Potential tax problems with fee payment using money orders

[bringham]

What is the name of your state? Georgia

I received cash gifts totaling around $17K from my parents, and friends, etc for the last 2 years. To avoid potential problems depositing the cash in bank, I wish to pay tuition fee, for my college going children, in the form of postal money orders. Does the IRS still track these money orders and come after me alleging that I evaded tax on that money?

 

[LdiJ]

What is the name of your state? Georgia

I received cash gifts totaling around $17K from my parents, and friends, etc for the last 2 years. To avoid potential problems depositing the cash in bank, I wish to pay tuition fee, for my college going children, in the form of postal money orders. Does the IRS still track these money orders and come after me alleging that I evaded tax on that money?

There is no tax on gifts received. You could get questions regarding where the cash came from but if you can prove that it came from gifts then its not a problem. It would have been better however, to have deposited the gifts as you received them rather than waiting until the amount got so high.

 

[stealth2]

There is no tax on gifts received. You could get questions regarding where the cash came from but if you can prove that it came from gifts then its not a problem. It would have been better however, to have deposited the gifts as you received them rather than waiting until the amount got so high.

But the mattress was safer.

 

[Taxing Matters]

What is the name of your state? Georgia

I received cash gifts totaling around $17K from my parents, and friends, etc for the last 2 years. To avoid potential problems depositing the cash in bank, I wish to pay tuition fee, for my college going children, in the form of postal money orders. Does the IRS still track these money orders and come after me alleging that I evaded tax on that money?

The purchase of the postal money orders for $17k cash may result in the generation of a currency transaction report (CTR) to the IRS. The IRS is not likely to conclude from that that you evaded tax on that money. What it might do is think that the money is taxable income and inquire why you didn't report that on your return. As LdiJ noted, if you can show the IRS the money was from gifts then that will resolve the matter and you won't owe any tax.

 

[bringham]

Thanks a lot for very quick replies. I am not buying money orders for all $17k now. I plan to buy money orders for $8k this semester, by spending $2k each time, on 4 different dates. Plan to do the same for the remaining $9k in the next semester. Will this still trigger a CTR (the post office does not ask any picture ID if the money order is below $3k each visit)?
I visited my relatives living in other country and it is my mistake not depositing the cash immeditely after I return.

 

[Zigner]

Why are you so worried about this? If the money was truly from gifts, then there is no problem.

 

[Taxing Matters]

Thanks a lot for very quick replies. I am not buying money orders for all $17k now. I plan to buy money orders for $8k this semester, by spending $2k each time, on 4 different dates. Plan to do the same for the remaining $9k in the next semester. Will this still trigger a CTR (the post office does not ask any picture ID if the money order is below $3k each visit)?
I visited my relatives living in other country and it is my mistake not depositing the cash immeditely after I return.

If the USPS suspects that you are trying to avoid the CTR reporting by breaking down the purchases so they are less than $10k it must still submit the CTR for them. The law prohibits you from structuring transactions to avoid reporting. So long as you can show the IRS that these were from gifts the IRS won't treat it as income, so you should not have a problem if you you have evidence the money was from gifts. You may be making a bigger deal of this than you need to.

By the way, if you brought into the U.S. $10k or more in cash when coming back from those foreign trips you had the responsibility yourself to declare the cash. If you did that, it would help you with proving that the money was from gifts from relatives in the country you visited.

 

[bringham]

Thank you very much and I got the point!