Results 1 to 18 of 18

Thread: Depositing Money and Staying Away from IRS trouble

  1. #1
    Newbie
    Joined
    May 2004
    Posts
    7
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Depositing Money and Staying Away from IRS trouble

    Ok Girls and Gals:

    As a poor college student, a dependent of my parents (who think I 'bartend&#039, and someone who is on lots of financial aid... what are the rules for depositing the 1 grand or so that i end up making per night dancing.... I only work the summer but I know your bank flags you once your savings/checking accounts reach a certain sum. Since on the books I am exempt from taxes, any ideas on what to do?

    Am I safe if I keep my balance under $10,000... does that apply for both accounts put together or $10,000 in each...

    Do you guys keep your money in a safe or at the bank..

    what to do....what to do...

    jen

  2. #2
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re:Depositing Money and Staying Away from IRS trouble

    The automatic reporting limits vary from state to state. Federal reporting limit is $10,000 in one account. My own state has set a $3,000 reporting limit, but my state is also part of the 40 state joint enforcement agreement so the IRS will receive the info from my state tax people even though they wouldn't receive a direct report if an account had, say $5,000 in it.

    HOWEVER, the automatic report generation is not the only way that your account info might draw attention. The IRS and state tax people have complete authority to request information on anyone's US bank account - all they need is a reason to ask for the info. If you are filing for Federal student aid, grants etc. this may be ample reason for some Federal agency to request info on your bank accounts (and of course share what they find with the IRS and state tax agency).

    If you're planning on 'flying below the radar' in regard to future dancing income, and at the same time you're planning on filing for Federal student aid and grants, you're definitely skating on thin ice. Even if you were to never deposit one single dollar of your future dancing earnings in a bank account, there are still big risks.

    #1 risk is that you'll spend those undeclared dollars in some way that can be tracked. This could be purchasing and registering a car (where the state title agency will automatically report the title registration and car's value). This could also be signing a lease with a corporate real estate agent, or buying a house or condo. This could also be making a big ticket purchase with certain national retailers. This could also be as simple funnelling money in and out of a checking account or credit card account. Even though the positive balance might never exceed the automatic reporting limit, the IRS could still obtain account info showing that in a one year period, for example, $20,000 flowed in and out of the account in a series of small deposits and withdrawls - but with no apparent income source for that $20,000 in total deposits to cover the $20,000 in total withdrawls.

    #2 risk is that your club or someone working in your club could, for some reason, attract the attention of some sort of government investigating agency. This could in turn result in info filtering back to the IRS or state tax agency or both from club records that A.)you were a dancer there from the club's copy of your application, B.)that you scheduled yourself on various nights according to club dancer schedules, C.)that you sold X number of private dances or Y amount of champagne room trips or cashed in Z dollars worth of funny money on the various nights that you appeared on the club dancer schedules. The IRS could then use this club info to estimate your unreported income (along with the unreported income of the club itself and all other dancers working there). Or it could be as simple as your club deciding to send you and the IRS a 1099 form next January thus reporting your estimated dancing income for the year (so that the club can take a tax deduction for itself on the money it paid out to dancers for private dances, champagne room trips and funny money cash-ins).

    Because of your Federal student aid and grants, and because of the fact that you are still considered to be a dependent on your parents' tax return, discovery of any of the above info could result in your parents as well as yourself being charged with fraud as well as with tax evasion. The fraud charges could stem from the fact that the student aid and grant applications were made with intent to defraud the government, because your eligibility is contingent on the total household income of your parents and yourself (which you will be lying about on the application).

    If you're adamant about trying to "fly below the radar", the only way that you can be reasonably confident that your financial trail will not eventually attract attention is if you never allow a bank account, checking account, investment account or other financial institution account balance to exceed $10,000 (or less, if your state reporting limit is less). You also cannot route more than $7,000 per year combined through bank accounts, checking accounts and credit card accounts ($7,000 is the income tax filing threshold), meaning that if you're going to spend more than that you must do it in cash or via money orders (which have their own automatic reporting over $1,000).

    You also cannot buy or lease any single item with a value of over $10,000 (or less, if your state reporting limit is less). You also cannot purchase anything from a national retailer which costs more than $3,000 in the same day, and you cannot purchase more than $1,000 worth of money orders from the same source on the same day. Doing so will trigger automatic expenditure reporting to the IRS or to your state or both. You also cannot carry more than $10,000 across the US border to a foreign country, or a report will be generated by US customs.

    All of these new reporting features and financial info sharing are a direct result of the Patriot Act, with the supposed intent being to track the finances of would-be terrorists. However, the IRS and state tax people find the new authority granted by the Patriot Act to be extremely helpful in investigating tax evaders. The IRS and state tax people are also really enjoying the instant information transfer on the expenditure side which is now possible due to computer tie-ins to credit card companies, national retailers etc. as well as to state agencies and financial institutions.

