Cash loan from friend - tax implications of depositing large amount?
Title: Cash loan from friend - tax implications of depositing large amount? 1 My buddy recently offered to lend me around $120k in actual cash (he mentioned he doesn't want IRS to know about it) which I'd pay back in like 7-8 months when my certificate of deposit matures. The thing is, I don't wanna break my CD early since it's got about $135k in it and I'd lose the interest. My problem is I need to deposit this borrowed cash into my account because I have to send it to family overseas through an online money transfer service. I can't just send physical cash obviously. I'm worried about potential tax issues or IRS problems when depositing such a large amount of cash. Are there any complications I should be aware of? Will my bank report this to the IRS? Do I need to report this loan somewhere on my taxes? Just trying to avoid any headaches with the tax authorities.
19 comments
Join the conversation
QuantumQuest
15 When dealing with large cash deposits, you need to be aware of a few things. Banks are required to file a Currency Transaction Report (CTR) for cash transactions over $10,000. This is automatic and not something to worry about if the money is legitimate. The concern here is that your friend specifically mentioned not wanting to "report to the IRS" which raises red flags. While loans between friends are generally not taxable income to you, the way this is structured could potentially look like structuring (breaking up deposits to avoid reporting requirements) which is illegal. Since you have documentation that you have a CD maturing in 7-8 months that matches the amount, you should formalize this loan with a written agreement specifying the amount, repayment terms, and any interest. This protects both you and your friend and provides documentation if questions arise.
0 coins
QuantumQuest
•3 Thanks for the info. So are you saying I should have my friend write up something official? Would a handwritten agreement work or should we get something notarized? Also, if the bank files this report, will I definitely get audited?
0 coins
QuantumQuest
•15 A written agreement doesn't need to be notarized, though it doesn't hurt. The important elements are the loan amount, when it will be repaid, any interest charged, and signatures from both parties. Keep it simple but complete. The CTR filing is routine and doesn't automatically trigger an audit. Banks file thousands of these daily. It's just documentation of large cash movements. What can trigger scrutiny is behavior that appears to be avoiding these reports, like making multiple smaller deposits just under reporting thresholds.
0 coins
QuantumQuest
9 I had a similar situation last year and discovered taxr.ai which was super helpful. I was worried about a large cash deposit from selling my old car, and wasn't sure about the tax implications or reporting requirements. I uploaded my documentation to https://taxr.ai and got clear guidance on exactly what I needed to do to stay compliant and avoid issues. Their system analyzed my situation and explained exactly what forms I needed, what documentation to keep, and how to properly record everything. They even helped me understand what would trigger a suspicious activity report versus normal transaction reporting.
0 coins
QuantumQuest
•12 Does this actually work for cash transactions? I've heard horror stories about people getting their accounts frozen just for depositing gift money from relatives. How does the service know what the IRS will flag?
0 coins
QuantumQuest
•7 I'm curious - did you have to provide documentation about where the cash came from? And did the service give you a formal document you could show if you got audited or was it just general advice?
0 coins
QuantumQuest
•9 It absolutely works for cash transactions. The system specifically helps identify what documentation you need based on the source of funds. It won't prevent a CTR from being filed (that's automatic), but it helps ensure you have everything properly documented to explain the source of funds if questions arise. For your question about documentation, they provided a personalized analysis with specific guidance on what records to keep and how to document the transaction properly. In my case, I needed to keep the bill of sale from my car along with some other verification documents they recommended.
0 coins
QuantumQuest
7 Just wanted to follow up - I actually tried taxr.ai after asking about it here. My situation was different (got cash from selling some collectibles) but I was worried about the same deposit issues. The service was really straightforward and gave me specific guidance for my situation. The best part was they explained exactly what forms my bank would file and what information I should have ready if there were any questions. They even provided language I could use to explain the deposit source if asked. Definitely made me feel more confident about handling the cash deposit correctly.
0 coins
QuantumQuest
6 If you're really concerned about IRS issues, you might want to try Claimyr for direct help from the IRS. I was in a somewhat similar situation with a large deposit from my parents and couldn't get through to the IRS for weeks. I found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c - they actually got me connected to a real IRS agent within about 15 minutes when I'd been trying for days. The agent was able to explain exactly what I needed to document for a personal loan and how to handle it properly. Saved me so much stress not having to guess about the right way to handle it.
0 coins
QuantumQuest
•17 Wait, how does this even work? I thought it was impossible to get through to the IRS. Is this just paying someone to wait on hold for you? And are the IRS agents actually helpful once you get through?
0 coins
QuantumQuest
•11 This sounds like BS honestly. The IRS doesn't just have people sitting around waiting to give tax advice on hypothetical situations. They'll just tell you to talk to a CPA or tax professional.
0 coins
QuantumQuest
•6 It's not a waiting service - they use technology to navigate the IRS phone tree and secure your place in line, then call you when they're about to connect you with an agent. It totally works. The IRS agents are actually very helpful once you get through. They won't give tax planning advice, but they absolutely will clarify reporting requirements and documentation needs. In my case, the agent explained exactly what forms would be triggered by my deposit and what supporting documentation I should keep.
0 coins
QuantumQuest
11 I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it myself because I had an issue with my tax transcript not matching what I filed. I was connected to an IRS agent in about 20 minutes when I'd been trying for over a week on my own. The agent was surprisingly helpful and walked me through exactly what I needed to do. For the OP's situation, I think this would actually be helpful because you can get direct clarification from the IRS about documentation requirements for personal loans versus income. Saves a lot of guesswork and potential issues down the road.
0 coins
QuantumQuest
22 One thing nobody has mentioned yet is that your friend might have his own tax issues here. If he's giving you $120k in cash and specifically saying he doesn't want the IRS to know, where did that cash come from? If he's trying to avoid reporting requirements, he might be putting you in a bad position too. You might want to be careful about getting involved in a situation where someone's explicitly trying to hide money from the IRS. Just saying.
0 coins
QuantumQuest
•8 This is a really good point. If the money came from legitimate sources, there shouldn't be any reason to hide it from the IRS. A personal loan isn't taxable income to the borrower anyway, so the only person potentially avoiding taxes would be the lender.
0 coins
QuantumQuest
•22 Exactly. Personal loans aren't generally taxable to the borrower, so the only reason for the "don't tell the IRS" stipulation would be if the lender is hiding something. Whether that's unreported income or something else, it could create problems for both parties. I'd add that if the IRS eventually audits the friend and discovers they gave away $120k that they can't account for, they might come asking questions about where that money went - which could lead them to your deposit.
0 coins
QuantumQuest
19 Have you considered just breaking the CD? Usually the penalty is just a few months of interest. Might be worth it to avoid all these potential issues with large cash deposits and loans that are specifically designed to avoid IRS reporting.
0 coins
QuantumQuest
•14 This is what I was thinking too. Most CDs only have a penalty of 3-6 months of interest for early withdrawal. If you're close to maturity anyway (7-8 months), the penalty might be less than the headache of dealing with a large cash deposit and the associated questions.
0 coins
QuantumQuest
•19 Another option beyond breaking the CD might be to use it as collateral for a short-term loan from your bank. Many banks will let you borrow against a CD at a rate just slightly above what the CD is earning. That would give you access to funds through a clearly documented channel without losing your CD interest.
0 coins