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Thread: Question, about money deposits

  1. #1
    Pamela
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    Default Question, about money deposits

    OK now i have a question, nothing has happened so far, but what about people putting money into your savings account. I have had this happen, alot, and my friends say it's a gift, which of course that is what it is. Also this bank that the money is being deposited in, i gain no interest. Does any of this matter, say how often money gets deposited, or the amount i have in my savings?

    Now i am a tad worried

    Pamela

  2. #2
    God/dess montythegeek's Avatar
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    Default Re:Question, about money deposits

    The gift tax is not the responsibility of the recipient but the giver.
    Tax Tip 2004-38, Feb. 25, 2004

    If you gave any one person gifts valued at more than $11,000 in 2003, it is necessary to report the total gift to the Internal Revenue Service. You may even have to pay tax on the gift.

    The person who received your gift does not have to report the gift to the IRS or pay either gift or income tax on its value.

    You make a gift when you give property (including money), or the use or income from property, without expecting to receive something of equal value in return. If you sell something at less than its value or make an interest-free or reduced-interest loan, you may be making a gift.
    http://www.irs.gov/newsroom/article/...107815,00.html

    Be aware though that depending on the amounts the IRS may (depending on the relationship with the gifter), MAY see this as an attempt to hide a payment for a service.

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    Banned Melonie's Avatar
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    Default Re:Question, about money deposits

    Be aware though that depending on the amounts the IRS may (depending on the relationship with the gifter), MAY see this as an attempt to hide a payment for a service.
    Geek has hit on the heart of the matter - if your bank's transaction records (which are immediately available to the IRS on request) show significant amounts of deposits, and the amounts of these deposits do not jive with the reported income on your tax return, red flags will be raised. True by the letter of the law you should not have to report "gifts' as income or pay income taxes on money you received as a 'gift". However, considering that you have an established history with the IRS of being a dancer, phone sex operator, etc. based on past years' tax returns, it would be extremely hard to persuade the IRS that these transactions were purely "gift" oriented (and therefore not taxable) as opposed to payments for "services rendered" (and therefore taxable as income).

    Unlike criminal courts in IRS courts you are basically guilty until proven innocent. Allowing these "gifts" to be officially recorded by running them through your bank account only serves to create easily obtainable hard evidence that you received money which you did not report as income, which can potentially be used against you by the IRS. Whether or not your bank account pays interest on the balance is irrelevant. What IS relevant is the fact that the bank's transaction records show that money is being deposited into an account under your name with no apparent source and without you declaring it as income and paying taxes on the money.

  4. #4
    Pamela
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    Default Re:Question, about money deposits

    Ok i have several accounts, maybe i am nuts...But what would be best to do with this extra money sitting in the accounts. Should i pull some out? I do not want to invest again at this time, i lost alot not long ago.

    Any options that would help me?

    Thanks,

    Pamela

  5. #5
    God/dess montythegeek's Avatar
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    Default Re:Question, about money deposits

    Quote Originally Posted by Pamela link=board=6;threadid=7334;start=msg84226#msg84226 date=1079283323
    Ok i have several accounts, maybe i am nuts...But what would be best to do with this extra money sitting in the accounts. Should i pull some out? I do not want to invest again at this time, i lost alot not long ago.

    Any options that would help me?

    Thanks,

    Pamela
    Pamela the first questions involve what you are saving the money FOR? Not that I am saying do not save, but what is your goal? A new car, a house, a new/better house, retirement, augmenting your standard of living later? If the answer is something you would be spending in 2 years or less than a bank account is protecting the principal at the expense of earning money on it. If it is something longer term like retirement, this stategy will be costing you part of your ultimate goal.

    There are ways to have some exposure to the market's better-than-CD returns without some of the risks of some things like hightech/dotcom investments. One (and I am not biasing your choices by saying it is one of many) way is to over 6 months or a year putting a fraction of the money each month into an index fund like a S&P500 index fund. Not doing it all at once means you are putting it in at an average rather than an all-at-once plunge.