    In the old days the IRS had no practical way to track how much money anyone actually spent, so that if there was no official report of a person's income the person really didn't need to worry since the IRS couldn't prove that undeclared income existed in any other way. Well the IRS could always prove income through expenditures, but in the old days this took an army of IRS agents and cost a fortune, such that the only people worthy of this much IRS effort were folks like Al Capone !

    However, with today's new laws and technology, the IRS no longer needs to directly prove that undeclared income existed. Today the IRS can now prove that the total amount of money that an average person spent exceeded the total amount of money that average person declared as income on their tax return (or could otherwise account for) very easily, since gathering the expenditure side financial info is now just a matter of transferring computer data files.

    The possibility of being charged with tax evasion is pretty serious in itself, especially for your parents who would risk having their house, cars, and other assets frozen or confiscated. But being charged with defrauding the government is some serious s#!t, even though the odds of discovery are small.

    Unless you are content to leave the $30-40-50,000 you'll earn dancing this summer in a safe and limit your spending to less than $1,000 at a time using cash or money orders, I would definitely think twice about 'flying below the radar". Even so, you would still be taking the risk that your club, or someone else who works at your club, will do something to warrant an investigation which could in turn unearth evidence against you. At least don't risk "flying under the radar" until the point where you have "emancipated yourself" and are no longer a dependent of your parents, such that your parents wouldn't be caught up in any s#!tstorm along with you because the tax return and federal grant applications in question are in your parent's name not yours.

  3. #3
    God/dess montythegeek's Avatar
    Joined
    Oct 2003
    Posts
    2,103
    Thanks
    0
    Thanked 9 Times in 5 Posts

    Default Re:Depositing Money and Staying Away from IRS trouble

    (I apologize in advance for what I expect will be a rather rude response to your question.)

    What makes you think you are special? The money the government spends has to come from somewhere. They either have to tax honest people more or borrow the money to pay the interest and tax other people more to do it.

    Financial aid is not for people who do not need it--in essence by lying on the financial aid forms you are stealing those funds (As well as committing perjury). An impolite interpretation of your question is "How can I steal and not get caught?".

    If you can make a $1000 a night working some 40 nights a year you can beat the average family. My suggestion (rude I know) is work one night every other week during the school year and pay your taxes and financial aid (as well as summers).

  4. #4
    Newbie
    Joined
    May 2004
    Posts
    7
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Re:Depositing Money and Staying Away from IRS trouble

    Melonie: THANK YOU! I am printing your response and saving it

    Monty: I see where you're coming from but have the urge to defend myself:

    a: parents pull in around 23,000 per year TOTAL

    b: Just started dancing

    c: Go to school in a state where I cant dance and make more than 150-200/night nor do I have time to dance during school year.... so the money i am making now is all going towards my enormous loans.

  5. #5
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re:Depositing Money and Staying Away from IRS trouble

    Jennifer, I understand your financial bind completely. However it would be a good thing to keep in mind that, if the IRS or your state tax agency were to ever stumble onto club info or personal expenditure info showing you were 'flying below the radar' on dancing income plus collecting student aid and grant money at the same time, that the government officials involved will certainly take the same point of view as Monty just did.

    Also, "using your dancing money to pay your student loans" could very well fall under risk #1 !!!! Government agencies DO share information with each other - particularly two federal agencies which routinely share information in order to verify eligibility for student aid and grants based on reported family income! If the amount of tuition and student loan payments being paid by you and your parents exceed the total declared income by you and your parents, you've got a potential 'aaa-ooo-gah' situation. All of this info is readily available to the IRS from your parents' tax return plus student aid/grant application forms plus financial confirmation forms/files which will be exchanged between your college and the government agencies which issue the student aid and grant money.

    If your parents are reporting a combined income for you plus themselves of less than $25,000 per year, yet financial records show that you are spending $15,000+ on tuition plus another $5,000+ on student loan interest payments plus at least another $15,000 to cover typical costs of living for you and your parents (car payments, mortgage or rent, utilities), this is an IRS disaster in the making if an unscheduled $10,000 payment against student loan principal was to magically appear out of nowhere !!

    Again please don't interpret my comments as advice in regards to how to break the law - the law states that if you earn more than $700 from dancing in a single year that you're supposed to report that income. The law also states that if this reported dancing income makes you ineligible for certain student aid or grant money, then so be it. However, if you're intent on "flying below the radar", to be reasonably safe from risk #1 you need to shove all of the cash you earn from dancing in a safe and sit on it until you graduate from college. Then once you have a"straight" job and a reported income, you can SLOWLY use the money in your safe to GRADUALLY pay down your student loan principal a bit faster than the normal payment schedule would call for.

