to admit they're paying it then you're in the clear.
No there are not. There is a limit of $12,000 per donee, per donor, per year to avoid absorbing some of the donor's life time gift tax credit. However, there is no limit on the amount of a gift. That being said, the donor cannot deduct a gift to an individual as an expense on his/her income tax return. Thus, the gift is not income to the donee (the person who receives it) nor is it an expense to the donor(s).
Here is how the gift tax system works. A single donor can give away $12,000 per year per recipient without touching his/her lifetime exemption. (Just to keep square with the IRS it is always a good idea to file a form 709 to document the gift.) A married couple can give away $24,000 per donee, per year without touching their life time exemption. The life time exemption is $1,000,000 so it's no big deal for most people to dip into it. However, high wealth individuals might bounce up against the limit.
From a tax planning point of view, the gift tax system allows high wealth individuals to begin gifting away their estates to family and friends for many years without causing any tax liabilities. (Of course, they don't get a deduction either.) Then, at some point, they can give away a big chunk of wealth, $1,000,000 under the current code, without incurring a tax liability. Not a bad estate plan. (In reality a married couple could push that to $2,000,000 plus $24,000 per year.)
HTH
Z
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Re: cashier's check - money order
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Originally Posted by
britt244
what if you actually live with someone rent free? not everyone has rent.
Then she'd have to prove that, obviously.
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Re: cashier's check - money order
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Originally Posted by
Zofia
No there are not. There is a limit of $12,000 per donee, per donor, per year to avoid absorbing some of the donor's life time gift tax credit. However, there is no limit on the amount of a gift. That being said, the donor cannot deduct a gift to an individual as an expense on his/her income tax return. Thus, the gift is not income to the donee (the person who receives it) nor is it an expense to the donor(s).
Here is how the gift tax system works. A single donor can give away $12,000 per year per recipient without touching his/her lifetime exemption. (Just to keep square with the IRS it is always a good idea to file a form 709 to document the gift.) A married couple can give away $24,000 per donee, per year without touching their life time exemption. The life time exemption is $1,000,000 so it's no big deal for most people to dip into it. However, high wealth individuals might bounce up against the limit.
From a tax planning point of view, the gift tax system allows high wealth individuals to begin gifting away their estates to family and friends for many years without causing any tax liabilities. (Of course, they don't get a deduction either.) Then, at some point, they can give away a big chunk of wealth, $1,000,000 under the current code, without incurring a tax liability. Not a bad estate plan. (In reality a married couple could push that to $2,000,000 plus $24,000 per year.)
HTH
Z
Mind you, my information on gifts might be off considering I am Australian. I apologize.
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Re: cashier's check - money order
Well, it's sort of like this:
She's going to get in trouble if she gets caught but her odds or randomly being audited are slim to none. The is not like sitting their analyzing all of our bank accounts.
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Re: cashier's check - money order
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Originally Posted by
VegasPrincess
Well, it's sort of like this:
She's going to get in trouble if she gets caught but her odds or randomly being audited are slim to none. The is not like sitting their analyzing all of our bank accounts.
No, but a computer is.