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how does the IRS know if you make money?

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how does the IRS know if you make money?

Old 09-26-05, 12:28 PM
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dnf
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how does the IRS know if you make money?

like for paying taxes.

sometimes ill do small little side jobs for my business and make a little here and a little there - do those need to be reported? id rather not since its not much anyways.
Old 09-26-05, 12:29 PM
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If you're driving a new BMW and you only make $24,000 a year then they would think somethings up. If you are making a few extra bucks a month I wouldn't worry about it.
Old 09-26-05, 12:32 PM
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can they track checks?
Old 09-26-05, 12:36 PM
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Originally Posted by dnf
can they track checks?

Of course. It depends on how much money you are talking a bout. I'd probably report anything more than $500 a month. Other wise you are asking for an audit.
Old 09-26-05, 12:36 PM
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Originally Posted by dnf
can they track checks?
If they have a reason to suspect you make more money than you report, certainly. If you say you make $12,000 a year but you're depositing large checks every week...

Of course, I don't know what makes them suspect it. I would think it's an audit thing, but I don't really know.
Old 09-26-05, 12:40 PM
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Originally Posted by dnf
can they track checks?

Link
Old 09-26-05, 12:43 PM
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Do you sell drugs, human organs or tanks and firearms?
Old 09-26-05, 12:48 PM
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Side jobs: Make sure you get paid in cash, don't deposit the money you make from said jobs.
Old 09-26-05, 12:53 PM
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Does the IRS really track your deposits? I am currently in charge of paying someones bills, so each money I deposit a check into my account, then pay their bills.

Would the IRS see this as income?
Old 09-26-05, 01:03 PM
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The IRS has several formulae that they use to figure these things out. The main one is an income to deduction ratio (above a certain level they're going to audit), but there are several. Plus there's always the chance of a completely random audit.
Old 09-26-05, 01:40 PM
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Originally Posted by WildcatLH
The IRS has several formulae that they use to figure these things out. The main one is an income to deduction ratio (above a certain level they're going to audit), but there are several. Plus there's always the chance of a completely random audit.
But can the IRS really see what is going into your checking account?
Old 09-26-05, 01:50 PM
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If they want to? Yes.

Are they going to check everyone's checking account? Obviously not.
Old 09-26-05, 02:01 PM
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IRS can do whatever they want if they audit you. You have to try and not trigger an audit

Unless you wear a tin foil hat, they can read your brain and they know you are cheating. I think even starting a thread with the letters IRS in the title is reason enough for them to come after you
Old 09-26-05, 02:03 PM
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Originally Posted by 4KRG
IRS can do whatever they want if they audit you. You have to try and not trigger an audit

Unless you wear a tin foil hat, they can read your brain and they know you are cheating. I think even starting a thread with the letters IRS in the title is reason enough for them to come after you
I realize they can during an audit - just didn't know if this would trigger an audit. Not sure if certain deposit amounts get reported or something like that.
Old 09-26-05, 02:12 PM
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Originally Posted by cpgator
I realize they can during an audit - just didn't know if this would trigger an audit. Not sure if certain deposit amounts get reported or something like that.
Anything over $10,000 gets reported automaticaly. Even if you cash in $10,000 worth of chips or coin at a casino it is reported - even if you cash in 3,000 in the morning, buy in for 5,000 in the afternoon, and cash in 2,000 at night... any "total" money movement of 10,000 or more must be reported.
Old 09-26-05, 02:21 PM
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Originally Posted by CPA-ESQ.
Anything over $10,000 gets reported automaticaly. Even if you cash in $10,000 worth of chips or coin at a casino it is reported - even if you cash in 3,000 in the morning, buy in for 5,000 in the afternoon, and cash in 2,000 at night... any "total" money movement of 10,000 or more must be reported.
Do you know this for a fact? Does it depend on the bank, or they type of deposit? Probably all my deposits have been greater than 10k - usually 15 to 20k, and they are all personal checks.
Old 09-26-05, 02:29 PM
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Originally Posted by cpgator
Do you know this for a fact? Does it depend on the bank, or they type of deposit? Probably all my deposits have been greater than 10k - usually 15 to 20k, and they are all personal checks.
This is a fact. The bank has to generate a cash transaction report, but it is only for cash transaction. Depositing checks do not involve a CTR.

If you are making 10-15k deposits and not reporting them, I think its a safe bet they will catch up with you sooner or later.
Old 09-26-05, 02:31 PM
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10-15k deposits per what? per check? per day? per month?
Old 09-26-05, 02:34 PM
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I'd love to have this problem! Find a way to put $200 a month aside and get HDTV in 07 or so. What types of little side jobs are we talking about? The market been so bad I cant even make an extra $100 a month online with ebay anymore.
Old 09-26-05, 02:55 PM
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Originally Posted by dnf
like for paying taxes.

sometimes ill do small little side jobs for my business and make a little here and a little there - do those need to be reported? id rather not since its not much anyways.

technically everything has to be reported

in case of bank accounts the bank gives you and the IRS the amount of interest they paid you and you have to report this on your taxes. The interest rates are well known so it's not hard math to figure out how much principal you have in the bank to earn that amount of interest. If your reported income and your interest reported is too far apart then it's probably a red flag. I'm guessing they are looking for large differences, not something that is a few thousand $$$.

My theory is this. On average an IRS accountant costs $100 an hour in pay and benefits. They won't audit you unless they can get back more than what it costs to audit you.
Old 09-26-05, 02:58 PM
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Originally Posted by uli2000
This is a fact. The bank has to generate a cash transaction report, but it is only for cash transaction. Depositing checks do not involve a CTR.

If you are making 10-15k deposits and not reporting them, I think its a safe bet they will catch up with you sooner or later.
I make these deposits once every month or two. Not sure why I would report them, since I don't consider them income.
Old 09-26-05, 04:02 PM
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Originally Posted by cpgator
I make these deposits once every month or two. Not sure why I would report them, since I don't consider them income.
You don't need to report the deposits - but the back does.

It's all part of "Know your customer" and the bank must tell the IRS if you are depositing an amount of $10,000 + in Cash. This is so they can track Terrorists, Drug Dealers, Organized Crime, and Money Launderers.

You do not need to "declare" every deposit as "income" unless it is. You may take in $15,000 from a store you operate, or work you perform - and deposit this at the end of the week. However at the end of the month you pay a bill for supplies, store rent, wages, for $40,000. Your Income is only $20,000 (60,000 - 40,000) This you must declare.

If you make some extra $ on the side - this too you must also declare under "Misc wages, tips, etc."

A couple of bucks here and there won't get picked up, however if you are working off the books and making $60,000; but have a small job on the books for $5,000 chances are your bank records, monthly expenses, and deposits will give you away.
Old 09-26-05, 04:05 PM
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It's my understanding that you must be able to explain away any large deposit that is not reported as income if you get audited... otherwise you're going to be in trouble.
Old 09-26-05, 04:06 PM
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Originally Posted by dnf
id rather not
Old 09-26-05, 04:10 PM
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