    I would also remind you again that you're not just talking about under-reporting income to the IRS in order to evade having to pay some income tax. You're talking about deliberately under-reporting income to the IRS with full knowledge that, based on this deliberately falsified financial info, you will appear eligible to receive government student aid and grant money - money which you would not actually be eligible to receive had the dancing income been accurately reported in accordance with the law. This constitutes committing a crime of fraud against the US Government, which could involve some serious jail time should the US Goverment ever discover the truth of the situation and prosecute to the full extent of the law.

  6. #6
    Senior Member Brooke Quinn's Avatar
    Joined
    Apr 2004
    Location
    Iowa
    Posts
    87
    Thanks
    0
    Thanked 1 Time in 1 Post

    Default Re:Depositing Money and Staying Away from IRS trouble

    Melonie -

    I love that you are a member of this community. Your knowledge is priceless.

    Jennifer -

    Reporting dance income isn't that big a deal and can HELP you in the long run, if you are conscientious about your filing. It ALWAYS easier to play by the rules.
    Success is not the result of spontaneous combustion. You must set yourself on fire. - Mileah Davis

    Try not. Do, or do not. There is no try. - Yoda, Star Wars

  7. #7
    Featured Member discretedancer's Avatar
    Joined
    May 2004
    Location
    PA
    Posts
    1,004
    Thanks
    0
    Thanked 0 Times in 0 Posts

    Default Re:Depositing Money and Staying Away from IRS trouble

    I'd say (as someone that loves to get away with things when I can) that you should go on radar here...the risks are huge (and can ruin whatever career you hope to build after college) and truly what you're doing isn't honest (to yourself, your parents of the IRS) and could get innocent people (your parents) in alot of trouble.

    $40,000 in a summer isn't a bad income - but it wouldn't be enough to kill your student loans entirely. Besides, you'd be doing a favor for the person who is now NOT GETTING A LOAN because there isn't enough money (and you're getting it on both sides).

    Maybe (just maybe) you could pour the money into a retirement fund (or some of it, up to the max) and that would turn your $50k into $30k or something - not really changing your paper financial status at all.

  8. #8
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re:Depositing Money and Staying Away from IRS trouble

    Maybe (just maybe) you could pour the money into a retirement fund
    Risk #1 will again rear its ugly head if she tries. A retirement or investment IRA account will generate financial records - which could set off the IRS "aaa-ooh-gah" horn if there isn't enough reported income to cover the money which went into retirement account deposits. With today's technology, it's virtually impossible to spend, save, or invest any significant amount of money without first filing income tax returns to explain to the IRS where the money came from (and pay taxes on it). Anybody "flying below the radar" on cash earnings is virtually forced to shove the money in a safe and only spend it using cash or money orders a thousand dollars or less at a time.

    You can basically blame the 9/11 terrorists and big time drug dealers for this change, because the new laws and authority granted to the IRS and state tax dept's is a direct result of trying to track undocumented cash flows by terrorists and drug dealers. Unfortunately, the same new laws and authority also make it very easy to track the cash flows of every US citizen as well, if the IRS is given any sort of a suspicion to prompt them to start looking !

  9. #9
    God/dess
    Joined
    Aug 2002
    Location
    Phoenix is home, work in Upper Midwest Boonies
    Posts
    3,274
    Thanks
    0
    Thanked 107 Times in 61 Posts

    Default Re:Depositing Money and Staying Away from IRS trouble

    My opinion. NEVER PUT ALL YOUR MONEY IN THE BANK.

    I only deposit bill money in the checking accounts and maybe $100-$200 more.

    I keep the rest in $100 bills.

    If anything ever happens my money cannot be levied and I won't be on the street.

    Unless you have investments or other things going on where you need to show money in the bank, if you make it in cash, keep most of the cash yourself.

  10. #10
    God/dess blondhottie's Avatar
    Joined
    Mar 2003
    Location
    St. Louis
    Posts
    4,575
    Thanks
    4,072
    Thanked 1,171 Times in 436 Posts

    Default Re:Depositing Money and Staying Away from IRS trouble

    I do the same thing that Tina does. I only put enough money in my checking account to cover my bills. I keep the rest of my money in a fireproof safe at home.

    The problem with having a lot of cash on hand is that you're tempted to spend it. I've seen girls at work buy $3,000 Louis Vuitton bags and then they're frantically trying to make their rent money at the end of the month. I figure if I'm dancing, I want to have something to show for it, and I don't mean designer clothing or handbags. It's okay to splurge on yourself once in a while, but don't overdo it.






  11. #11
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re:Depositing Money and Staying Away from IRS trouble

    I'm told that retailers who carry brands like Louis Vuitton are exactly the type of merchants that the IRS likes to check financial records at - people who spend huge amounts of money on 'luxury' items often are exactly the ones who have something to hide from the IRS !

