Cash in the Bank & Proposed IRS Changes

by | Oct 28, 2021

Bank account information

Why You May Soon Have to Justify Your Bank Accounts

There have been a number of stories insinuating all bank transactions above $600 may soon be reported to the IRS. And it this post, Certified Financial Planner Quentara Costa gives you the scoop on Comprehensive Financial Account Reporting in the Administration’s Fiscal Year 2022 Revenue Proposals.

There have been a number of stories insinuating all bank transactions above $600 may soon be reported to the IRS. It’s not only been in the news, but I’ve seen local banks email customers asking them to write into Congress to voice their concern! Banks, much like their customers, aren’t thrilled with this latest tax proposal due to privacy infringement and the general burden of reporting.

Closing the Wealth Gap?

The proposal is an effort to “close the wealth gap.” But to me it seems like a direct attack on middle-class workers in the service industry who rely on tips. And for that reason, I wanted to look into this further to understand what the buzz is about.

The Truth of the Matter

The truth of the matter is that the proposal has nothing to do with individual transactions. Line items will not be reported to the IRS under the proposal. BUT – gross inflows and outflows for the year would be. And within those gross totals the amount of transactions that are cash deposits and withdrawals will also be tallied. This means the IRS may not see your weekly $1,000 cash deposits, but they would see a gross annual cash deposit of $52,000. And that would raise a red flag if your self-reported tip income was only $26,000 for the year.

On the flip side, for heavy cash outflows it may flag that you’re paying workers under-the-table, failing to file 1099-NEC, and/or gifting beyond the annual exclusion limits. So while the IRS wouldn’t receive the details behind your gross inflows and outflows, it’s not far-fetched that you’d have to be prepared to explain the gross figures should you be flagged.

The $600 Back Story

So where did the $600 figure come from? Gross transactions or account balances exceeding $600 trigger the requirement.

For example:

  • A rarely used checking account with $200 that earns simple interest will not trigger reporting.
  • A checking account with $1,000 that receives about $3,000 a month in cash deposits and $2,500 withdrawals in cash and direct payments would trigger reporting due to the balance and the transactions.

For full details, see the the source proposal — page 88 in print & page 94 of the PDF (Click here to open).

.

You Might Like

Local Front Walkway Replacement

Local Front Walkway Replacement

Another Job by CM Landscaping Services CM Landscaping Services — Andover's affordable landscaping company — recently replaced a concrete front walkway. Because the homeowners thought it was tired-looking & had begun to degrade. Which was bound to become a safety...

Meet Marissa Michaels Stylist Danielle O’Brien

Meet Marissa Michaels Stylist Danielle O’Brien

Stylist Danielle Lives in Andover Marissa Michaels stylist Danielle O'Brien is an Andover resident. And loves working at downtown Andover's Marissa Michaels Hair Salon. Where she does excellent hair for locals in a salon that feels like home. Delivers Client-Focused...

Where to Get Golf Lessons in Andover

Where to Get Golf Lessons in Andover

Sports Bar & Restaurant Offers Golf Lessons Matchplay Golf and Sports Lounge is open in Shawsheen Plaza. Already popular as a great local party spot, the sports bar now offers golf lessons. James Farrell, Director of Golf, runs the golf lessons program. Which uses...

Pin It on Pinterest

Share This