Buying an expensive car. Cash, Check? IRS? Please help. Thank you!?
How does this work? Read the detail before answering. This is a fictitious question. Now lets say for example that i have $150k in my savings account and i want to buy an expensive car around $115k with cash. Now in this case I make 50K annually, and I save a percentage of that each year in my savings or checking account, and eventually (even 30 years later), I will have enough money to buy this car. Moreover i do not know anyone neither i am going to get any inheritance or any gift from someone. Can someone explain to me the whole details with the IRS? They really does not even know about my $150k saved up. I do not have any savings account according to IRS. Now if i go out and purchase an expensive car worth around $115k then is it possible for IRS to catch me as a fraud? Why can't I tell them I have saved up this money over time of years and years of hard work? I am just a little bit confused because I heard any payment over $5,000 cash the IRS gets suspicious. This a serious question. Please try your best to answer it accurately and to the best of your knowledge. No irrelevant answers please.
Thank you and have a great rest of your day!
- Coffee DrinkerLv 76 years ago
You heard wrong.
The IRS requires banks to notify them of any deposits of $10,000 or more. That doesn't mean the IRS does anything, they just keep records. If they see someone making lots & lots of deposits without reporting income on their tax return then the IRS might investigate. But a single transaction such as purchasing a car is unlikely to draw any attention. People make large transactions everyday for situations exactly like what you describe - selling a car, getting an inheritance, getting an insurance settlement, etc. There's nothing suspicious or alarming about someone making a large transaction once in a while. The IRS is mainly looking for people who do it repeatedly - which is usually a sign that someone is running a business under the table, selling drugs, or doing something along those lines.
In your example the large withdraw probably wouldn't even get reported since it was a withdraw, not a deposit. If it did get reported to the IRS nothing would happen since it would be a one-time thing. If for some reason they singled you out to investigate, you would just show the bank records showing years of steady deposits, then show proof that you spent the money on a car and nothing would happen.
- StephenWeinsteinLv 76 years ago
Don't go anywhere with over $100,000 in cash. Someone might rob you.
It's only reported to the IRS if it's cash, which would be really dangerous for other reasons, not just because of the IRS.
If you wanted to buy a car with money that was in your savings account, you would have the bank issue a check that you could take to the car dealer, but couldn't be cashed by anyone else (and could be replaced if stolen), so the risk of theft would be less, and there would be no IRS problems.
- Bostonian In MOLv 76 years ago
First off, only CASH transactions of $10k or more are reported to the IRS. That includes a series of smaller CASH transactions that add up to $10k or more. So, what is a CASH transaction? Glad that you asked!
Cash obviously includes the folding green stuff. No surprises there. It also includes foreign currency valued at the current exchange rates. A cashier's check not made out to any specific person or made out to "Cash" is also treated as cash. So is your personal check that is made out to "Bearer" or "Cash." Add in counter drafts, traveler's checks, casino chips, and money orders and that largely sums up what is "cash" for reporting purposes.
Things that are not cash: A check drawn on your account made out to a specific individual or business, such as a car dealer. Or your great aunt Maude. ACH transactions. Credit card transactions (other than cash advances) used to purchase goods.
Banks and businesses are required to report cash transactions to fight crime like drug dealing, money laundering, terrorism, etc. Even if something does get reported, 99.99% of it is nothing and there are no repercussions. In the HIGHLY unlikely event that you are contacted about a transaction, your records would quickly put paid to the matter and that would be the end of it.
As far as the fancy wheels are concerned, it would only be reported if you paid in cash. Write a check or arrange an ACH transfer from your bank to the dealer and nothing is reported. Even if it was reported, it's not unusual for someone with a mid to high 5 figure income to have 6 figures in savings and investments after 20 or 30 years. You've been reporting the dividends, interest, etc. on your holdings on your tax returns so the IRS already has a pretty good idea of what your financial picture looks like. If anything was suspicious, they (or someone else) would have been nosing around already even if you never spent any of your wad.
- troLv 76 years ago
transactions of $10K are reported by the bank to IRS, if you paid $115K cash for a car, that dealer's deposit is reported to IRS
this might trigger the fraud dept to question where this money came from since you don't have savings accounts that you have been reporting the interest income each year, so IRS doesn't know how could afford this expensive car on $50K income a year
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- Steve DLv 76 years ago
They may investigate, but since you say you have been putting the money into your savings or checking account, you and/or the bank will have a paper trail showing your continued deposits. You would only get in trouble if you had the money saved in a shoebox under your bed - you then would have no paper trail to prove the money was not gotten from illegal sources.
- kelby7670Lv 76 years ago
You are a bit paranoid. The IRS doesn't care.
- pearlmarLv 76 years ago
In this case that is a rather small salary so I would finance the car rather than use my savings. You need that for backup in case anything happens, like you lose your job.
- 4 years ago
Finally, that's what I was exploring for! Thanks to author of this question.