  12. #12
    Veteran Member ladysummer's Avatar
    Joined
    May 2004
    Location
    Atlanta, Georgia
    Posts
    332
    Thanks
    0
    Thanked 1 Time in 1 Post

    Default Re:Depositing Money and Staying Away from IRS trouble

    All the more reason I am doing my taxes and declaring my dancing money......... IRS need not worry about this dancer...!!!

  13. #13
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re:Depositing Money and Staying Away from IRS trouble

    I do the same thing that Tina does. I only put enough money in my checking account to cover my bills. I keep the rest of my money in a fireproof safe at home
    While using a checking account will not generate an automatic report as long as the maximum balance is kept below certain thresholds, you should be aware that the transactions going through your checking account CAN be used by the IRS to "estimate" your probable income. For example, if you are depositing $500 a week and writing $2,000 in total checks every month to cover your rent, car payment, utility bills etc. the IRS can "estimate" that your total annual income must be in the $35,000 ballpark after taxes, $50,000 ballpark before taxes, in order to be able to afford this and still buy food, gas and other necessary items. The IRS can then check their "estimate" against the tax return you filed last year, with any major disparity setting off the "aaa-ooo-gah" horn.

    Personally I do not use a checking account to avoid creating this sort of easy access trail of financial records, and instead I pay all of my bills with money orders. Even so, I still have to be careful because the purchase of more than $1000 worth of money orders from the same place on the same day will also generate an automatic transaction report !

  14. #14
    Featured Member bambiblue's Avatar
    Joined
    Oct 2003
    Location
    la la land
    Posts
    1,143
    Thanks
    71
    Thanked 114 Times in 68 Posts
    My Mood
    Cool

    Default Re:Depositing Money and Staying Away from IRS trouble

    I am not going to lecture you, but as many of these girls have already stated...it is very easy for the IRS to get your bank accounts and find out how much you are making. I have a friend that worked as a feature and just recently got caught for tax evasion. It's pretty hard to cough up 25,000 in back taxes so my advice to you is to keep adequate reciepts and treat your new job as a buisness.....because that's exactly what this is. Find a good accountant and keep track of all your tanning, makeup, outfits, shoes, tampons, travel...etc. It's really the best and safest way to do it.

  15. #15
    God/dess Emily's Avatar
    Joined
    Feb 2003
    Location
    Las Vegas
    Posts
    11,302
    Thanks
    4
    Thanked 143 Times in 72 Posts

    Default Re:Depositing Money and Staying Away from IRS trouble

    You are not seriously deducting tampons, are you?

  16. #16
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re:Depositing Money and Staying Away from IRS trouble

    You are not seriously deducting tampons, are you?
    I can just visualize an IRS auditor trying to disallow this deduction, and a girl pulling a plastic bag out of her closet containing all of her used tampons from the past year as proof !!!

  17. #17
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re:Depositing Money and Staying Away from IRS trouble

    I have a friend that worked as a feature and just recently got caught for tax evasion. It's pretty hard to cough up 25,000 in back taxes so my advice to you is to keep adequate reciepts and treat your new job as a buisness.....because that's exactly what this is.
    Your friend isn't the first, and certainly won't be the last ! You're right, though, that it can be absolutely tragic when a dancer winds up on the losing end of an IRS audit. While it would have been manageable to put aside $500 a week every week throughout the year towards paying estimated taxes, it can be virtually impossible to cough up $25,000 in a matter of days to avoid being charged with tax evasion.

  18. #18
    Member
    Joined
    Sep 2008
    Posts
    18
    Thanks
    0
    Thanked 1 Time in 1 Post

    Default Re: Depositing Money and Staying Away from IRS trouble

    Oh my. Reading all of this has scared me shitless. I don't know how any of this stuff works. I only make about 150-200 a night so far as a beginner. After taxes I'm sure it's half of that. I'm trying to save up for a new car but don't have college loans or financial aid stuff hovering over my head. I do work a day job, but they recently cut my hours drastically. They won't fire me because they need me for the holidays, but that's not enough to cover a car payment. It's all sooo confusing!

Similar Threads

  1. Does Payoneer show my name to clients depositing money on there for me?
    By FiendishGyrator in forum Camming Connection
    Replies: 17
    Last Post: 10-06-2011, 03:41 PM
  2. Having so much trouble staying motivated...
    By LilMissNaughty in forum Other Work
    Replies: 12
    Last Post: 01-31-2011, 10:43 AM
  3. insomnia trouble staying asleep
    By jaizaine in forum Body Business
    Replies: 12
    Last Post: 12-24-2007, 02:53 PM
  4. insomnia trouble staying asleep
    By jaizaine in forum The Lounge
    Replies: 4
    Last Post: 12-23-2007, 01:35 PM
  5. Depositing money
    By PinkLove in forum Dollar Den
    Replies: 27
    Last Post: 10-03-2007, 02:43 PM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •