I just want to point out that intentionally breaking up deposits to avoid reporting requirements (called "structuring") is actually illegal, even if the money is 100% legitimate. I've seen people mention this but want to emphasize it - depositing the full $4k at once is actually LESS suspicious than doing 4 separate $1k deposits.

I'm sorry for your loss. As others have mentioned, $4,000 is well below the $10,000 threshold for mandatory bank reporting to the IRS, so you should be fine depositing it all at once. One thing I'd add that might help ease your mind - keep a simple written record of what this money was for. Something like "Cash inheritance from Uncle [Name] - designated for funeral expenses, deposited [date] to pay credit card used for funeral costs." This isn't required for the bank, but it's good practice for your own records in case you ever need to reference it later. Also, while this cash won't trigger any IRS reporting, remember that inheritance itself generally isn't taxable income to you as the recipient - it's the estate that would handle any tax obligations. So even from a tax perspective, you're in the clear. Take care of yourself during this difficult time.

@Aaron Lee (the original poster) - I wanted to circle back to your specific situation since there's been so much great advice in this thread! Based on what you described (8 bags of clothing donations plus cash donations throughout the year), here's what I'd recommend: First, contact the shelter where you donated the clothes ASAP to get a receipt if you don't have one already. Most shelters are used to providing these retroactively. For valuing those 8 bags, use the "thrift store test" others mentioned - think about what each category of items would actually sell for at a thrift store, not what you originally paid. Since you file MFJ, your 2025 standard deduction will likely be around $29,200. To benefit from itemizing, your total deductions (charitable donations PLUS mortgage interest, state/local taxes, medical expenses, etc.) need to exceed that amount. Don't just look at donations in isolation. Given the volume of your donations, it might actually be worth paying for a consultation with a tax professional this year, especially since you mentioned never tracking donations before. They can help you properly value everything and determine if itemizing makes sense. You could also try some of the tools mentioned in this thread like taxr.ai to get a better sense of your total deductible amounts. The key is getting organized now while the donation is still fresh in your memory, rather than scrambling at tax time!

One important thing I haven't seen mentioned yet is that for clothing donations valued over $500, you'll need to file Form 8283 (Noncash Charitable Contributions) with your tax return. This form requires more detailed information about each item donated, including the date acquired, how you acquired it, and your cost basis. Also, if any single clothing item is valued at more than $5,000 (like a designer dress or expensive coat), you'll need a qualified appraisal. Most regular clothing donations won't hit this threshold, but it's worth keeping in mind if you donated any high-end items. Another tip: keep a detailed list of what you donated by category. Instead of just writing "8 bags of clothes - $400," break it down like "10 men's shirts - $40, 6 pairs women's jeans - $60, 5 sweaters - $50" etc. This level of detail will be crucial if you're ever audited and shows the IRS you made a good faith effort to properly value your donations. The combination of your clothing donations plus cash contributions might actually get you closer to making itemizing worthwhile than you think, especially when you factor in your other potential deductions!

Great question about the 1099 reporting! I run a similar childcare assistance program and went through this exact dilemma last year. Based on our experience and consultation with our CPA, you'll definitely need to issue 1099-NEC forms to the providers. The IRS considers these payments as compensation for services, regardless of whether you're paying on behalf of the families or directly for your own organization's benefit. Since you're the entity cutting the checks and the providers are performing services (childcare), the $600 threshold applies. One thing we learned the hard way: make sure you collect W-9 forms from all providers before making your first payment. We had to scramble at year-end to get tax information from some providers, which delayed our 1099 processing. Also, keep detailed records showing which families each payment benefits - this helps with both your grant reporting and provides backup documentation if there are any questions later. The good news is that most childcare providers are already accustomed to receiving 1099s from families who pay them directly, so this shouldn't be a surprise to them.

This is such a timely discussion! I'm actually in the planning stages of a similar childcare assistance program and this thread has been incredibly valuable. One additional consideration I haven't seen mentioned yet is whether you need to coordinate with any state reporting requirements. In our state, certain childcare assistance payments have additional reporting obligations beyond the federal 1099 requirements. I discovered this when speaking with our state's childcare licensing division - they mentioned that some direct payment programs need to be reported to help them track funding sources and ensure compliance with state childcare regulations. It might be worth checking with your state's childcare regulatory agency to see if there are any additional reporting requirements for your direct payment program. I'd hate for anyone to get surprised by state-level compliance issues after getting the federal tax reporting sorted out! Also, thanks to everyone who shared the practical tips about W-9 collection and QuickBooks setup - those details are exactly what I needed to hear as I'm building our administrative processes.

Important note: The 92.35% multiplier exists because employees only pay FICA taxes on 92.35% of their self-employment income. The other 7.65% is considered the "employer equivalent" portion of self-employment tax that you get to deduct from your income. This is one of those weird tax rules that makes the math confusing but actually benefits you as a self-employed person. It's the government's way of creating some parity between self-employed people and regular employees.

Just wanted to add one more helpful tip that saved me a lot of headaches: make sure you're keeping detailed records of all your business expenses throughout the year, not just scrambling to find them at tax time. I use a simple spreadsheet to track everything monthly - office supplies, software subscriptions, business meals, mileage, etc. It makes calculating that net business income so much easier when you need to figure out your self-employment tax base. Also, don't forget that you can deduct half of your self-employment tax as an adjustment to income on your regular tax return. So even though you pay the full 15.3%, you get to deduct 7.65% worth when calculating your income tax. It's like getting back the "employer portion" that regular employees never see on their paychecks.

Just to add another perspective - I work in tax prep and see this question come up a lot. While technically you're supposed to report all gambling winnings, the practical reality is that for amounts under $600, many people don't bother and it's rarely an issue. The bigger concern is being consistent - if you're going to report small winnings, make sure you're also tracking and reporting ALL your gambling activity throughout the year, not just the wins. Also worth noting that if you do decide to report it, you'll need to pay taxes on the full $275 even if you lost money on other nights at the casino (unless you itemize and can prove those losses with documentation). So if you're taking the standard deduction, you're essentially paying taxes on gross winnings without being able to offset losses.

As someone new to this community, I really appreciate all the detailed advice here! I'm in a similar boat - won about $150 at a local casino last month and had no idea about the reporting requirements. The consensus seems to be that while technically all gambling winnings should be reported, the practical enforcement for small amounts without casino documentation is minimal. What really helped me understand this better was the point about itemizing vs. standard deduction - if you can't itemize to offset losses, you're paying taxes on gross winnings which could be more costly than the risk of not reporting small amounts. For peace of mind though, I think I'm going to report mine anyway and just consider it the "cost of doing the right thing." Better to be overly cautious with tax matters, especially as someone who's never dealt with gambling income before. Thanks everyone for the education!