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Posted: 6/1/2015 2:20:37 PM EDT
[#1]
Always. See case vs. Hastert that is in the news...
LINK On May 28, 2015, Hastert was indicted by federal prosecutors who allege he evaded the requirement that banks report cash transactions over US$10,000, Prepare thy angus if you do not report. |
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Posted: 6/1/2015 2:37:09 PM EDT
[#2]
I'm not talking about the transaction being reported or not reported - it would be via banks so it would be on record. The $10,000 law doesn't mean that it's considered income by the IRS, it's just that it has to be reported. My question is whether or not the IRS would consider it taxable income and whether I could show that it isn't income.
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Posted: 6/1/2015 2:53:00 PM EDT
[#3]
Quote HistoryQuoted:
I'm not talking about the transaction being reported or not reported - it would be via banks so it would be on record. The $10,000 law doesn't mean that it's considered income by the IRS, it's just that it has to be reported. My question is whether or not the IRS would consider it taxable income and whether I could show that it isn't income. Is there an interest component to it? If not, how could it be income? The money was taxed at the time it was earned and transferred to the parents. I imagine it could have been considered income to the parents though. I'm not a tax expert by any means so I'm curious to see how this goes. |
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Posted: 6/1/2015 2:56:37 PM EDT
[#4]
Im in a very similar situation OP. So far the best advice have got was a $9999 check to me and another one (same amount) to my wife. This is under the gift limit so doesn't have to be reported. Have to do this untill total amount is paid back.
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Posted: 6/1/2015 3:10:28 PM EDT
[#5]
Quote HistoryQuoted:
Im in a very similar situation OP. So far the best advice have got was a $9999 check to me and another one (same amount) to my wife. This is under the gift limit so doesn't have to be reported. Have to do this untill total amount is paid back. Sounds like structuring to me. Not a lawyer or accountant, but it seems that if you have copies of checks written to your parents and they match the amount your parents write to you then if this comes up it should be resolved easily. Call a lawyer. First hit from Google for IRS loan to family member. |
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Posted: 6/1/2015 3:19:26 PM EDT
[#6]
Quote HistoryQuoted:
Sounds like structuring to me. Not a lawyer or accountant, but it seems that if you have copies of checks written to your parents and they match the amount your parents write to you then if this comes up it should be resolved easily. Call a lawyer. First hit from Google for IRS loan to family member. Quote HistoryQuoted:
Quoted:
Im in a very similar situation OP. So far the best advice have got was a $9999 check to me and another one (same amount) to my wife. This is under the gift limit so doesn't have to be reported. Have to do this untill total amount is paid back. Sounds like structuring to me. Not a lawyer or accountant, but it seems that if you have copies of checks written to your parents and they match the amount your parents write to you then if this comes up it should be resolved easily. Call a lawyer. First hit from Google for IRS loan to family member. I could definitely show the checks to my parents. The loan amount is actually less than the total of the checks. |
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Posted: 6/1/2015 3:42:52 PM EDT
[#7]
Quote HistoryQuoted:
I could definitely show the checks to my parents. The loan amount is actually less than the total of the checks. Quote HistoryQuoted:
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Im in a very similar situation OP. So far the best advice have got was a $9999 check to me and another one (same amount) to my wife. This is under the gift limit so doesn't have to be reported. Have to do this untill total amount is paid back. Sounds like structuring to me. Not a lawyer or accountant, but it seems that if you have copies of checks written to your parents and they match the amount your parents write to you then if this comes up it should be resolved easily. Call a lawyer. First hit from Google for IRS loan to family member. I could definitely show the checks to my parents. The loan amount is actually less than the total of the checks. So the checks included "gift" amounts, or purchases? Based on what I read, I think you're in "you need professional advice" territory. You may get professional advice here, but I imagine it will be followed with "you need to call a local tax professional". |
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Posted: 6/1/2015 4:26:38 PM EDT
[#8]
Unless you collect interest it is not income.
You (and they) can run afoul of the 'gift tax' rules. Have an experienced tax attorney advise you how to handle it. A few documents (even signed now) might be adequate. The attorney will have a read on 'imputed interest' rules also. |
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Posted: 6/1/2015 4:41:27 PM EDT
[#9]
Quote HistoryQuoted:
Unless you collect interest it is not income. You (and they) can run afoul of the 'gift tax' rules. Have an experienced tax attorney advise you how to handle it. A few documents (even signed now) might be adequate. The attorney will have a read on 'imputed interest' rules also. If the part of the checks I wrote that are not included in the loan are considered gifts, they fall well within the $10,000/year max. Anyone know a good attorney in the Lawrenceburg Indiana area? EDIT: I've contacted a local attorney. Hopefully this attorney can help or recommend someone. |
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Posted: 6/2/2015 4:09:45 PM EDT
[#10]
Quote HistoryQuoted:
So the checks included "gift" amounts, or purchases? Based on what I read, I think you're in "you need professional advice" territory. You may get professional advice here, but I imagine it will be followed with "you need to call a local tax professional". Quote HistoryQuoted:
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Im in a very similar situation OP. So far the best advice have got was a $9999 check to me and another one (same amount) to my wife. This is under the gift limit so doesn't have to be reported. Have to do this untill total amount is paid back. Sounds like structuring to me. Not a lawyer or accountant, but it seems that if you have copies of checks written to your parents and they match the amount your parents write to you then if this comes up it should be resolved easily. Call a lawyer. First hit from Google for IRS loan to family member. I could definitely show the checks to my parents. The loan amount is actually less than the total of the checks. So the checks included "gift" amounts, or purchases? Based on what I read, I think you're in "you need professional advice" territory. You may get professional advice here, but I imagine it will be followed with "you need to call a local tax professional". The only part of what I put into the bank account that is part of the loan was home mortgage, property tax and home insurance. The rest of it wasn't a gift, it was me paying the utilities and various other expenses, but out of their account since the utilities were in their name. |
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Posted: 6/2/2015 8:49:57 PM EDT
[#11]
Quote HistoryQuoted:
Always. WUT? Repayment of a loan is not income. |
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Posted: 6/2/2015 8:53:02 PM EDT
[#12]
Quote HistoryQuoted:
Im in a very similar situation OP. So far the best advice have got was a $9999 check to me and another one (same amount) to my wife. This is under the gift limit so doesn't have to be reported. Have to do this untill total amount is paid back. Best advice? Absolutely horrible advice. A first day banker would recognize this as an attempt to subvert reporting requirements and be reporting it for reward in 87 picoseconds. If the checks go through ACH the Feds will see it and the pattern anyway. There is no need to hide legal transactions. Not sure why folks are afraid of the $10,000 number. It is not illegal to move money in these amounts. I routinely move amounts over this (NFA items, classic cars), it is a non-issue. |
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Posted: 6/2/2015 10:09:03 PM EDT
[#13]
So, does anyone think that various e-mail conversations over the past few years mutually acknowledging the loan and that it would be paid back via the sale of the house, the monthly checks, etc. would be proof enough to the IRS - should they question it - that there is a legit non-taxable loan?
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Posted: 6/2/2015 10:14:18 PM EDT
[#14]
Quote HistoryQuoted:
Im in a very similar situation OP. So far the best advice have got was a $9999 check to me and another one (same amount) to my wife. This is under the gift limit so doesn't have to be reported. Have to do this untill total amount is paid back. Oh my goodness that is the worst possible advice you could ever give someone. Even if everything else you did was legal, doing that is not only specifically illegal (structuring), but it's guaranteed to capture the bank's full attention and get you properly fucked. |
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Posted: 6/2/2015 11:14:16 PM EDT
[#15]
Quote HistoryQuoted:
Oh my goodness that is the worst possible advice you could ever give someone. Even if everything else you did was legal, doing that is not only specifically illegal (structuring), but it's guaranteed to capture the bank's full attention and get you properly fucked. Quote HistoryQuoted:
Quoted:
Im in a very similar situation OP. So far the best advice have got was a $9999 check to me and another one (same amount) to my wife. This is under the gift limit so doesn't have to be reported. Have to do this untill total amount is paid back. Oh my goodness that is the worst possible advice you could ever give someone. Even if everything else you did was legal, doing that is not only specifically illegal (structuring), but it's guaranteed to capture the bank's full attention and get you properly fucked. I thought structuring had to do with cash withdraws, not yearly gifts. Withdrawing $9,999 in cash is not required to be reported, but if you withdraw $9,999 every day you'll get noticed by the FBI. On the other hand, you are allowed to give someone $10,000 per year tax free as a gift. You can't do that every day, only once per year per person. |
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Posted: 6/3/2015 10:05:57 AM EDT
[#16]
Here's something I found on the TurboTax website:
https://turbotax.intuit.com/tax-tools/tax-tips/Tax-Planning-and-Checklists/The-Gift-Tax-Made-Simple/INF12127.html The gift tax only kicks in after lifetime gifts exceed $5.34 million in 2014 The first thing to know about the federal gift tax is that gift givers—not gift recipients—have to pay it. Thankfully, you won’t owe the tax until you’ve given away more than $5 million in cash or other assets during your lifetime. The lifetime exclusion will be raised to $5.34 million starting in 2014. If you’re married, your spouse is entitled to a separate $5.43 million in 2015. So actually owing the gift tax is not a concern for most folks. But you may still have to file gift tax returns even though you don’t owe any tax. So please keep reading. The annual gift tax exclusion provides additional shelter The annual federal gift tax exclusion allows you to give away up to $14,000 in 2014 and 2015 to as many people as you wish without those gifts counting against your $5 million lifetime exemption. (After 2015, the $14,000 exclusion may be increased for inflation.) Say you give two favored relatives $20,000 each in 2014 and give another relative $10,000. The $20,000 gifts are called taxable gifts because they exceed the $14,000 annual exclusion. But you won’t actually owe any gift tax unless you’ve exhausted your lifetime exemption amount. Assuming you haven’t, the two taxable gifts simply reduce your lifetime exemption by $12,000 [($20,000 - $14,000) x 2 = $12,000]. The $10,000 gift is ignored, because it’s below the $14,000 annual exclusion. If you give three individuals $14,000 each in 2014, these gifts are ignored because they don’t exceed the annual exclusion. So does that mean that I could be "gifted" the entire loan with no tax penalties on either side? I guarantee my parents have not gifted five million dollars. |
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Posted: 6/3/2015 10:18:56 AM EDT
[#17]
I am not licensed to offer this type of advice...
One idea (IF you do not want to find an accountant and/or attorney) is to find a blank loan note online. Fill it out as if you are loaning your parents the $83K in the form of a line of credit that they can make draws on- since the money was not all loaned at the same time. 0% interest rate. When they sell the house, they write you a check for what they owe. In my limited knowledge, this would appear to serve as proof for the IRS/tax concerns (no 'income' - 0% interest) and show that the money you receive back is repayment of the principal advances. The arrangement you guys have worked out seems to be totally within all laws and regulations- so trying to structure/hide/ect the repayment could be viewed as incriminating or draw attention to it. |
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Posted: 6/3/2015 10:34:19 AM EDT
[#18]
Quote HistoryQuoted:
Unless you collect interest it is not income. You (and they) can run afoul of the 'gift tax' rules. Have an experienced tax attorney advise you how to handle it. A few documents (even signed now) might be adequate. The attorney will have a read on 'imputed interest' rules also. Yes, consult a tax attorney and write something up to indicate it was a open-ended loan . If they are paying back more than you loaned them, that is interest and is income. The principle amount would not be. As long as you have cancelled checks to support it, you can show it was money you spent on your parent's behalf and now that the house is being sold, they are returning it. Structuring and all that money laundering stuff applies to CASH. If people are writing and depositing check or doing wire xfers, that is not the same thing. |
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Posted: 6/4/2015 2:26:20 PM EDT
[#19]
Quote HistoryQuoted:
So, does anyone think that various e-mail conversations over the past few years mutually acknowledging the loan and that it would be paid back via the sale of the house, the monthly checks, etc. would be proof enough to the IRS - should they question it - that there is a legit non-taxable loan? Having had a 120k deposit questioned, you are fine. It was a loan repayment. The irs was not even that curious. The money went into the same account the money was coming out of. Not hard to look at transaction history and see it. I then moved the funds after the deposit. Now, if you charged interest, it is different. |
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Posted: 6/4/2015 3:08:27 PM EDT
[#20]
Quote HistoryQuoted:
So does that mean that I could be "gifted" the entire loan with no tax penalties on either side? I guarantee my parents have not gifted five million dollars. I don't believe so. If you note, in the explanation you posted there is a "taxable gift", that is a gift that exceed the annual exclusion limit ($14k this year). That is because anything above the $14k annual limit is taxable as income on your end (if it's a gift). You either need to A) take $14k gifts per year until the loan is repaid, or B) consult a tax attorney regarding the implications of this being a loan. Caution: with option A it may come into question whether the payments to your parents in prior years were gifts to them. If so, and they exceeded the annual exclusion limit your parents may be on the hook for back taxes. I would exhaust all reasonable methods of option B before even thinking about option A. |
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Posted: 6/4/2015 5:33:03 PM EDT
[#21]
Quote HistoryQuoted:
Im in a very similar situation OP. So far the best advice have got was a $9999 check to me and another one (same amount) to my wife. This is under the gift limit so doesn't have to be reported. Have to do this untill total amount is paid back. That's structuring. That's illegal. |
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Posted: 6/4/2015 5:34:45 PM EDT
[#22]
Quote HistoryQuoted:
I thought structuring had to do with cash withdraws, not yearly gifts. Withdrawing $9,999 in cash is not required to be reported, but if you withdraw $9,999 every day you'll get noticed by the FBI. On the other hand, you are allowed to give someone $10,000 per year tax free as a gift. You can't do that every day, only once per year per person. Structuring covers deposits as well. You can give more than 10k per year as a gift. It's around 13-14k mark where Gift Tax implications start to arise (not sure what the number is now, it goes up yearly). |
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Posted: 6/8/2015 9:49:09 PM EDT
[#23]
I am a tax professional so take my advice for what it is worth.
