It’s also super common for people to underreport income and then realize they snot themselves in the foot when they learn that they don’t qualify financially to sponsor a relative for immigration purposes.
Taiwan has a different system in that apparently the national taxation bureau doesn’t charge penalties for under reporting income. They simply recalculate the taxes and simply have the people pay the difference. They also don’t look into other years.
The results are pretty much what you would expect, with many organizations paying employees in cash and only reporting part of the income.
Some typos are funnier than others.
The IRS does not have the bandwidth to check everyone’s bank activity. Unless you are already on their radar for some reason, they aren’t examining bank records. And they certainly aren’t monitoring who got a mortgage and how they qualified for it.
These loan program are actual “products” marketed by lenders and you can read the marketing materials yourself and see the euphemisms used (you “value your privacy” and “have income whose source is difficult to document”). If you go to a Chinese or Indian cultural festival in the US you will find representatives of even big regional banks with booths set up flogging these “programs”. My wife has had several clients who are at the poverty line based on their tax returns but are buying $700,000 houses and getting $500,000 mortgages and $200,000 down payments that are coming in as “gifts” from relatives either in China/India/Philippines/Vietnam/etc. Not everyone who buys a house goes through the standard process of conforming mortgage.
I know when we got our six mortgages (four houses, two refis) we had to go through an intense verification process. That will get you the best rate for your credit rating. But for 75/100/150/200 basis points more you can get a LOT of corners cut.
This is why you are seeing scare ads about giving the IRS the power to snoop in your bank account. They could use data analysis to identify people with large incoming deposits that are not matched to any reported income source.
That will force tax cheats to really keep their cash business in cash, and their expenses in cash as well. And in today’s world that’s gets difficult. This is what leads to the guy going to buy a BMW with a suitcase of cash. These aren’t all drug dealers, they’re more likely dry cleaners.
You report all your income? Great. You will have nothing to worry about. I’ve had three IRS audits. All resolved by letters of explanation and with a few hundred dollars changing hands. In one case they cut me a small check. Every single person I know who has had horror stories about IRS audits has been cheating on a massive and ongoing basis. Those are the guys the NFIB is looking out for. If they were a fringe minority of the small business community, they would be looking out for you, the honest taxpayers.
Fair enough I guess. It just seems like low hanging fruit for auditors to look at people who are getting these loans and not showing enough income to the IRS to pay for them.
I’m not sure what someone would have to pay on gifts from foreign sources, but you are still supposed to file a Form 3520 to declare it, even if it does not end up being taxable.
Right, it’s easy enough to purchase some things in cash, day to day living expenses and minor luxuries, but big ticket items are a bit harder.
I did buy a used car in cash once, but it was only a few thousand dollars, and if anyone had needed to see the provenance of the money, I could show where I had withdrawn it from my bank account.
I would think that the drug dealers would have the opposite concern, trying to legitimize as much of their income as possible and pay taxes on it.
Hopefully not. I keep most of my receipts, but it’s likely that there are some expenses here and there that I may not be able to account for.
But, worst case scenario is a few hundred dollars worth of unaccountable expenses, meaning a few dozens of dollars in extra tax liability.
I do wish the IRS was better staffed, as they made a mistake a while back that took forever to get fixed, as it was pretty much impossible to actually speak to a human being who was able to deal with it.
I only personally know one person who has a horror story about IRS audits, and he simply did not pay any taxes from 1989 until 2011 when they finally caught up with him. Landscaping business, all cash(and checks, which he would cash, not deposit into an account).
I’d not really heard of the NFIB before. Just looking over their wiki entry, they seem much more politically motivated than economically. But yeah, I can see how, based on their ideological makeup, they’d be more encouraging about businesses not paying their share of our tax burden.
I’m not sure if you are saying that the massive tax cheats are or are not a fringe minority. I know that I worked in a few restaurants that were pretty obviously keeping two sets of books, not to mention the servers who didn’t declare their actual tips, nor what they stole from the restaurant.
I’m sure my industry is rife with undeclared income. I’m always having clients offer to pay for services or to give tips in cash so that I don’t have to pay taxes on them. I always tell them that we declare all sales and tips, but I don’t mind avoiding the credit card fees on them, so they are welcome to do so.
I have enough stuff to worry about running a business, I don’t really want to add a worry about getting caught trying to cheat on my taxes.
The reason I put “gifts” in quotes was because these aren’t gift. It’s either their own money being laundered and returned to them or more likely a loan for the down payment which would violate the terms of the mortgage.
But the mortgage brokers know this. As long as the loan is not secured by the property, they aren’t too concerned. They just want a big enough down payment to protect their claim in case the borrower doesn’t pay. And 20% is plenty of protection unless there’s a massive crash in property values. At which point moral hazard kicks in for all mortgagees, particularly those with 0% or 5% down CONFORMING loans.
