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Thread: NEWBIE-Won't depositing all cash income trigger bank IRS audit? Intend to pay taxes!

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    Dizzy NEWBIE-Won't depositing all cash income trigger bank IRS audit? Intend to pay taxes!

    I've scoured many, many old posts!!
    I've been dancing on and off for 4 months. I've been depositing all of my earnings in a personal bank account. I'm $3,000 away from the $10,000 total deposit limit. I NEED to pay school tuition via check, and my total cash earnings/deposits will exceed 10k pretty soon!!! I intend on paying ALL taxes and fully reporting my income, and just emailed a dance-friendly CPA. But, I think I will surpass the $10k limit before I pay taxes (which would be June 15?? Or sept, one of those). What happens if you get an audit due to continuous large cash deposits before you have a chance to file taxes? How am I supposed to deposit my earnings/pay for school without being audited or having my bank account scrutinized??? I'm trying to be 100% legal, I want to sleep at night!!
    THANK YOU SO VERY MUCH FOR ANY INPUT!!! xx

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    Default Re: NEWBIE-Won't depositing all cash income trigger bank IRS audit? Intend to pay tax

    As an independent contractor, you should be filing quarterly tax payments, so, yes, June is your first round. Since this is your first year filing as such, it's based on your estimated earnings, rather than the previous year's. More here: http://www.irs.gov/Individuals/Self-Employed

    As an aside, it's when you deposit 10k AT ONCE that question are raised, not when it's over a period of several months before your taxes are even due.

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    Default Re: NEWBIE-Won't depositing all cash income trigger bank IRS audit? Intend to pay tax

    Ah! Thank you so much for clarifying that!
    Basically I have barely two weeks to pay this quarter. I just realized this yesterday, because I'm new and I've been trying to figure out this whole tax stuff on my own, and I found this site recently!!
    What happens if I can't file until Sept.? Isn't there some type of things where a "first year business" is exempt for the expectation of filing quarterly, and can first file annually on April 15 (or if I wanted, September) ?

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    Default Re: NEWBIE-Won't depositing all cash income trigger bank IRS audit? Intend to pay tax

    ^^^ All good stuff but the reporting threshold has been lowered to $ 4000. Any deposit of $ 4000 or more will be reported to the IRS.

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    Default Re: NEWBIE-Won't depositing all cash income trigger bank IRS audit? Intend to pay tax

    Quote Originally Posted by gwenyth View Post
    Ah! Thank you so much for clarifying that!
    Basically I have barely two weeks to pay this quarter. I just realized this yesterday, because I'm new and I've been trying to figure out this whole tax stuff on my own, and I found this site recently!!
    What happens if I can't file until Sept.? Isn't there some type of things where a "first year business" is exempt for the expectation of filing quarterly, and can first file annually on April 15 (or if I wanted, September) ?
    Generally independent contractors must file quarterly estimated taxes. You said you got a good accountant ? Do what he or she says. In fact , they can and should be helping you with your quarterly reporting and payments.

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    Default Re: NEWBIE-Won't depositing all cash income trigger bank IRS audit? Intend to pay tax

    Don't freak out about quarterlies

    Putting something away is a good idea, and they do fine you but as long as you can put up come april 15th they stay happy

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    Default Re: NEWBIE-Won't depositing all cash income trigger bank IRS audit? Intend to pay tax

    ^^^ All good stuff but the reporting threshold has been lowered to $ 4000. Any deposit of $ 4000 or more will be reported to the IRS.
    Actually, high tax rate states are already down to $3,000 per deposit / cash transaction.

    And there is indeed a 'first year in business' exemption from IRS penalties being charged for 'under-payment of estimated taxes'. This does nothing about the IRS expecting you to pay 30%+ of your total 2014 earnings by next April 15th, though. Also by next April 15th, the exemption will have expired thus you'll also have to send in 30%+ of the money you will earn between January 1st and April 1st as a first quarter 2015 estimated tax payment. The April 15th 'sticker shock' can be reduced if you do make a September 15th and January 15th estimated tax payment though.

    I'm pulling the 30% figure out of thin air based on your statement that you are a college student ( thus unmarried, with no children ) ... who also legally remains a dependent of your parents until you reach age 24. This basically means that your parents will continue to get a $3,000+ tax 'break' while you yourself will have to pay an extra $3,000 in taxes because you cannot claim yourself as a dependent on your own tax return.

    Also, if you have grants or loans through FAFSA, you need to inform your parents how much money you are earning from dancing so they can include it in the 'total household income' figure they submit on your next FAFSA application.

