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I work at a bank (not a tax professional though) and wanted to clarify something important: banks DO report certain deposit activity to the IRS, but not in the way most people think. Banks file Currency Transaction Reports (CTRs) for cash transactions over $10,000, and Suspicious Activity Reports (SARs) for potentially questionable transactions. But these aren't income reports - they're anti-money laundering measures. Your $950 cash deposit from your roommate wouldn't trigger any reporting to the IRS unless there's a pattern that looks suspicious. The $600 threshold everyone's talking about is completely separate and only applies to third-party payment networks reporting business transactions.
What makes a pattern "suspicious" though? If I deposit several small amounts of cash over time from my side hustle selling stuff at flea markets, will that trigger something? I've heard about "structuring" but I'm not sure how that works.
Great question! "Structuring" is deliberately breaking up large cash transactions to avoid the $10,000 CTR threshold, which is actually illegal regardless of whether the money is legitimate. Regular, consistent small deposits that match your known income sources or banking patterns generally won't trigger suspicion. What might raise flags are sudden changes in deposit patterns, multiple cash deposits just under reporting thresholds, or transactions that don't align with your normal banking history. For your flea market sales, keeping good records is key. If the bank ever questions your deposits, having documentation of your sales helps demonstrate they're legitimate income, not suspicious activity.
Just to summarize what everyone's covered here since there's been a lot of great info shared: 1. The $600 reporting rule ONLY applies to third-party payment networks (PayPal, Venmo, Cash App) for business transactions - NOT regular bank deposits 2. Your $950 cash deposit from your roommate loan repayment will NOT be reported to the IRS as income by your bank 3. Banks only report cash transactions over $10,000 (CTRs) or suspicious patterns (SARs) - these are anti-money laundering measures, not income reporting 4. Even if you do get a 1099-K from a payment app, you can offset non-taxable personal transfers on your tax return with proper documentation The key takeaway for your situation: deposit that cash from your roommate without worry! It's a personal loan repayment, not income, and won't trigger any IRS reporting. Just keep a note about what the deposit was for in case you ever need to explain it later. Hope this helps clear up the confusion - this new rule has definitely caused a lot of misunderstandings!
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Can someone explain in simple terms how to actually calculate the IRC 1341 credit? My mom received Social Security benefits for my dad after he passed, but then had to repay them the following year when they determined she wasn't eligible. I'm trying to help her figure out if this credit applies and how to calculate it.
I helped my cousin with something similar! Here's a simple breakdown: Method 1: Take a deduction in the current year for the amount repaid. Method 2: Calculate the tax from the prior year WITHOUT the income you later repaid, then subtract that from what you actually paid that year. The difference becomes a credit on this year's return. Usually Method 2 gives you more money back, especially if you were in a higher tax bracket when you received the money. But you should calculate both ways and use whichever gives the better result. For Social Security specifically, I think repayments generally qualify for this treatment, but there might be special rules. Publication 525 has a whole section on Social Security repayments.
I went through a similar situation with my husband's employer overpayment situation last year. One thing I learned that might help Emily - make sure you have the IRC 1341 credit calculation worksheet clearly documented and attached to your response to the IRS. We initially just referenced Publication 525 in our filing, but the IRS examiner wasn't familiar with the specific calculation method. When we resubmitted with the actual worksheet showing step-by-step how we calculated the credit amount (comparing the tax liability with and without the repaid income), they processed it much faster. Also, if your brother-in-law's employer has an HR department or payroll company, try to get a letter from them that specifically uses the words "overpayment" and "paid in error" rather than just "repayment requested." The IRS seems to want very clear language establishing that the original payment was incorrect, not just that money was requested back for other reasons. The 6-month timeline isn't unusual for this type of credit review, but having the right documentation should speed things up considerably.
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To all those having trouble reaching a human at IRS. I just ran across this video that gave me a shortcut to reach a human. Hope it helps! https://youtu.be/_kiP6q8DX5c
Code 806 is your withholding credit (taxes taken from your paychecks) and code 768 is your Earned Income Credit. The date shows when these were processed. These are both in your favor! If you already received a on 3/9/22 but these codes are dated later, you might be getting an additional payment. Keep checking for an 846 code which means " issued" - that's when you'll know money is coming your way.
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Random question - are there any benefits to filing taxes as a student even with no income? I heard something about it helping with credit scores but that sounds like BS to me lol
Filing taxes has zero direct impact on your credit score. Credit bureaus don't even look at your tax returns. However, having tax returns can be helpful documentation when applying for larger loans like mortgages later on. Lenders sometimes want to see a history of tax returns, even for years with little/no income, to verify your financial history. But that's for major loans years down the road, not your regular credit score.
Based on what everyone's shared here, it sounds like you're not required to file since you have no income, but you might actually benefit from filing anyway! Even with just that one community college class, you could potentially claim the Lifetime Learning Credit for the tuition you paid. The credit is worth up to 20% of qualified education expenses (up to $2,000 max), so if you spent money on tuition, books, or required fees, you might get some of that back. Since you mentioned you're 33, you're definitely eligible regardless of how many classes you're taking. Also, just a heads up - if you ever need to prove your income status for financial aid or other programs, having a filed return (even showing $0 income) can be really helpful documentation. Some schools and government programs prefer actual tax returns over just verbal statements about not having income. Florida doesn't have state income tax, so you'd only need to worry about federal. Might be worth running the numbers to see if filing would get you any money back!
Laila Fury
Just adding another perspective - could they be confusing this with the Trump-era payroll tax deferral that happened during COVID? That was only for Social Security and was temporary, but I remember some companies misunderstood it. Or maybe they're thinking of the increased standard deduction? Either way, absolutely not legal to just stop withholding federal taxes!!! My sister works for a tax prep company and says they're already seeing people coming in with massive unexpected tax bills because of withholding mistakes. Don't wait on this!
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Geoff Richards
•I was thinking the same thing about possible confusion with COVID-era policies. My company temporarily messed up withholding in early 2022 thinking some of those policies were still in effect when they'd actually expired. Took them a month to fix it and everyone had to make catch-up withholding payments.
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Caleb Stone
This is absolutely not legal and needs immediate attention! As others have mentioned, employers are required by federal law to withhold income taxes based on employee W-4 forms - there's no "compensation philosophy" exemption. I'd recommend your wife take a multi-pronged approach: 1) **Document everything** - Save copies of paystubs showing zero federal withholding and any communication from HR about this policy 2) **Submit a new W-4** - Even if the old one should transfer, get a fresh one on file immediately requesting proper withholding 3) **Calculate quarterly payments** - Start making estimated tax payments to avoid underpayment penalties. You can use IRS Form 1040-ES or the IRS online payment system 4) **Escalate beyond HR** - If payroll/HR won't fix this, consider contacting the Department of Labor or your state's labor department. They take employer tax compliance seriously The fact that this is affecting ALL employees makes it sound like a systematic error during the acquisition rather than individual W-4 issues. The new company may not realize they're violating federal tax law, but ignorance isn't a defense here. Don't let them brush this off - you're looking at potentially thousands in unexpected taxes plus penalties if this continues!
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