    The odds are you can do better than this by picking stocks or sectors, but there is more risk as well (you could be wrong and lose). There is no single answer like "buy XYZ stock". Other conditions in your portfolio make all the difference. For example your retirement planning--are you taking the best advantage of IRA/401K options.

    As for having separate accounts, it is like the 1950's housewive using the envelope system for budget management--taking the pay check and putting part of it in envelopes for the light bill, food etc. It is at least a discipline and being disciplined is at least better than a shotgun approach.

  6. #6
    Banned Katrine's Avatar
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    Default Re:Question, about money deposits

    How about putting the money into a retirement IRA? You can't touch it now, but it seems that its a safe place to put some extra money. Aren't there tax breaks for this?

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    Banned Melonie's Avatar
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    Default Re:Question, about money deposits

    Pamela, if you still have "ties" in Sweden, I'd highly recommend moving the money over there, exchanging it for Euros, and depositing it in a Swedish bank. My Swiss euro account has returned 3% interest plus 20% non-taxable exchange rate gains vs. the US dollar over the past year ! Plus, if any IRS attention in your finances should ever develop for any reason, it will be light years more difficult for the IRS to get transaction and balance information out of a Swedish bank than the simple phone call it requires to a US bank manager to get copies of your US bank transaction and balance info.

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    Veteran Member NVJosh's Avatar
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    Default Re:Question, about money deposits

    Pamela,

    monty's right...a lot depends on your goals. Melonie's suggestion is one option, I know of several very good tax-motivated investments, I know of safer ones with lower returns, etc., etc. Once you figure out what you want from the money, you might want to contact a financial planner in your area to help you with your investment choices.

  9. #9
    Pamela
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    Default Re:Question, about money deposits

    Ok, yes Sweden that would probably be good, as my family is there, and i have a trust.

    However i have a paying job (hospital) with all the goodies, 401K, retirement etc. I don't think i want to add to that.

    What i want to do the legal way of course is pull money out. I guess and safe-lock it. Would that be illegal to have cash at home locked up?

    I know the risks of a robbery, so maybe it wont be at a 'home."

    But i have all these "stupid" accounts, and not thinking people may be wondering where the money is coming from.

    Also i tend to hold checks myself, and deposit them all in 1 lump sum. Is that good?

    Just want to know how banks and the IRS looks at all this money shit.

    Pamela

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    Banned Melonie's Avatar
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    Default Re:Question, about money deposits

    I accomplish the same objective with much less risk (and some potential gains) by turning that cash into 1oz bars of gold !

    There is an automatic reporting threshold of $10,000 (federal) for any cash transactions, so any account holding more than this amount is probably much more visible on "IRS radar". $10,000 is also the limit which you can take out of the country at one time without automatically attracting the attention of US Customs and the US State Dep't (and the CIA)

    It is not illegal to hold cash at home, providing that you have shown that the cash came from a 'legitimate' source and also that you have shown that you paid the appropriate taxes on that money via your tax return.

  11. #11
    God/dess montythegeek's Avatar
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    Default Re:Question, about money deposits

    Pamela,
    I think you are getting disoriented by the difference between stocks and flows. The stock I am referring to is the balance in you accounts. Flows are when you take stuff out and put stuff in.
    Having 10-15 accounts is not in and of itself going to raise eyebrows. What will show up on the IRS radar is flows. If you close 5 accounts and put the funds in the others, you have no tax liability on that and you can readily prove it is just an asset transfer.
    The last post from you raised one concern on my part--you could be accidentally setting yourself up to raise eyebrows by going to cash from fully exposed in previosuly taxed funds to cash. When you spend the cash you may be making yourself look like someone hiding untaxed income. While this is not the case--you may LOOK that way.
    If you have too many accounts just transfer the funds to already existing accounts and consolidate. If you want to change institutions have them do a wire transfer and the fact you were just moving money is even more transparent.

    Someone who has a mattress with $40K and buys a nice car for cash "looks like" someone who had $40 in hidden income.

  12. #12
    Pamela
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    Default Re:Question, about money deposits

    Friends are telling me to pretty much do the same, just consolidate the accounts, i will. Don't need that many open.

    Question? What if i have checks that are being deposited into a savings, say showing proof of work. Instead of cash deposits?

    Pamela

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    God/dess montythegeek's Avatar
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    Default Re:Question, about money deposits

    Pamela as long as you pay taxes on your income you have nothing to worry about. If for example you were getting paid for phone work by direct deposit and it was going into a savings account that is no sweat as long as the 1099 you get from them and what you report on taxes all squares.

    Having more than one job and saving one of the salaries just means you are frugal (admirably so in my opinion).

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    Banned Melonie's Avatar
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    Default Re:Question, about money deposits

    Pamela, the problem only really arises when you decide to deposit the cash you received for performing private parties, or other income sources which have no official W2 or 1099 reporting behind them. If these cash amounts (flows) are large enough to draw attention, they will be reported to the IRS. The IRS will eventually want to see that estimated taxes are being paid and that these amounts are declared as income on your tax return. If they are then you still have no problem, although you will wind up being put on the "defensive" in having to prove to the IRS that you didn't do anything wrong.

  15. #15
    Pamela
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    Default Re:Question, about money deposits

    Thanks all i think i may have been doing this right. I ONLY get paid by direct deposit from hospital, and phone work i get a pay check that i deposit into savings (hospital goes to checking) private dances, NO cash, they pay by check or a few do money orders.

    I have a friend (well a guy who always thinks he's dying) putting cash into my savings, that will be the problem perhaps, and i need to stop this by having a check come in perhaps.

    But everything i deposit shows for work done, and yes i get my 1099's, as well as the hospital tax form, i am an employee.

    Anything up to $600 for the year helping out say phone training, i get no 1099, as not required by law to file, so i don't then.

    Pamela

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    God/dess montythegeek's Avatar
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    Default Re:Question, about money deposits

    Josh may have a more informed opinion on the technical aspects, but I think you are doing things wisely. If you have a friend who is depositing money into your savings, the only thing that he could do any more convinving to the IRS is if HE writes gift on the check and you zerox it.

    I am sure if the amounts were enough they might be suspicious and this would not be that convincing anyway. If he is also a client of say your phone work, make sure you separate any paid funds from gift funds in your records.

    To pull some numbers out of the air say you did paid work for him for $60 and he wrote you a check/deposit for $100 the IRS is likely to consider the $40 a tip rather than a gift. If the Guy gave you $5000 at a time unconnected to a service being provided (or something not usually thought of as a generous tip percentage say 100%) that would rather be more credible as a gift unless you painted his house.

    The bank will have a record of who wired the funds to you so as long as they are from a person rather than a business, you aren't in bad shape. I would think that your safest course is to keep any gift funds isolated from any work funds as much as possible so there is no way they can be confused. Hey you are in FLA--there are old geezers giving money away to friends all the time. My parents former neighbors were "semi-professional friends" to old folks so they would get remembered in wills (no joke and only a little sarcasm).

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    Banned Melonie's Avatar
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    Default Re:Question, about money deposits

    Anything up to $600 for the year helping out say phone training, i get no 1099, as not required by law to file, so i don't then.
    Actually, while individual "employers" are not required to file 1099's unless their annual payment to you exceeds $600, this does not mean that you do not need to report the under $600 amounts that you received from them as income. This is particularly true if the sum total of these different under $600 payments adds up to many thousands of dollars and if all of this money is flowing through your bank accounts so that the transactions are being recorded.

  18. #18
    Pamela
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    Default Re:Question, about money deposits

    This year the under $600 was a one time thing. It was only for training PSO's. I have exceeded over $600 before and filed. So being this was my first traing and under $600 i was told i get no 1099.??

    Lol Monty, i know it "pays" to live here

    Pamela

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    Banned Melonie's Avatar
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    Default Re:Question, about money deposits

    This year the under $600 was a one time thing. It was only for training PSO's. I have exceeded over $600 before and filed. So being this was my first traing and under $600 i was told i get no 1099.??
    You are correct that the training outfit is not required to issue you a 1099 because they have paid you less than $600 over the course of last year. However, if YOU have earned more than $600 last year (and you obviously did between your hospital pay, phone sex work etc.) you are required to report the training check and any other miscellaneous income along with your hospital pay and phone sex checks, whether or not you received a W2 or 1099 copy for every bit of it.

    Of course, if a W2 or 1099 wasn't issued, then the IRS has no direct way of knowing this income exists.

    However, the IRS does have an indirect way of finding out, by comparing the total amount of bank deposits to your accounts and then subtracting the W2 and 1099 amounts. If for example you received $40,000 from the hospital job, and received another $20,000 from your phone sex work, then the IRS will know you earned $60,000 based on the W2 and 1099 copies that they receive. The IRS also has a general idea of what the cost of living is in your zip code area - perhaps $15,000 per year. If the IRS looks at all of the deposits made to all of your bank accounts, and they total more than $45,000 (probably due to the training check plus private party money plus gifts), then the IRS starts wondering where the extra "mystery money" came from. They'll look at your tax return to see if you have reported other sources of miscellaneous income to explain the "mystery money".

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    Veteran Member NVJosh's Avatar
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    Default Re:Question, about money deposits

    While Melonie is certainly correct, if you're talking about less than $600, I wouldn't lose too much sleep over it.

    I had one client where the IRS agent (a moron) kept insisting he was hiding $300,000 of income because he was recreating his income from bank deposits. And we kept saying "Look! Here's his withdrawals from account #2 that are the same amount as the deposits to account #1! He's just doing transfers!" It took an entire afternoon to convince the agent that the extra deposits weren't income.

    So, reconstruction of income by deposits does happen, however the Service will generally be concerned with this only when large amounts are involved.

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    God/dess montythegeek's Avatar
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    Default Re:Question, about money deposits

    To amplify what Melonie said, just because the do not issue you a 1099 does not mean that they do not or WILL NOT AT SOME TIME communicate the fact that they paid you the money. Absence of a 1099 does not get you off the hook for the taxes--it just means it may take them longer to find your records if they look.

    If you do not tell them about the $xyz and they audit the company 2 years from now they might look at whther the people the company paid reported it. If you pop up as having reported it, they have no reason to look at you any further. It is sort of like hiding in plain sight--the one who looks like they are trying to hide is suspicious--the one acting normal is ignored.

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    Default Re:Question, about money deposits

    just because the do not issue you a 1099 does not mean that they do not or WILL NOT AT SOME TIME communicate the fact that they paid you the money. Absence of a 1099 does not get you off the hook for the taxes--it just means it may take them longer to find your records if they look
    Ain't that the truth ! This is a favorite tactic when a strip club gets audited by the IRS. They'll pull the social security numbers of dancers off the employment applications, and look for reported income from this club on the dancers' previous year tax returns. If the computer check shows that a dancer reported a "reasonable" amount of income from this club, that will probably be as far as the IRS will bother to look.

    But if the computer check comes up nada, the IRS then has cause to start poking around club records for things like how many nights was a particular dancer on the schedule and how many times a particular dancer went into the private dance/champagne room. This has the potential of having the IRS show up at a dancer's doorstep trying to collect $50,000 in unpaid taxes on undeclared income from previous years.

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    Default Re:Question, about money deposits

    What a wonderful info! Thanks girls!
    But I also was told as long as you have a regular job and pay taxes you should be ok, plus my husband does our taxes together. I just wanted to see i am safe here
    ORCHID

  24. #24
    Pamela
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    Default Re:Question, about money deposits

    Thanks all, i will mention this "training crap" i done for the company to my accountant, and report it.

    Pamela

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    Banned Melonie's Avatar
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    Default Re:Question, about money deposits

    But I also was told as long as you have a regular job and pay taxes you should be ok, plus my husband does our taxes together. I just wanted to see i am safe here
    Well, filing a joint return where both you and your husband have "straight job" W2 income is certainly going to deflect a lot of potential IRS computer attention, like the "where did the bank deposit money come from" sorts of issues. However, if a club that you work at happens to be audited, and your SS# and work schedule happen to turn up, then you're in just as big of a bind if you haven't reported income from this club on your joint return.

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