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Thread: automatic flags

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    Default automatic flags

    ive read here that tuition payments and car purchases as well as any purchase over a specific dollar amount (forget how much, $3000?) is an automatic report to the irs so if your taxes dont allow for said purchases its an automatic red flag.

    i was wondering if plastic surgery was also an automatic flag. or if payments to collection agencies were.

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    Default Re: automatic flags

    Payments to a plastic surgeon's office, if not financed, should be virtually invisible in terms of a paper trail. Payments to collection agencies do create a 'secondary' paper trail via credit reporting, but this is nowhere near as conspicuous as spending money on something that is reported at a 'primary' level ... such as registering the deed to a house, registering the title to a car / boat / motorcycle, triggering the filing of a cash transaction report ( which can occur with amounts as low as $3000 in some states ), making large tuition payments without corresponding FAFSA loan / grant financing, etc.

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    Default Re: automatic flags

    thanks!! just to be clear, when you say "financed" for plastic surgery, you mean specific loans right? not putting it on a regular credit card and paying it off that way?

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    Default Re: automatic flags

    I meant paying the doctor 'cash', as opposed to entering into any sort of 'financing' transaction. And while a regular credit card charge will potentially create a paper trail, it won't be as blatant as the appearance of a new loan specifically written to cover a plastic surgery.

    The point about the 'red flag' is that the IRS is now using 3rd party reports of money being spent by a particular person to cross-check the amount of income reported by the same person. If the IRS sees say $25k in reported income ( with perhaps $22k remaining after taxes ), but also sees that the same person spent $5000 as a downpayment on a car, plus $5000 in spending on a credit card, plus another $5000 in spending on college tuition ( net of FAFSA grants ), plus the IRS database shows that the typical cost of rent + food + utilities in that person's specific zip code area is $12k per year, the question is probably going to be asked by the IRS regarding how all of this spending in excess of the amount of after-tax income the person actually reported was possible.

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