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    Default Re: NEWBIE-Won't depositing all cash income trigger bank IRS audit? Intend to pay tax

    Quote Originally Posted by Eric Stoner View Post
    ^^^ All good stuff but the reporting threshold has been lowered to $ 4000. Any deposit of $ 4000 or more will be reported to the IRS.
    Not. I asked the advisor I met with who works for BOA and Merrill lynch. It all depends on the circumstances...Also if you do this frequently and they see this as a habit in your accounts, it';s a little different of course than someone they have no history on coming in with large sums all the time..

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    Default Re: NEWBIE-Won't depositing all cash income trigger bank IRS audit? Intend to pay tax

    Quote Originally Posted by Melonie View Post
    Actually, high tax rate states are already down to $3,000 per deposit / cash transaction.

    And there is indeed a 'first year in business' exemption from IRS penalties being charged for 'under-payment of estimated taxes'. This does nothing about the IRS expecting you to pay 30%+ of your total 2014 earnings by next April 15th, though. Also by next April 15th, the exemption will have expired thus you'll also have to send in 30%+ of the money you will earn between January 1st and April 1st as a first quarter 2015 estimated tax payment. The April 15th 'sticker shock' can be reduced if you do make a September 15th and January 15th estimated tax payment though.

    I'm pulling the 30% figure out of thin air based on your statement that you are a college student ( thus unmarried, with no children ) ... who also legally remains a dependent of your parents until you reach age 24. This basically means that your parents will continue to get a $3,000+ tax 'break' while you yourself will have to pay an extra $3,000 in taxes because you cannot claim yourself as a dependent on your own tax return.

    Also, if you have grants or loans through FAFSA, you need to inform your parents how much money you are earning from dancing so they can include it in the 'total household income' figure they submit on your next FAFSA application.
    Melonie , where do you get this info on banks reporting deposits of 3,000. It's completely false. You and Eric so often, I believe go by what you here rather than experience. Though you give good info. This is untrue!

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    Default Re: NEWBIE-Won't depositing all cash income trigger bank IRS audit? Intend to pay tax

    Oops. Hear. Also lenders care more about where money comes from. Banks just want your money...

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    Default Re: NEWBIE-Won't depositing all cash income trigger bank IRS audit? Intend to pay tax

    Melonie , where do you get this info on banks reporting deposits of 3,000. It's completely false
    State law in NY and other high tax rate states requires $3,000 cash transaction reporting by financial institutions, major retailers, etc. to the state tax agency. They in turn 'share' this data with the IRS under reciprocal information sharing agreements. These states have also set an even lower limit for certain cash transactions ... for example NY requires WalMart et al to report cash money order purchases totaling $1,000 in a single day. This is not a 'federal' requirement, but the transactions still wind up being reported as if it was !

    Driving force is obviously the fact that states with high income tax rates and deep gov't budget deficits want every dollar of state tax revenues they can lay their hands on. And indeed these state income tax agencies are becoming even more aggressive in their investigations / collection efforts than the IRS.

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    Default Re: NEWBIE-Won't depositing all cash income trigger bank IRS audit? Intend to pay tax

    Ok. A sar report can be filled out for any transaction they feel is suspicious. There is no set amount and you will never know one is being filled out. Is that what your speaking of? I highly doubt walmart is going to do this. Seriously , if you pay cash they wouldn't even know your info. Sorry I call B.S....

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    Default Re: NEWBIE-Won't depositing all cash income trigger bank IRS audit? Intend to pay tax

    especially what would be the point? Sales tax is being paid?

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    Default Re: NEWBIE-Won't depositing all cash income trigger bank IRS audit? Intend to pay tax

    Also only banks and lending institutions fill these out. Walmart?

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    Default Re: NEWBIE-Won't depositing all cash income trigger bank IRS audit? Intend to pay tax

    Ok , your saying this on money orders again. You said this about the post office years ago and I can tell you I've gotten money orders at the post office over the amount you use to speak of and nothing was filled out as they had no info on me to do so...

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    Default Re: NEWBIE-Won't depositing all cash income trigger bank IRS audit? Intend to pay tax

    All I can tell you is that if you walk up to a NY WalMart service counter and ask to purchase money orders totaling $1000+, they will pull out a pad of forms with the NY state logo on top ... ask your name, address, SS# etc. ... and also ask to see your driver's license. Same will happen when purchasing $1000+ of money orders at a NY post office. A NY used car dealer will pull out the same form along with the vehicle registration forms if you pay for the purchase with cash. I don't know exactly how NY bank reporting takes place since they don't require that a form be filled out at the teller's counter ... but the bank already has all the info necessary via the customer's bank account record.

    If you feel better calling 'bullshit' I have no problem with that. However, for a fact this stuff is now happening in NY and other high tax rate states ... which is something that dancers living in those states should be aware of. Additionally, I'll point out that these high tax rate states started doing something else at about the same time that these cash transaction report forms appeared ... they started contracting with tax 'bounty hunters' i.e. private collections firms who are paid a percentage 'commission' on any additional tax revenues they are able to collect for the state. My NY business acquaintances tell me that the NY state tax dep't has recently increased staffing levels substantially, and that NY state tax dep't inquiries and audits now outnumber federal IRS inquiries and audits.
    Last edited by Melonie; 06-05-2014 at 03:17 AM.

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    Default Re: NEWBIE-Won't depositing all cash income trigger bank IRS audit? Intend to pay tax

    Here say. Ok.

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    Default Re: NEWBIE-Won't depositing all cash income trigger bank IRS audit? Intend to pay tax

    whatever ... here's what Chase had to say about this last January ... from

    (snip)"In a bid to close potential money laundering loopholes, JPMorgan Chase (JPM) tells FOX Business it is set to roll out a new policy that requires customers who want to make a cash deposit to show identification and be listed on the actual account.

    It is believed that the New York-based financial giant would be the first big bank to enact such a change.

    JPMorgan, the largest U.S. bank by assets, has been in the crosshairs of heavy regulatory scrutiny in the past year, highlighted by a $2 billion settlement last week over lax standards related to the Madoff Ponzi scheme.

    Chase tellers are expected to begin asking customers for ID when making cash deposits on February 1, but the policy is not expected to be strictly enforced until March 3, Chase told FOX Business.

    “We are making this policy change for cash deposits only to combat misuse of accounts, including money laundering," a Chase spokesperson said."(snip)
    Last edited by Melonie; 06-05-2014 at 07:37 AM.

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    Default Re: NEWBIE-Won't depositing all cash income trigger bank IRS audit? Intend to pay tax

    Quote Originally Posted by michele11 View Post
    Ok , your saying this on money orders again. You said this about the post office years ago and I can tell you I've gotten money orders at the post office over the amount you use to speak of and nothing was filled out as they had no info on me to do so...
    Please try to keep in mind the differences among things like statutes i.e. laws passed by Congress or legislatures ; regulations issued by various agencies that are SUPPOSED to help enforce laws and various bank policies including but not limited to policies set to aid or promote compliance with various banking laws and regulations. Melonie has not made any of those up. They are what they are and all Melonie does is report what they say.

    I've been using the same bank branch for years for both my business and personal accounts. They do not make me comply with each and every picayune rule and reg. They take large cash deposits from me without requiring forms or a stool sample. Because THEY KNOW ME ! If they report deposits over $4000 or only $3000 makes no nevermind to me because I declare and pay taxes ( State and Federal ) on every penny.

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    Default Re: NEWBIE-Won't depositing all cash income trigger bank IRS audit? Intend to pay tax

    Things are definitely getting tighter. CVS cards you now to purchase a moneypak over $400.

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    Default Re: NEWBIE-Won't depositing all cash income trigger bank IRS audit? Intend to pay tax

    If they report deposits over $4000 or only $3000 makes no nevermind to me because I declare and pay taxes ( State and Federal ) on every penny
    ... and therein lies the 'bottom line' for this thread. If a person's business records and tax filings are complete, there's not much reason to fear that cash transaction / suspicious activity reports will increase the probability of an audit. However, for dancers who are trying to continue the 1990's tax paradigm of undocumented earnings, under-reported income, under-paid taxes etc., the high tax rate states are leading an effort to prevent you from succeeding. Increased 'automatic' reporting of cash transactions is an obvious step in that direction.


    CVS cards you now to purchase a moneypak over $400.
    Curiosity question since I never go to California anymore. Do they 'take notes' or simply look at your driver's license ? I must assume that this policy somehow stems from the California Franchise Tax Board, given that CVS has no corporate interest in identifying customers they are receiving cash from ! Also a bit surprising that the limit was set at $400 ( versus $1000 in NY )

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    Default Re: NEWBIE-Won't depositing all cash income trigger bank IRS audit? Intend to pay tax

    Quote Originally Posted by Eric Stoner View Post
    Please try to keep in mind the differences among things like statutes i.e. laws passed by Congress or legislatures ; regulations issued by various agencies that are SUPPOSED to help enforce laws and various bank policies including but not limited to policies set to aid or promote compliance with various banking laws and regulations. Melonie has not made any of those up. They are what they are and all Melonie does is report what they say.

