Author Topic: Tax thread (Read 5406 times)

zale · « **on:** August 05, 2012, 01:12:57 AM »

I did a search. If there is a thread for this already, then this post can be deleted or merged with that thread.

Although for any tax-related questions the right person to ask is an accountant or a tax lawyer, I find that it's very hard to get straight answers or information about taxes. (Perhaps this is because the IRS Tax laws are confusing in and of itself.)

That said, I think it would be a great idea to start a tax thread. The purpose of this thread is not to replace your accountant or to use tax-evasion trickery, but rather to try and get some general clarity with regards to taxes - specifically and primarily with regards to credit cards.

Here is my first question:

If you use AP, Paypal, or other CC payment processors to meet CC spend, and you move significant money through your bank account this way, how do you explain this money in your bank account as not being "income"? Also, is there a way to pay the CC companies directly via PP or AP, so that it does not have to first go through your bank account?

mow · « **Reply #1 on:** August 05, 2012, 01:14:52 AM »

What's taxes

Name Changed · « **Reply #2 on:** August 05, 2012, 01:28:41 AM »

You only will have to report once you get a 1099-k from Paypal or Amazon. That is only after 20k in transaction.

What's the big deal to file a 1099-k as not making any profit?

Also it won't help to pay from Paypal or Amazon your CC's (even if it is possible) as you still will get a 1099-k for over 20k.

IRS doesn't look at your bank they see the 1099's W2's ect, and not filing one is a call for an audit.

From my knowledge there is now way to pay CC direct from Payapl or Amazon.

zale · « **Reply #3 on:** August 05, 2012, 01:58:22 AM »

Quote from: Name Changed on August 05, 2012, 01:28:41 AM

You only will have to report once you get a 1099-k from Paypal or Amazon. That is only after 20k in transaction.

Please explain: 20k in what timeframe? Per year? Also, if PP has not yet asked for your SS number, can they send a 1099 anyway?

Quote

What's the big deal to file a 1099-k as not making any profit?

Ok, so then this would be the answer to my question. (Provided that the IRS doesn't audit this)

Quote

IRS doesn't look at your bank they see the 1099's W2's ect, and not filing one is a call for an audit.

Sounds like you are bound to get audited either way. Can you can keep filing W-2's and 1099's, and keep declaring them as 0% profit without getting audited?

In general, what amount of money movement in a bank account would prompt an IRS audit?

Name Changed · « **Reply #4 on:** August 05, 2012, 02:09:05 AM »

Quote from: zale on August 05, 2012, 01:58:22 AM

Please explain: 20k in what timeframe? Per year? Also, if PP has not yet asked for your SS number, can they send a 1099 anyway?

20k per calander year. With paypal they limit your account and require a SS at some point, but until then they cant give a 1099. They will require it once you hit 20k, and your money will be frozen with them...

Quote from: zale on August 05, 2012, 01:58:22 AM

Sounds like you are bound to get audited either way. Can you can keep filing W-2's and 1099's, and keep declaring them as 0% profit without getting audited?

I dont think a W-2 could be 0% profit. A 1099 could even be filed as a loss

Quote from: zale on August 05, 2012, 01:58:22 AM

In general, what amount of money movement in a bank account would prompt an IRS audit?

Banks inform the IRS of transactions that are over 10k. Other than that I am not exactly sure

ANONYMOUS · « **Reply #5 on:** August 05, 2012, 02:12:11 AM »

If you do get audited, would it be a problem to tell them what exactly you do? & why you declared 0% profit??

Thanks in advance!

txtmax4 · « **Reply #6 on:** August 05, 2012, 02:20:07 AM »

http://forums.dansdeals.com/index.php?topic=13264.0

txtmax4 · « **Reply #7 on:** August 05, 2012, 02:22:02 AM »

Quote from: Name Changed on August 05, 2012, 02:09:05 AM

Banks inform the IRS of transactions that are over 10k. Other than that I am not exactly sure

I believe that's only for cash.

Name Changed · « **Reply #8 on:** August 05, 2012, 08:57:29 AM »

Quote from: txtmax4 on August 05, 2012, 02:22:02 AM

I believe that's only for cash.