The repayment of the loan is not taxable. Be prepared with supporting information to back up your initial loans. Interest you did not charge could be questioned. Gift tax rules would apply. In short nothing should be taxable. |
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Posted: 6/9/2015 4:00:44 PM EDT
[#24]
Quote HistoryQuoted:
That's structuring. That's illegal. Quote HistoryQuoted:
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Im in a very similar situation OP. So far the best advice have got was a $9999 check to me and another one (same amount) to my wife. This is under the gift limit so doesn't have to be reported. Have to do this untill total amount is paid back. That's structuring. That's illegal. Only with CASH. |
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Posted: 6/14/2015 12:39:04 PM EDT
[#25]
If you charge interest on a loan, that's income to you.
If you forgive interest or make an interest free loan, that's income to them. You can, however, make a gift of the interest. The interest amount that you could charge for what you have loaned them would seem to fit within the annual gift tax exemption. So long story short, they pay you back on your loan, and you made a gift of the annual interest charges for each year the loan was outstanding. No income tax issues for anyone involved. Hooray! ETA: Talk to a tax professional. |
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Posted: 6/22/2015 12:01:11 PM EDT
[#26]
Loans have interest. IRS could conceivably try to make you pay tax on the nonexistent interest you should have charged.
But no taxes due on repayment of principle, it's not income. Whatever happens, you better be able to document the hell out of it. |
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Posted: 6/26/2015 12:55:03 AM EDT
[#27]
Quote HistoryQuoted:
I don't believe so. If you note, in the explanation you posted there is a "taxable gift", that is a gift that exceed the annual exclusion limit ($14k this year). That is because anything above the $14k annual limit is taxable as income on your end (if it's a gift). You either need to A) take $14k gifts per year until the loan is repaid, or B) consult a tax attorney regarding the implications of this being a loan. Caution: with option A it may come into question whether the payments to your parents in prior years were gifts to them. If so, and they exceeded the annual exclusion limit your parents may be on the hook for back taxes. I would exhaust all reasonable methods of option B before even thinking about option A. Quote HistoryQuoted:
Quoted:
So does that mean that I could be "gifted" the entire loan with no tax penalties on either side? I guarantee my parents have not gifted five million dollars. I don't believe so. If you note, in the explanation you posted there is a "taxable gift", that is a gift that exceed the annual exclusion limit ($14k this year). That is because anything above the $14k annual limit is taxable as income on your end (if it's a gift). You either need to A) take $14k gifts per year until the loan is repaid, or B) consult a tax attorney regarding the implications of this being a loan. Caution: with option A it may come into question whether the payments to your parents in prior years were gifts to them. If so, and they exceeded the annual exclusion limit your parents may be on the hook for back taxes. I would exhaust all reasonable methods of option B before even thinking about option A. Nope. The recipient of a gift is never taxed. The giver of a gift is only taxed if the amount exceeds 14,000 per year, and then no tax will actually be paid if it is under the lifetime gift amount (the uniform credit equivalent amount). |
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Posted: 6/26/2015 1:02:29 AM EDT
[#28]
Quoted:
I won't go into the details because it would take too long and aren't important, but over the last four and a half years I have been loaning my parents money to pay the bills on the house. I have been writing personal checks and putting it into their bank account to the tune of about $30,000 per year. House payments, utilities, etc. are all paid out of that account that I'm putting my money into. All told it's about $83,500 now. The house is about to be sold, and the proceeds from the sale will pay my loan back. Will this be considered income by the IRS? We never wrote a loan contract - it's just an oral agreement. OP, this is really simple. Ignore most of what has been posted, as it is either wrong, or irrelevant. You made a loan to your parents. No tax consequences for that. Your parents repay the loan. No tax consequences for that. If they don't pay you a market rate of interest on the loan, you will have "imputed interest" (what they should have paid you, but didn't). You "gift" them the interest that they didn't pay. The interest amount is under the annual exclusion amount, so no gift tax. No reporting is required. |
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Posted: 6/28/2015 4:12:30 PM EDT
[#29]
If you "have to" charge x% interest, then how do stores offer same as cash (effectively 0% if you pay it off on time) for large purchases? Same goes with credit cards that offer 0% FOR 18 months (I have a couple still in the 18 month interest-free period). If this isn't considered a gift, I don't see how the nonexistent interest for a loan to a family member or friend could be a gift.