    I've been using the same bank branch for years for both my business and personal accounts. They do not make me comply with each and every picayune rule and reg. They take large cash deposits from me without requiring forms or a stool sample. Because THEY KNOW ME ! If they report deposits over $4000 or only $3000 makes no nevermind to me because I declare and pay taxes ( State and Federal ) on every penny.
    I have several bank accounts all of which I've had, the longest 25 years the least 7 years. They know me very well also as I own several homes with them and make large deposits on the frequent. I also had a successful business account I ran large amounts through. Yes there is inaccurate info in this thread!

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    Default Re: NEWBIE-Won't depositing all cash income trigger bank IRS audit? Intend to pay tax

    Quote Originally Posted by Melonie View Post
    whatever ... here's what Chase had to say about this last January ... from

    (snip)"In a bid to close potential money laundering loopholes, JPMorgan Chase (JPM) tells FOX Business it is set to roll out a new policy that requires customers who want to make a cash deposit to show identification and be listed on the actual account.

    It is believed that the New York-based financial giant would be the first big bank to enact such a change.

    JPMorgan, the largest U.S. bank by assets, has been in the crosshairs of heavy regulatory scrutiny in the past year, highlighted by a $2 billion settlement last week over lax standards related to the Madoff Ponzi scheme.

    Chase tellers are expected to begin asking customers for ID when making cash deposits on February 1, but the policy is not expected to be strictly enforced until March 3, Chase told FOX Business.

    “We are making this policy change for cash deposits only to combat misuse of accounts, including money laundering," a Chase spokesperson said."(snip)
    This is nothing new. My mother who is not listed on my account made several large deposits into my account when I was fixing one of my rentals. Yes they ask forI'D and I had to addher to my account for her to doso. I deposit money into my moms account all the time too. Have for years so she has money for my daughter. I need to provide all kinds of info even though it's never more than 100 and I have her acct number. I've built all my homes from the ground up. Had construction loans at 22, and owned several businesses. Preach your INFO to someone else..

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    Default Re: NEWBIE-Won't depositing all cash income trigger bank IRS audit? Intend to pay tax

    And of course if you're filing as the op mentioned in her first post then she will be fine so I don't know how this thread turned into this..

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    Default Re: NEWBIE-Won't depositing all cash income trigger bank IRS audit? Intend to pay tax

    Quote Originally Posted by gwenyth View Post
    I've scoured many, many old posts!!
    I've been dancing on and off for 4 months. I've been depositing all of my earnings in a personal bank account. I'm $3,000 away from the $10,000 total deposit limit. I NEED to pay school tuition via check, and my total cash earnings/deposits will exceed 10k pretty soon!!! I intend on paying ALL taxes and fully reporting my income, and just emailed a dance-friendly CPA. But, I think I will surpass the $10k limit before I pay taxes (which would be June 15?? Or sept, one of those). What happens if you get an audit due to continuous large cash deposits before you have a chance to file taxes? How am I supposed to deposit my earnings/pay for school without being audited or having my bank account scrutinized??? I'm trying to be 100% legal, I want to sleep at night!!
    THANK YOU SO VERY MUCH FOR ANY INPUT!!! xx
    Making cash deposits alone will not cause you to get a tax audit. Audits are more likely to happen because of errors on tax returns. I will tell you the banks perspective.

    The cash reporting limits are there to catch money laundering. (Money laundering is when cash obtained fraudulently ie drug sales are deposited into bank accounts to look more legit for transfer)
    The reporting is sent to anti money laundering agencies within the IRS.

    The 10k cash reporting limit is NOT about the cash accumulated over time in one account. It is about 10k in cash deposited in a short period of time. The general rule of thumb is less then a week.

    The only time smaller amounts are reported is when cash is brought in to be used to purchase money orders, cashier checks, international transfers, or travelers checks. These are purchases over 1k.
    If you do not have cash in hand, handing it to someone.... it can not be reported ... if you are are using a debit card, check, etc it wont be reported.

    The easiest way to tell if you are being reported is when they ask for your drivers license. The current driver license number and information has to be recorded and sent with the report. If you are not being asked for this information at the time of the transaction it is less likely that you are being reported.

    Based on what you have told us I doubt you have much to worry about. But I would suggest talking to your CPA about these issues. They have all of your information and will be able to tell you how best to protect yourself.
    Nature knows no indecencies; man invents them. ~ Mark Twain


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