No bank activity - red flag?
Does IRS pay attention to that? Like if you have money in your account but there's no deposits or withdrawls for a couple of years? Like if you make cash and pay for everything with cash, never bothering to go thru the bank, and then pay taxes, but they can't see the bank activity? Problem? Potential audit? Oh, and no big purchases in the meantime, like car or a house.
TIA!
Re: No bank activity - red flag?
I may be wrong, but from what I understand, the IRS only investigates bank statement if you are going through an audit, but the statements themselves don't trigger an audit.
Re: No bank activity - red flag?
as Emily says, the IRS probably won't pay any attention whatsoever to individual bank accounts unless some other factor causes IRS computers to start raising red flags in regard to that individual.
Re: No bank activity - red flag?
The only time the IRS gets notified of activity on your accounts is if you deposit $10,000.00 or more in cash. They wont tell you that but they are sent information about it from the bank.
Other than that the only time the IRS knows about your accounts is if your audited.
Re: No bank activity - red flag?
I've heard here and there that those notifications are often (or always) sent in recent years at amounts waaay below the $10k mark. Like maybe $3k deposited into a personal account, etc. Any truth to this?
Re: No bank activity - red flag?
No not from my experiance. They say it is to track drug money. But if that were true why would the IRS be told?
The only time it is done is if the amount is ten thousand or over in cash. You can deposit large checks without the IRS being notified.
Re: No bank activity - red flag?
Quote:
Originally Posted by pissymissy
Does IRS pay attention to that? Like if you have money in your account but there's no deposits or withdrawls for a couple of years? Like if you make cash and pay for everything with cash, never bothering to go thru the bank, and then pay taxes, but they can't see the bank activity? Problem? Potential audit? Oh, and no big purchases in the meantime, like car or a house.
TIA!
PM,
Your greatest risk is that the state will declare your account unclaimed funds. Then you will have to go begging to the Secretary of State to get access to your money. Every state has an unclaimed funds law to account for people who moved, or forgot accounts. Conversion to this account is done automatically by the bank/etc. on dormant accounts and the interval varies by state. To stay active all you have to do is do SOMETHING--anything (deposit/withdraw $1.00) every few years.
Although the IRS has very powerful computers, it has enough to deal with with big fish to care about a small account. From a technical standpoint it would cost them more money to mail you a form letter than the tax would be on the income from a $1000 savings account. Now if they had another reason to care about you (like you had $100k and never reported income), they would look into things.
Re: No bank activity - red flag?
The IRS gets told because often times the easiest way to bust organzied crime is tax evasion...
Re: No bank activity - red flag?
Thanks guys for the info!
Re: No bank activity - red flag?
P.S. What if the all the amount of the money in the account is all taxed and clear, and another question, does it constitute as activity if majority of it is in the CD, and only couple of grand is in checking? I mean CD gets me interest every month, so technically it's activity, right? Or is it still unclaimed funds?
Dunno if it made sense; let me know, lol.
Re: No bank activity - red flag?
Quote:
Originally Posted by pissymissy
P.S. What if the all the amount of the money in the account is all taxed and clear, and another question, does it constitute as activity if majority of it is in the CD, and only couple of grand is in checking? I mean CD gets me interest every month, so technically it's activity, right? Or is it still unclaimed funds?
Dunno if it made sense; let me know, lol.
Activity means a visble transaction demonstrating the account owner is still around. If you get an interest check and deposit it, you have proven you are still alive. If you have another active account you have proven you are alive. Banks are on your side in wanting to make it easy for you to get your due, the state wants the dough if it is lost (they keep it if you do not respond to the Sec of State's newspaper adds for a few years), OR the S of S claims he returned xxx million in citizen's money (even though he grabbed xxx+20% for the state originally).
Re: No bank activity - red flag?
Re: No bank activity - red flag?
Banks can get a little wierded out with large sums, even if the dollars are in check form rather than cash.
I went to the bank today to deposit a fairly large end of year personal bonus check (around $30K) into my checking account. I wanted $2K back in cash and had to talk to the manager about it even though the check was issued to me by ADP as a payroll check and was golden. The teller was saying "Well, we may have to put a hold on it for 30 days" which meant I couldnt get any cash back until the waiting period was up. I got my way as I am a very very good customer of said bank. But Im not sure if their hesitation was just bank policy or some IRS thing.
FBR
Re: No bank activity - red flag?
Quote:
The only time it is done is if the amount is ten thousand or over in cash. You can deposit large checks without the IRS being notified.
The federal cash transaction reporting limit is indeed 10 grand - however many states (particularly those states with high state income tax rates) have set lower limits, and the transactions do not have to be 'pure cash' either. I believe that New York's limit is only $3,000, and includes not only cash but money orders and personal checks. Since most states also have an information sharing agreement with the IRS, a state based red flag will automatically be passed on to the IRS even if the 'reason for suspicion' picked up on by the state tax people would not have set off any alarms under IRS federal criteria.
FBR, the song and dance story given to you by your bank is strictly based on bank policy. Under the ACH electronic check clearing system, a 'golden' payroll check drawn on a bank in the same state would take 48 hours to clear, maximum, and probably less than 24 hours ! A personal check from a middle easterner denominated in denars and drawn on a bank in Damascus would clear in less than 30 days !
Re: No bank activity - red flag?
I agree with Melonie on this one except for one point.
Check 21 is what the electronic clearing law that was passed last October. In order for finicial institutions to use Check 21 they have to have alot of expensive equipment. Not all finicial instutions have the equipment. Actually few from my experiance. Many still use the old way of clearing checks. In a few years all checks will be cleared electronicly though.
Banks use holds not only because of the clearing time but also because of fraud. This time of year is the highest time for check fraud. No matter where a check is drawn off of it is suspect.