On Monday morning I found in my mail a large padded envelope addressed to me. No return address, post mark of Boise, Idaho.
Inside is five thousand in $100 bills and a computer printed note:
Mr Beitz
Please accept this gift of $5000
The following Monday I receive another envelope. Same thing, no return address, nothing hand written. This time a postmark of Dallas, Texas. Note is slightly different:
Peter,
Here is a gift for you. Spend it as you wish
After that, every Monday I receive envelopes with 5 grand in them. The postmark is always different. The note is always slightly different.
I have no clue who would be sending me these gifts or why.
What should I do?
At what point does this cause a problem for me?
If I begin putting 5K in my personal bank account every week eventually the IRS is going to question it against my tax return.
Will they accept “someone is mailing me gifts of money every week” and let it slide? There is no evidence who is sending the cash or if it is the same person every week. Would the money get confiscated? What if it’s just a group of some billionaires trying to screw with me? Would I get into trouble for their prank?
As they should since you should be declaring all income whether you know where it came from or not. I’d also document with pictures and saved envelopes every gift received.
Put the cash in a bank (separate bank, separate account from any of my other accounts). Maybe buy a CD every week, once the pattern has established itself, might as well earn some interest. It needs to be kept liquid, though, in case there are developments that require you to return it or turn it over to someone.
Keep the envelopes and notes in a very safe place, safe deposit box or similar.
Start declaring quarterly tax returns that include this money.
I would not assume that I can get away with anything, like saying each week’s gift is from a different person, and therefore under the $10K per year gift exception.
Even if you do not record anything, that leaves the possibility that the person sending the money is, and that anything you do that even hints that you are trying to hide it will be viewed suspiciously.
I was under the impression that gifts are not considered income. And, in fact even gifts exceeding $19,000 per year are only an issue for the giver, not the recipient. (Gifts over that amount must be declared for offsetting lifetime estate tax exceptom)
You would need to have some credible evidence that this was a bona fide gift. In practice the IRS takes the position that all payments are income unless you can show that they are not. In some cases the presumption is easy to rebut. My mother giving my daughter $500 on her birthday is going to be assumed to be a gift motivated by natural affection. If she gives $500 to the kid down the street they may ask if he has been mowing their lawn and shoveling snow “ out of the goodness of his heart”.
From the description in the OP I don’t think the IRS or tax court would be convinced.
Now there are reporting requirements for deposits of cash exceeding $10K. These are called Cash Transaction Reports or CTRs. See Notice to Customers: A CTR Reference Guide. These reports were invented exactly as a deterrent to money laundering, and a way for the Feds to gather evidence for possible prosecution. The deposits themselves aren’t crimes, no matter how many or how large. But they might be indirect evidence of other crimes. The pattern is what matters.
Now there’s no requirement to report $5K cash transactions. But decent bet that if you’re showing up at the same bank repeatedly making $5K transactions on a fairly regular cadence, somebody there will become suspicious that you’re “structuring” deposits; AKA deliberately spacing them out to stay below the $10K reporting threshold. Which is itself a crime and will almost surely get the Feds interested in your activities.
I agree it’s suspicious. I don’t know who has the burden of proof in such a situation. If the OP has to prove it’s a bona fide gift, that might indeed be problematic. But we know (here in the SDMB hypothetical) that’s it’s not earned income. The safest thing to do is declare it as income and pay the taxes. it’s still free money and that would reduce the risk that the gov’t is going to care. Although, there could still be an investigation for money laundering.
Nitpick, it’s $19,000 per year currently. And, as stated earlier, that’s an issue for the giver, not the receiver.
ETA: As LSL states, there is a $10,000 cash reporting requirement. But that’s a whole different thing.
$5K / week is $260K / year. One can live fairly high on the hog even in a high cost of living area on that. Especially if you’re limited to spending it at retail and are covering your housing, insurance, etc., costs out of wages or other typical traceable sources of income.
Remember, they often catch tax cheats or other criminals when their lifestyle and their 1040 don’t align. I bet e.g. Beck would have a hard time using up a quarter mil a year without it showing.
For the IRS if you declare everything and do withholding (and record it all as @Elmer_J.Fudd says) it would be all good
Depositing it would be a problem I’m sure nowadays there is a limit for the amount of unexplained cash a bank will accept, due to money laundering regulations and this would quickly exceed that. I don’t think a handwritten note like that would count as an explanation.
Is there not simply a limit where they’ll tell you no? I’d have thought nowadays, when you are into your first few months of 20k a month of unexplained cash they would just refuse your business, as clearly something illegal is going on.
So, according to some of you, someone could really screw me up by doing this.
Claiming the money as income might be problematic. I got the money doing what?
I own a business with an annual income of approximately 104K a year. I have records of business transactions, expenses, etc.
Just claiming 260K with no explanation from where and what. If that worked the criminal element would just do that
Here’s the plan ..get arrested for something minor and white collar. Go to minimum security prison for a few months. While there, form a friendship with the biggest tax evader, we’ll call him Don.
I bet he can tell you how to spend dough you’d gotten in strange ways.
Look, it’s doable else so many of the rich and infamous couldn’t do it.
Just too many brown paper bags in the world.
Oh, and @LSLGuy you don’t know how fast I can spend, lemme tell you…