Pre-COVID, I helped with the packup after my city’s Biggest Garage Sale. (It was to benefit the symphony, and I would pick up things both for my own business, and for the library where I volunteer, and we definitely contributed as well.) One of the women running it was telling another volunteer that the reason she made several deposits a day was because of exactly this; the year before, she had walked into the bank/credit union where the symphony had their account with $14,000 in cash, on top of the checks, and the teller brought out an officer who took her back and asked a few questions. She had absolutely no idea that they did anything like this, and was really embarrassed even though they understood completely; they were simply following the law.
Based on their Facebook and LinkedIn pages, I suspect that one of my HS classmates and her husband are sovereign citizens. Among other things, her parents, who are quite wealthy, bought their house outright and sold it to them on contract.
I decided not to send her a friend request when I saw her page, although if she were to send one to me, I’d reciprocate.
She’d better hope that nobody comes after her for structuring. That’s way worse to deal with than the hassle of $10k+ in cash.
I had to look that up. For $14,000, in a fundraiser for a nonprofit, I doubt that would happen.
The money was used to underwrite programs that weren’t otherwise in the budget, much of it involving admission-free performances in nursing homes or for children.
It’s just that being investigated for potentially structuring is a lot more invasive and aggressive than just explaining the deposit in the first place, even if nothing came of it.
In a case like that, I can see making multiple deposits during the day to reduce the amount of cash on hand that could be stolen.
Yeah, it’s fine to make multiple deposits for any number of reasons.
So long as that reason is not to avoid getting flagged for a $10,000 deposit.
It doesn’t matter the reason you do it, if you do it to avoid the report, that’s illegal.
I work with a non-profit that makes multiple deposits to reduce theft risk during its annual multi-day festival. No one would accuse it of structuring though since each of the deposits exceeds $10,000 by a good margin. As you say, it’s a perfectly reasonable strategy even for a smaller non-profit dealing with smaller sums. If it has the side effect of reducing some paperwork, who can fault it?
“Structuring” is defined as configuring your cash deposits for the specific purpose of avoiding the $10,000 reporting requirement. You can legally arrange your cash deposits any way you like for any reason except for that specific reason. It doesn’t matter who you are, if you are doing this, it’s illegal and you can end up in legal hot water. Dennis Hastert was famously charged with, and plead guilty to, structuring a series of hush money withdrawals to one of his sex abuse victims. He was never charged with anything else - just the structuring.
It wasn’t even “potentially” structuring. According to @nearwildheaven, it was most definitely structuring:
If an investigator ever asks her why she was doing it this way, and she says anything resembling “to avoid reporting requirements”, then she’s admitting to a felony that could bring a five-year prison sentence.
Well, yes and no. If you file joint, the spouse is liable, except that are Innocent Spouse provisions.
The estate will have to pay, but if nothing there, no one else owes anything. So the son does not owe a dime.
Getting back to the Op- There are of course some deminimus points. If you make 80K a year as a or plumber for a company, paid W2, and you do a job for a buddy, netting you $500 which you “forget” to report, no one cares much.
Selling stuff on eBay may not be taxable, as long as you are selling off your personal property at a loss from what you paid for it new.
https://en.wikipedia.org/wiki/Oncale_v._Sundowner_Offshore_Services,_Inc.
Cite?
Yeah, my Bro said the guideline for picking cases to audit was that they wanted $1000, likely several times that now.
Not called, they have a form for that, it was likely efiled.
And they pretty much have to file it, or bad things happen.
In America, this is true, but with an exception- if you don’t admit your guilt and don’t promise to file properly and pay, you can go to jail. This happens with hard core tax protesters.
It would have to be over $400, and then only as a side issue. Say the IRS audited casualty losses and contributions, and found out you had a side business, then the auditor would add it in to the other adjustments. But they won’t even start a audit unless they can get a couple thou.
No, unreported 1099 income would be “audited” by mail, say you got that $500 1099 from side work. But that would be more or less “Hey we found this 1099, you owe $200 on that, if you wish to dispute, please call or write…”
This has happened to two of my friends:
K had put lost of sweat equity and his 401k into the house his brother owns, and they both lived it. Brother had promised all his 401K was left to pay off the home, whatever left was split 3 kids and K. Brother died, will had everything split between three kids, two of whom are convicted felons. K got nothing.
Z’s father died, left house to his wife, with a promise Z- the only child- would get the house. Widow remarried, left house to new husband, who then remarried and will likely leave house to her kids. Z gets nothing.
Years ago I read a New Yorker article about two successful bank robbers who “retired” and settled down. Unfortunately for them, they were turned in by a contractor for paying in cash. I seem to recall it was something like $15,000 and the wife and the contractor got into a dispute over something so he turned her in.
The article was about how they had managed to commit so many robberies so it didn’t get into the details of how being turned in led to getting busted for the bank jobs.
The difference between bank robbers/jewel thieves/gangsters and random tax evaders is, the former own bars, restaurants, and other “legitimate” businesses they can launder money through.
The difference, when you think about it, is that money laundering is pretty much the opposite of tax evasion.