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Posted: 7/1/2015 1:30:02 PM EDT
[#30]
Quote HistoryQuoted:
Nope. The recipient of a gift is never taxed. The giver of a gift is only taxed if the amount exceeds 14,000 per year, and then no tax will actually be paid if it is under the lifetime gift amount (the uniform credit equivalent amount). Quote HistoryQuoted:
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So does that mean that I could be "gifted" the entire loan with no tax penalties on either side? I guarantee my parents have not gifted five million dollars. I don't believe so. If you note, in the explanation you posted there is a "taxable gift", that is a gift that exceed the annual exclusion limit ($14k this year). That is because anything above the $14k annual limit is taxable as income on your end (if it's a gift). You either need to A) take $14k gifts per year until the loan is repaid, or B) consult a tax attorney regarding the implications of this being a loan. Caution: with option A it may come into question whether the payments to your parents in prior years were gifts to them. If so, and they exceeded the annual exclusion limit your parents may be on the hook for back taxes. I would exhaust all reasonable methods of option B before even thinking about option A. Nope. The recipient of a gift is never taxed. The giver of a gift is only taxed if the amount exceeds 14,000 per year, and then no tax will actually be paid if it is under the lifetime gift amount (the uniform credit equivalent amount). The gift tax is usually paid by the donor, but the donee may agree to pay it. The gift tax will only be excluded under the unified tax credit if the donor elects to do so. |
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Posted: 7/8/2015 1:54:47 PM EDT
[#31]
Quote HistoryQuoted:
The gift tax is usually paid by the donor, but the donee may agree to pay it. The gift tax will only be excluded under the unified tax credit if the donor elects to do so. Quote HistoryQuoted:
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So does that mean that I could be "gifted" the entire loan with no tax penalties on either side? I guarantee my parents have not gifted five million dollars. I don't believe so. If you note, in the explanation you posted there is a "taxable gift", that is a gift that exceed the annual exclusion limit ($14k this year). That is because anything above the $14k annual limit is taxable as income on your end (if it's a gift). You either need to A) take $14k gifts per year until the loan is repaid, or B) consult a tax attorney regarding the implications of this being a loan. Caution: with option A it may come into question whether the payments to your parents in prior years were gifts to them. If so, and they exceeded the annual exclusion limit your parents may be on the hook for back taxes. I would exhaust all reasonable methods of option B before even thinking about option A. Nope. The recipient of a gift is never taxed. The giver of a gift is only taxed if the amount exceeds 14,000 per year, and then no tax will actually be paid if it is under the lifetime gift amount (the uniform credit equivalent amount). The gift tax is usually paid by the donor, but the donee may agree to pay it. The gift tax will only be excluded under the unified tax credit if the donor elects to do so. While those are both possibilities, they almost never occur. |
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Posted: 7/13/2015 10:08:24 AM EDT
[#32]
Check with a lawyer to be certain in your case but there are two questions,
First, are you giving any of them money to your parents? IIRC an adult child may give up to $10K a year, tax free to a parent, not sure if it is each or both together. If the money was an interest free loan, you should have the documentation to show how much you lent them and how much they paid back. |
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Posted: 7/14/2015 5:10:18 PM EDT
[#33]
Quote HistoryQuoted:
Check with a lawyer to be certain in your case but there are two questions, First, are you giving any of them money to your parents? IIRC an adult child may give up to $10K a year, tax free to a parent, not sure if it is each or both together. If the money was an interest free loan, you should have the documentation to show how much you lent them and how much they paid back. Tax-free gifts have already been addressed in this thread, and they have nothing to do with parent/child status, nor are they $10,000. |
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