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$50,000 bank transfer...what about taxes?

by maxrezn
16 replies
I need some help from someone who knows how the IRS views huge bank transfers when it comes to tax time.

My latest business was contacted by a production company working under a major airline and it looks like we got the job. The business is so new that it doesn't even have a bank account yet. They want to do a bank transfer tomorrow...right after the money is received...a significant portion of it will be transferred to a Brazilian company I'm using to complete this job via another bank transfer.

My question is, what should I expect regarding taxes and the IRS when $50,000 goes in my personal bank account, and $30,000 goes out shortly after?
#$50 #bank #taxes #transferwhat
  • Profile picture of the author bearbo001
    As with anything regarding money, especially amount this sizable, don't rely on just us, shell out a couple hundred $ and chat with a tax accountant.

    Question: if they don't have a bank account, how are they going to do a bank transfer? I know in US, to do any type of financial transfer a bank account is needed to both send and receive the transfer. Brazilian banks...I don't know. To receive a wire transfer, a US bank, along with the funds will receive the relevant originating account information, which may suffice.

    In regards to the money going out, assuming you have appropriate tax id's and paper trails in place, the $30k outgoing should be viewed as expenses and the remaining $20k, assuming it still resides in your US bank at EOY 2012, it would likely be viewed as income, which would be taxed at either your corporate or personal tax rate.

    Please note the number of "assumings" above as I am trying to help you out with the information provided.

    Hopefully my input was of assistance.
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    • Profile picture of the author beeswarn
      Previous poster is probably right. I think you just got worked over.

      If it works out for you, and I hope it does, go hire a CPA (if you've done any of this business in the U.S.) and get your accounting right, asap. The IRS sees all transfers that large because all U.S. banks have to report them.
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  • Profile picture of the author HypeText
    Originally Posted by maxrezn

    I need some help from someone who knows how the IRS views huge bank transfers when it comes to tax time.

    My latest business was contacted by a production company working under a major airline and it looks like we got the job. The business is so new that it doesn't even have a bank account yet. They want to do a bank transfer tomorrow...right after the money is received...a significant portion of it will be transferred to a Brazilian company I'm using to complete this job via another bank transfer.

    My question is, what should I expect regarding taxes and the IRS when $50,000 goes in my personal bank account, and $30,000 goes out shortly after?
    Anything transferred by wire...in or out, $10,000 or more is required by law to be reported by the Banks doing and/or recieving the transfer.

    Since you are using your personal account I would STRONGLY recommend you speak with a CPA as you may be liable to pay Income Tax on the whole $50k.

    A CPA would be able to tell you how you might be able to document it to get around that.

    I will say I am very surprised you are being paid by wire transfer as that is not a typical business practice.


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    • Profile picture of the author gerbs
      Originally Posted by HypeText View Post

      $10,000 or more is required by law to be reported

      Yep, anything over 10k is flagged and is actually manually reviewed by a federal official, usually from the IRS.

      Definitely don't take advice from anyone on here, including myself fwiw - Get some professional advice and use caution when dealing with "new accounts."
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      • Profile picture of the author believemarketing
        Originally Posted by gerbs View Post

        Yep, anything over 10k is flagged and is actually manually reviewed by a federal official, usually from the IRS.

        Definitely don't take advice from anyone on here, including myself fwiw - Get some professional advice and use caution when dealing with "new accounts."
        flagged is not quite accurate... sending, receiving big amount of money is everyday normal procedure... the irs just wants to make sure there is no funny business... it is basically like when you receive a paycheck or for being a contractor... someone else (either your client or your employer, or your bank) is always required to report back to IRS....

        of course there is the other reasons (terrorist, fraud, money laundering, etc)
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  • Profile picture of the author iAmNameLess
    This is a business expense right?
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  • Profile picture of the author HypeText
    Originally Posted by iAmNameLess

    This is a business expense right?
    Thats what he said, however money is going thru his personal account and since it is a wire there will be no check to make a copy of for documentation purposes.

    Question...since this business is so new...is it licensed and is there a business entity formed?


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    • Profile picture of the author iAmNameLess
      Originally Posted by HypeText View Post

      Thats what he said, however money is going thru his personal account and since it is a wire there will be no check to make a copy of for documentation purposes.

      Question...since this business is so new...is it licensed and is there a business entity formed?


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      Yeah.. but I would assume he'd have an invoice or some record of payment.

      Good question though... I'd hope he has a license or incorporated.
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    • Profile picture of the author SirThomas
      Originally Posted by HypeText View Post

      Thats what he said, however money is going thru his personal account and since it is a wire there will be no check to make a copy of for documentation purposes.

      Question...since this business is so new...is it licensed and is there a business entity formed?


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      Wire transactions are documented in your bank account just like checks, cash or direct deposits. It's a very common business type transaction. nothing shady about that.

      What he needs to learn is how to prove to IRS all of his international expenses, so he can officially offset his profits. CPA recommended.


      Thomas
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  • Profile picture of the author MaxwellB
    Even though the client's business is so new that it doesn't have a bank account why don't you receive the wire to your business bank account...from the clients (personal?) bank account?

    Why would you receive a wire to your personal bank account when this is a business transaction and you have a business account?
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  • Profile picture of the author SirThomas
    Originally Posted by maxrezn View Post


    My question is, what should I expect regarding taxes and the IRS when $50,000 goes in my personal bank account, and $30,000 goes out shortly after?
    It doesn't matter how fast the funds disappear from your account. You will owe taxes on $50,000, unless you can legitimately use the $30k expense to only be tax liable for $20k. Contact a CPA and ask what you need to do to have that $30k properly recorded as a legitimate expense.


    Thomas
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  • Profile picture of the author thehypnoguy
    If your location is Brazil like it says under your name why are you concerned about what the IRS says or thinks. Also, I would make sure that the first wire is considered cleared at your bank before placing the second wire to your subcontractor. You could find yourself holding the bag otherwise.

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  • Profile picture of the author Chris Cho
    Seriously... ask your accountant. I had 30k sent from Korea and I don't remember exactly what my accountant did but he always keeps me happy. They are the true ninja! =)
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  • Profile picture of the author maxrezn
    The company sending the money is an established French firm...I'm using another one of my businesses to accept the transfer and noting everything as an expense. I solved it but thanks for your help guys.
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  • Profile picture of the author Hugh
    Be careful. And have a serious talk with your banker.
    People who want to do a deal in a hurry, but have no bank acct worry me.

    Hugh
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    "Never make someone a priority in your life who makes you an option in theirs." Anon.
    "Some see private enterprise as a predatory target to be shot, others as a cow to be milked, but few are those who see it as a sturdy horse pulling the wagon." -- Winston Churchill

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  • Profile picture of the author dminorfmajor
    It's weird to see how many useful comments came out of the OP's post. If I were in that situation, this is the last place I would have come with that question. And no offense to the OP at all, it's just cool to see how diverse the WF members are.
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