It is a known fact that whenever an excess of $10,000 changes hands, the internal revenue service steps in and collects the federal government’s fair (:dubious: ) share fof tax.
Does this start exactly at ten large, or at one dollar or one penny over?
I think you are mistaken. I get commissions larger than 10,000 several times a year, and income tax is not deducted until I file in April. I think greater than 10,000 dollar retail transactions are required to be recorded but income tax is not collected until due.
The 10 grand clause is to try to thwart money laundering and drug dealing. I used to sell cars and know for fact that anytime cash over 10 g’s changes hands, you have to show the IRS that it’s legit. i.e. you withdrew it from your bank
Not a “known fact.” Cash transactions over $10,000 must be reported to the Treasury Department. This requirement doesn’t have anything to do with tax collection. As Seeking Truth has pointed out, it has to do with tracking down money laundering operations (drug money, illegal gambling money, prostitution money, whatever).
Making a series of cash transactions of just under $10,000, in an effort to evade this reporting requirement, is referred to as “structuring,” and this can also be a violation of Federal law. This is one of the areas in which Rush Limbaugh may run into trouble, as it is alleged that he withdrew large amounts of money from his bank, always in amounts just less than $10k, so that those cash transactions wouldn’t be reported to the Feds. He maintains that it was “walking around money,” and money used to pay for renovations to his home. The suspicion, of course, is that it was money used to buy drugs illegally. In fact, the purpose of the cash withdrawals doesn’t matter - the mere fact that the amounts withdrawn were carefully designed to evade reporting requirements makes those withdrawals, in and of themselves, illegal.
On the other hand, any time anyone pays you a salary, bonus, or commission, in any form (cash, check, electronic transfer, whatever), regardless of the amount, it is subjected to income tax withholding. When you file your income tax return the following year, if too much was withheld, you get a refund. If not enough was withheld, you get to write a check to the IRS.
If you sell your car to someone for $15,000, and they pay you by check, nothing has to be reported to anyone (other than perhaps state sales tax when the new owner registers the car). It’s not a cash transaction, and there’s no “income” from which taxes must be withheld.
Actually they don’t have to “withhold” - what they are required to do is file a Form 1099 with IRS and send you a copy. It is your requirement to report the income and pay any required tax.
The employer will withhold income taxes unless you, the taxpayer, file a W-4 form that indicates that no withholding is required, and there are penalties attached to filing a false W-4.
Here’s the IRS citation that explains that withholding is required.
Actually County is correct. If you are an independent contractor you may get regular payments, for example commissions, and no withholding is required on the payment. But the person who receives the money is obligated to file quarterly of not monthly tax estimates.
But in that case, there is no “employer.” If you’re an independent contractor, there is no employer/employee relationship. If I pay a plumber to fix a leaky valve, I don’t withhold anything for income taxes. He’s an independent contractor. I’m not his employer.
An “employer” is required to withhold.
Originally posted by Early Out
On the other hand, any time anyone pays you a salary, bonus, or commission, in any form (cash, check, electronic transfer, whatever), regardless of the amount, it is subjected to income tax withholding. When you file your income tax return the following year, if too much was withheld, you get a refund. If not enough was withheld, you get to write a check to the IRS.
Sorry to nitpick but the quote County was referring to used the word “anyone”. You are correct in that is should be employer. For example you can receive a monthly commission check for your entire career and never have tax withheld, but you must be an independent contractor not an employee.
True. And that whole “independent contractor” thing can get pretty murky. I’m thinking of the situations in which people employ a nanny or housekeeper, for example. Are these “employees” or “independent contractors?” Do their “employers” have to withhold for income taxes? How about paying FICA (Social Security)?
It ends up being the sort of stuff that keeps tax attorneys and accountants fully billable!
So…
Is the IRS informed AT $10,000, or at some amount IN EXCESS of $10,000?
So what happens if your monthly salary is $10000 or more?
C’mon folks, read what several of us have posted already! This is not complicated.
If you earn any salary at all, your employer has to withhold some of it for income taxes. It doesn’t matter how much your salary is. It can be $100 a month, $10,000 a month, or $100,000 a month. The only thing that changes is how much is withheld for taxes. Each month, the employer has to send that withheld money to the IRS. At the end of the year, the employer gives you a W-2 form that states how much you earned, and how much was withheld for taxes. If too much was withheld, you get a refund; too little, you have to pay the difference.
The $10,000 limit applies to cash transactions at a bank. If you walk into a bank and deposit $10,000 or more in cash, the bank has to report that fact to the Treasury Department. Ditto if you withdraw $10,000 or more in cash. It has nothing to do with the IRS, and it has little or nothing to do with income taxes.
These are two completely separate, unrelated things.
Yes, it applies to cash transactions at a bank but it also applies to other cash transaction as well (I don’t know what is exempted).
For example if you walk into your stock brokers office and give him $11,000 in cash to cover a margin call or to buy stock, he must report the cash. A casino that pays you $11,000 in return for your chips must report the payout of cash etc.
Slightly tangential question: many slot machines have their max payoffs set at just under $1,200 (e.g., if the jackpot for a 1 coin play is $400, and for 2 coins is $800, for 3 coins it will be the unnatural $1,199.) I’ve been told this is because anything at $1,200 or more must be reported to the IRS. True? If so, it doesn’t seem too logical. The winner might have pumped a thousand dollars into the machine to win the jackpot, or someone could win two jackpots back-to-back, so that the total value of winnings is no where near the magical $1,200 mark. Does the IRS do this simply because there is no more accurate/efficient method for getting income on winnings without signficant expenditure?
The IRS has apparently set an arbitrary figure, below which it is too much trouble to fool with the money, probably can’t make a profit.
Gambling losses are deductible on your income taxes, up to the amount of your winnnings. It is the poor bookkeeper indeed who actually pays income taxes on gambling winnings.
A CTR (Cash Transaction Report) will be filed for any cash transaction of $10,000.00 or more. Or if there is reason to suspect structuring of transactions in an attempt to avoid reporting - ie: $6K today, $6K tomorrow, or $6K at Branch A and $6K at Branch B on the same day.
I used to file so many of the dang things for casinos that I had ready-made templates with the casinos’ name, address and EIN (a business’ version of a Social Security #) prefilled so I just had to plug in the amount and whether it was a deposit or withdrawal.
I believe the CTR (Currency Transaction Report) must be filed with the IRS if the cash transaction is over $10,000. It is also filed for money orders and traveler’s checks in lesser amounts. The SAR is filed if someone has a large amount of cash and cannot adequately account for it e.g. comes into the bank and opens a bank account with $15,000 in cash and then says he just sold his house. The FDIC (in banks) is responsible for auditing compliance with the Bank Secrecy Act, which this falls under; but the IRS reviews the CTR’s. Since millions are sent in I can’t imagine they reviews a very large percentage. Businesses with large cash deposits, like a grocery store for example, can be granted an exemption.
For more details look here: http://www.fincen.gov/reg_guidance.html
The original poster might be confusing this with being able to gift tax-free up to $10,000 per person (may be a little more now; not sure).