That's a really good point I hadn't considered. Do you think the mortgage company would report that information directly to the IRS though? Or would they only discover it if they specifically investigated him for some reason?

Mortgage companies don't routinely report down payment sources directly to the IRS - that's not their job. However, they do file what's called a Mortgage Interest Statement (Form 1098) that shows the IRS your friend bought a property. If the IRS ever decides to audit your friend, they'd look at his income versus his expenses and assets. A $50K down payment that doesn't align with reported income would raise immediate questions. The IRS could then subpoena the mortgage application documents, which would reveal the source of funds. It's not about the mortgage company reporting him - it's about the paper trail created during the mortgage process that could be discovered during an audit. The bigger issue is your friend deliberately hiding taxable income, which has no statute of limitations for fraud.

What was the small exchange you used? Was it US-based? I'm wondering if offshore exchanges report to the IRS too or if they're safer.

I didn't even realize there was a worksheet! I'll definitely look into that option. And yeah, the new form looks completely different from what I remember filing years ago - the elimination of allowances really threw me off. Thanks for the pointer about the worksheet!

Happy to help! The worksheet is actually on page 3 of the W4 form PDF from the IRS website. It's pretty user-friendly for simple situations like yours. Just be sure you're using the 2025 version of the form since they adjust the numbers slightly each year. Another tip: after you submit your W4, check your first couple of paystubs carefully to make sure the withholding looks reasonable. If it seems way off, you can always submit a new W4 to adjust. Most payroll systems let you update it anytime.

That's actually not how the new W4 works anymore. There's no place to put "0" since they eliminated allowances in 2020. The form is completely different now. You'd need to add an additional amount to be withheld on line 4(c) if you want extra withholding.

Thanks for mentioning this! Do you know if setting up a payment plan affects your credit score? And is there a minimum amount I have to pay monthly or can I set it to whatever I can afford?

Setting up an IRS payment plan generally doesn't directly affect your credit score - the IRS doesn't report to credit bureaus like a normal lender would. However, if you fail to pay and the IRS files a tax lien, that WILL hurt your credit. So the payment plan actually helps protect your credit by preventing more serious collection actions. For monthly payment amounts, it depends on how much you owe. For debts under $10,000, you can pretty much set your own monthly payment as long as you can pay off the full amount within 3 years. For larger amounts, the IRS may want financial information to determine what you can afford. They're surprisingly reasonable about this - they'd rather get paid slowly than not at all.

This is actually brilliant advice. I had a similar situation (though not as old) and the Social Security earnings record was spot on. Combined with the IRS transcript it gave me everything I needed!

Thank you for this perspective. My husband's company is pretty small (only 15 employees) and I think they're just not sophisticated with their accounting. When I asked him about it, he said they just direct deposit this extra amount every month with a note saying "travel" and have never asked for any kind of documentation. Should he just start tracking his miles anyway even if they don't require it?

Yes, he should absolutely start tracking his miles regardless of what the company requires. Use an app or a mileage log that records the date, business purpose, starting point, destination, and total miles for each business trip. This documentation will be invaluable if you're ever audited. With a small company, it's worth having a conversation with whoever handles payroll. They might genuinely not know the proper way to handle this. Many small businesses try to help employees with these stipends without realizing they're creating tax problems. You could suggest they implement a simple accountable plan where employees submit mileage logs monthly. This would make the stipend non-taxable when handled correctly, which benefits both the employee and employer (they wouldn't have to pay payroll taxes on properly documented reimbursements).

That's not entirely correct. You can't deduct both the standard mileage rate AND car payments. You have to choose one method - either standard mileage OR actual expenses. And with actual expenses, you can only deduct the interest portion of the car payment, not the principal, plus depreciation. And once you choose actual expenses for a leased vehicle, you have to use that method for the life of the vehicle.

Thanks for the suggestion! Do you know if bank-to-bank transfers also fall under this $600 reporting threshold, or is that just for payment apps?

Bank-to-bank transfers don't fall under the same $600 reporting requirements that apply to payment apps. Those rules specifically target third-party payment networks like PayPal, Venmo, etc. Regular transfers between bank accounts aren't subject to 1099-K reporting regardless of the amount. This is why some people prefer setting up direct transfers for recurring payments like rent or mortgage sharing. It's more straightforward from a tax perspective since there's no confusion about whether it's a business or personal transaction.

That's called "structuring" and it's actually illegal if you're doing it specifically to avoid reporting requirements. Not worth the risk just to avoid something that isn't even taxable in the first place.

Thanks for the info! Definitely don't want to do anything sketchy. Seems like the simplest approach is just to properly mark the payments as personal and not worry about it.