You are correct IF it is a capital gain, but I would think that those kinds of things typically depreciate in value over time, unlike a home or salable, real property/land—and thus would not be subject to capital gain treatment. Under this new proposal, as I understand it, any $10,000.00 TRANSACTION would be subject to being flagged as a taxable event. Someone please correct me if I am wrong.
being flagged as a potential taxable event and being an actual taxable event are two separate things. i can imagine it would definitely increase the burden of record keeping/reporting for a lot of folks.
Yes, automatically. However, what's being proposed goes a step further. They want to match up deposits with what's on the tax return. This is a method of audit used for decades by the IRS, when the tax return doesn't seem to match up with income or net worth. This has been extraordinary in the past, not universal...
Earle — I’ve been out of the regulatory loop for a few years now, so my knowledge is a bit dated.
Shelby, that's the current law, AFAIK. There are a rabbit's warren of regs on what is or isn't "cash." As I understand it, the current proposal is for ALL transactions. And I agree there's no way they can handle all that data...
I'll give you one reason I'm against it that has NOTHING to do with "because I'm cheating". If "you've" ever received an "IRS Notice" involving any "adjustment" on their part to your tax return or request for "additional information", it more times than not turns into a 6-8 month (sometimes longer) nightmare for the taxpayer, and sometimes longer. The lag time in information sent, received, posted etc on the government's part is atrocious, not to mention trying to get in touch with someone on the phone to "discuss" anything. All the while automated notices continue to roll into your mailbox stating "Second notice" then "Intent to Levy" notices.
I know this is about banks, but cash apps, beginning in 2022 will be required to report to the IRS transactions for any users who received at least $600 via the cash app (venmo, paypal, etc) It is my understanding the taxpayer will receive a 1099-K from the cash app companies. Receiving the form doesn't mean you owe additional taxes, but what it does mean is if the IRS sends you a notice regarding the monies the burden of proof is on the taxpayer to prove the monies had nothing to do with income. It can turn into a major pain in the tail and consume months of your life. Trust me, I just got out of an 8 month dealing with the idiots.
I'm well familiar with that. One estate I represent had an annuity mature and it generated about $43K in tax. We filed the 1041, along with the check. Then we started getting the string of notices you relate. Our CPA (I hire CPAs to do the 1041s, as opposed to filing them myself) kept assuring me that the check just hadn't "caught up" with the return, which had been filed electronically. They said they had had instances where it took six months. Well, it took about three, during which time I received all of the notices you describe. Back about 5-6 years ago, I received the king of all "additional information" notices. It was a polite letter, explaining that they had lost our return and would I please make a copy of it and send it to them. I did and that was the last I heard of it...
We have a ladies group that we regularly send small amounts of money to so that one person can make reservations and pay. On a larger scale - if one person books a trip for a friend or family group bc it's easier - then the transaction would be flagged because they'd be getting money - but it wouldn't be income at all - but spent right away. Moving money for convivence.
I know this is nitpicky parsing of words, but welcome to the world of bank regulations.
That's correct and I just stated it above. They're interested in inflow of funds, not just cash, into bank accounts, which inflow and outflow is more than $10K and isn't payroll-related or a federal program like Social Security. It will be very intrusive. One of my banks emailed me this AM, urging me to write our (we may as well not have one) congressman and providing a form letter...
Again, this is not "transaction" oriented. They are interested in each and every bank account which had credits and debits in excess of $10K annually, except for those with an identifiable source - 1099, payroll, SS, etc. IOW, you will have to reconcile your 1040 annually with your bank statements or run into trouble...
It isn't a guarantee it will be flagged, it just means if you receive accumulated funds of $600 or greater through cash apps during a calendar year the app service will send you a 1099-K and in turn, report that to the IRS. It doesn't mean you will be automatically flagged. It just means IF you are then the burden of proof falls upon you to prove those monies weren't business/income-related.
As proposed, 1099s aren't even involved. They just want the flow of funds in and out of your bank accounts matches your 1040 income...
But why the walk back? Why did it need to exist in the first place to need to be walked back?
There was a discussion I watched with a money laundering expert on how major banks handle money laundering. If you or I came into a bank with a legitimate 10k of cash for deposit into a new account it would likely be refused or would entail considerable paperwork. If a foreign national came into the same bank wanted to transfer $20 mil. from an off shore account for investment in the US the same banker would say "let's have lunch at my club and discuss how we should handle the transfer to enable your investment".
