Depositing gift cash in my bank account

[rodrigo57]

Appreciate again.

I received a letter from that Asian country. The letter is signed by my relative/donor, along with two witnesses’ signatures, who witnessed when I received the gift. The letter is in English and also contains the full contact addresses of these 3 persons. The letter explained the amounts of cash gift, dates, the relation between me and that donor, and unambiguously stated that it is gift. I received scanned copy of that letter by email, and original will arrive by mail later on. Will it serve the purpose if the IRS contacts me once I deposit 10,000 dollars or more in the bank?

 

[PayrollHRGuy]

Appreciate again.

I received a letter from that Asian country. The letter is signed by my relative/donor, along with two witnesses’ signatures, who witnessed when I received the gift. The letter is in English and also contains the full contact addresses of these 3 persons. The letter explained the amounts of cash gift, dates, the relation between me and that donor, and unambiguously stated that it is gift. I received scanned copy of that letter by email, and original will arrive by mail later on. Will it serve the purpose if the IRS contacts me once I deposit 10,000 dollars or more in the bank?

I see no reason it shouldn't but there is no way to know until it does or doesn't.

 

[Taxing Matters]

Will it serve the purpose if the IRS contacts me once I deposit 10,000 dollars or more in the bank?

Better than not having it. The IRS may accept your explanation, but no one here can guarantee that. It depends on what information the IRS has and the particular employee reviewing the matter.

 

[LdiJ]

Appreciate again.

I received a letter from that Asian country. The letter is signed by my relative/donor, along with two witnesses’ signatures, who witnessed when I received the gift. The letter is in English and also contains the full contact addresses of these 3 persons. The letter explained the amounts of cash gift, dates, the relation between me and that donor, and unambiguously stated that it is gift. I received scanned copy of that letter by email, and original will arrive by mail later on. Will it serve the purpose if the IRS contacts me once I deposit 10,000 dollars or more in the bank?

I recommend that the next time a relative gives you a gift, that you deposit it in the bank immediately. That will avoid some of the problems you are going through now. Had you done that with this money, it would have been $9000.00 deposited twice a year or so apart. That would not have raised any eyebrows.

 

[rodrigo57]

very well appreciated!

 

[rodrigo57]

It is my overlook for not asking earlier: if for any reason the IRS determined that this deposit of $10,000 or more is not gift but earned income then how much penalty (on top of the "unpaid tax") the IRS will order me to pay for that deposit? How much time I will be given for such payment?

 

[Taxing Matters]

It is my overlook for not asking earlier: if for any reason the IRS determined that this deposit of $10,000 or more is not gift but earned income then how much penalty (on top of the "unpaid tax") the IRS will order me to pay for that deposit? How much time I will be given for such payment?

First of all, it wouldn't necessarily be treated as earned income. The IRS is likely to simply say it is taxable income if it does not accept that it was from a gift and leave it at that. As for what penalty might be imposed, that will depend on all the facts. If a penalty is imposed, the most likely penalty would be the 20% accuracy related penalty. That means 20% of the tax attributable to the underreported income. So, just for a simple example, suppose that the deposit was $10,000 and the IRS determines it was taxable income and that it decides to apply the 20% penalty. And suppose that the marginal tax rate for you was 25%. That would mean that the IRS adjustment resulted in $2,500 in additional tax (25% of $10,000) and a penalty of $500 (20% of $2,500).

 

[rodrigo57]

Appreciate a lot! Is it safe to conculde that I won't be sent to jail (and I will not be imposed any other punishments, physical or financial) if I pay that additional tax and penalty if IRS comes after me for that $10,000?

 

[PayrollHRGuy]

Appreciate a lot! Is it safe to conculde that I won't be sent to jail (and I will not be imposed any other punishments, physical or financial) if I pay that additional tax and penalty if IRS comes after me for that $10,000?

Yes, that is safe to assume.

 

[Taxing Matters]

Appreciate a lot! Is it safe to conculde that I won't be sent to jail (and I will not be imposed any other punishments, physical or financial) if I pay that additional tax and penalty if IRS comes after me for that $10,000?

You may also have tax and penalty to pay to your state, but once the IRS assesses any additional tax and penalty and you pay it you'll be done on the federal side of things. If they were going to criminally prosecute you they'd do that before any assessment of the additional tax.

ETA: I see you are in Florida, a state without an income tax, so the state won't be a problem for you.

 

[rodrigo57]

Appreciate a lot! What would happen if they were going to criminally prosecute me, I have no idea on how that process works and any information is very useful.