Here

What does “cash” mean for the purposes of Form 8300?
For purposes of Form 8300:
Cash is money. It is currency and coins of the United States and any other country.
Cash is also certain monetary instruments - a cashier’s check, bank draft, traveler’s check, or money order - if it has a face amount of $10,000 or less and the business receives it in:
A “designated reporting transaction” as defined in Treas. Reg. section 1.6050I-1(c)(iii) (generally, a retail sale of a consumer durable, a collectible, a travel or entertainment activity) or
Any transaction in which the recipient knows the payer is trying to avoid the reporting of the transaction on Form 8300.

meshugener · « **Reply #9 on:** August 05, 2012, 09:14:58 AM »

How do you pay a CC bill directly from AP or PP?

Name Changed · « **Reply #10 on:** August 05, 2012, 09:19:27 AM »

Quote from: meshugener on August 05, 2012, 09:14:58 AM

How do you pay a CC bill directly from AP or PP?

You cant

zale · « **Reply #11 on:** August 05, 2012, 10:51:19 AM »

Quote from: Name Changed on August 05, 2012, 02:09:05 AM

A 1099 could even be filed as a loss

And this could be done even if there is a positive balance sitting in the account?

Name Changed · « **Reply #12 on:** August 05, 2012, 11:10:29 AM »

Quote from: zale on August 05, 2012, 10:51:19 AM

And this could be done even if there is a positive balance sitting in the account?

When filing taxes the IRS doesn't look at your bank accounts. Also Businesses always file losses, but have a balance in their accounts.

Lamdan · « **Reply #13 on:** August 05, 2012, 11:21:23 AM »

The million dollar question is, is there any reason to be nervous to churn thousands of dollars a month from cc to AP to bank account to cc. If you get audited by the IRS, will you be able to explain what you did, and get away with it?

PlatinumGuy · « **Reply #14 on:** August 05, 2012, 11:22:38 AM »

Quote from: Lamdan on August 05, 2012, 11:21:23 AM

The million dollar question is, is there any reason to be nervous to churn thousands of dollars a month from cc to AP to bank account to cc. If you get audited by the IRS, will you be able to explain what you did, and get away with it?

Theres nothing illegal, so thats not really a question.

zale · « **Reply #15 on:** August 05, 2012, 11:31:53 AM »

Quote from: PlatinumGuy on August 05, 2012, 11:22:38 AM

Theres nothing illegal, so thats not really a question.

Yes it is, it's advancing cash, which is against the T&C of the CC issuer. The question is if the IRS could care less about that.

Name Changed · « **Reply #16 on:** August 05, 2012, 11:37:36 AM »

Quote from: zale on August 05, 2012, 11:31:53 AM

Yes it is, it's advancing cash, which is against the T&C of the CC issuer. The question is if the IRS could care less about that.

IRS doesnt care if you earn money illegally (you could even be a drug dealer)

Against T&C doesn't mean illegal

3ZeroT · « **Reply #17 on:** August 05, 2012, 11:50:05 AM »

When he U.S. mint was in full swing you had people making tens of thousands of cash deposits every month... wouldn't that look suspicious? Yet I never heard a single report of IRS audit on that activity. In any case as long as money going into your account can be linked back to your own CC then it is not income or taxable. As for the CC rewards the current IRS position is that CC rewards earned on a purchase are considered a 'discount' and thus not taxable, though arguably in this case of churning cash equivalents it might be a grey area. But so far the IRS hasn't taken much interest in this activity it seems...

3ZeroT · « **Reply #18 on:** August 05, 2012, 11:55:23 AM »

Quote from: Name Changed on August 05, 2012, 11:37:36 AM

IRS doesnt care if you earn money illegally (you could even be a drug dealer)

Oh yes they do!

It's right in IRS Publication 17

"Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Form 1040, line 21, or on Schedule C or Schedule C-EZ (Form 1040) if from your self-employment activity."

MarkS · « **Reply #19 on:** August 05, 2012, 11:59:31 AM »

Quote from: 3ZeroT on August 05, 2012, 11:55:23 AM

Oh yes they do! It's right in IRS Publication 17

"Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Form 1040, line 21, or on Schedule C or Schedule C-EZ (Form 1040) if from your self-employment activity."

Name Changed meant that they don't care about the illegality - as long as you report it and pay tax on it. He was saying that a drug dealer must report their income and pay taxes and the IRS doesn't go reporting them to the DEA.
He wasn't saying that since it's illegal the IRS doesn't care about the income.
Of course since drug dealing is usually a cash business done by criminals, they usually don't report it. Which is why some mobsters or drug dealers who managed to stay under the radar of law enforcement, ended up going to jail for tax evasion (like Al Capone).

The point is, that the fact that the T&C of the CC company say you can't advance cash with AP, doesn't matter to the IRS.