Does this sound legal or illegal?

[sleepyheads]

I'm a lurker from another board, but thought you ladies may have more knowledge about this topic. My MIL started a business about a year ago and my H had borrowed some money from her to start a business about 2-3 years ago. Many of her customers pay her in cash.



Over the the holidays she asked H if he would take 7k from her in cash and either 1) deposit it into our account and then write a check to her mortgage company or 2) use the cash to get a cashiers check and pay her mortgage. If we did this, she told us we wouldn't need to pay back the loan that we borrowed. This sounds like some sort of tax evasion on her end and I want no part of it. Based on this info alone (because this is all the info I have), do you think it could be anything other than tax evasion of some sort? TIA.



Edit: Meant to post on MM. Will copy over there

[oswin]

I'm not sure exactly what she gains by doing this, but there must be something she wouldn't be asking for it. I strongly suspect it's illegal. I don't see how she'd gain $7k by doing this such that it'd be worth it to forgive the loan.

[niq]

Jan 29, 2016 17:12:37 GMT -5 oswin said:

I'm not sure exactly what she gains by doing this, but there must be something she wouldn't be asking for it. I strongly suspect it's illegal. I don't see how she'd gain $7k by doing this such that it'd be worth it to forgive the loan.

Especially since loan forgiveness is often a taxable event!

OP, your MIL should probably talk to an accountant. The good news is as long as the IRS gets their money, they are usually happy.

[sleepyheads]

I should probably edit the OP, as the loan I'm talking about was simply MIL giving us 7k of her own money, not any loan with a bank , for my H's new business. MIL is telling H we don't have to pay her back if we do this for her.

[sleepyheads]

Jan 29, 2016 17:20:31 GMT -5 @rennido said:

I'm guessing she needs to pay something, but she over drew her bank account and they will take the money. I don't think this is a tax issue.

I'm like 80% positive that she really doesn't have to report anything she makes under 10k right? I know a guy (construction) that bids jobs that are just under 10k so he doesn't have to report them. Sneaky as fuck.

Oh she made way over 10k...probably between 60-100k I'm guessing. I think it's a coincidence that the amount she wants us to deposit and pay her mortgage is about the same we borrowed from her- actually I think what we owe her is a bit less, maybe 6500.

[explorer2001]

There are so many read flags here.

1) the IRS may be looking at her bank accounts for deposits to document unclaimed cash income (which is tax evasion and bad)

2) the IRS looks at whether or not you can afford your lifestyle/bills on your reported income. If they don't line up, the audit can get pretty intense. I had a client years ago go through this and it is still one of my top 5 worst audits. If you pay her mortgage for her, it helps explain away the lifestyle/income disconnect and could conceivably implicate you as complicit in helping her hide income/evade taxes

3) it could be viewed as money laundering; taking her unclaimed income and washing it through your accounts to make it appear legitimate when deposited in her account or used to pay her bills

4) $7000 is well below the annual gift exclusion but if this happens more, you could end up over the limit and if MIL doesn't pay/report the gift tax the IRS could take it from the "gifts" you received - aka your money. Plus again how did she gift $$$ she didn't earn and back to the lifestyle mismatch.

[explorer2001]

Jan 29, 2016 17:20:31 GMT -5 @rennido said:

I'm guessing she needs to pay something, but she over drew her bank account and they will take the money. I don't think this is a tax issue.

I'm like 80% positive that she really doesn't have to report anything she makes under 10k right? I know a guy (construction) that bids jobs that are just under 10k so he doesn't have to report them. Sneaky as fuck.

Wrong and illegal!

Under $10,000 the bank doesn't have to report the transaction to the Treasury so it won't be tracked. That doesn't make the income non-taxable. It makes the guy you know a tax evading cheat!

[sleepyheads]

Jan 29, 2016 17:28:57 GMT -5 explorer2001 said:

There are so many read flags here.

1) the IRS may be looking at her bank accounts for deposits to document unclaimed cash income (which is tax evasion and bad)

2) the IRS looks at whether or not you can afford your lifestyle/bills on your reported income. If they don't line up, the audit can get pretty intense. I had a client years ago go through this and it is still one of my top 5 worst audits. If you pay her mortgage for her, it helps explain away the lifestyle/income disconnect and could conceivably implicate you as complicit in helping her hide income/evade taxes

3) it could be viewed as money laundering; taking her unclaimed income and washing it through your accounts to make it appear legitimate when deposited in her account or used to pay her bills

4) $7000 is well below the annual gift exclusion but if this happens more, you could end up over the limit and if MIL doesn't pay/report the gift tax the IRS could take it from the "gifts" you received - aka your money. Plus again how did she gift $$$ she didn't earn and back to the lifestyle mismatch.

I agree with all this, which is why I want nothing to do with it. I'm wondering if they are any LEGAL reasons why she would want us to this. I can't think of any myself.

[steph96]

But if you wrote her a check for the $7k loan, she would still have to deposit it into her bank account, correct? I don't think it's anything going on with her account. I think she is trying to launder money.

[sleepyheads]

Jan 29, 2016 17:51:16 GMT -5 steph96 said:

But if you wrote her a check for the $7k loan, she would still have to deposit it into her bank account, correct? I don't think it's anything going on with her account. I think she is trying to launder money.

She wants it sent to her mortgage company, which is a bank, but it would not be deposited into a checking/savings account.

[steph96]

Jan 29, 2016 17:58:45 GMT -5 sleepyheads said:

Jan 29, 2016 17:51:16 GMT -5 steph96 said:

But if you wrote her a check for the $7k loan, she would still have to deposit it into her bank account, correct? I don't think it's anything going on with her account. I think she is trying to launder money.

She wants it sent to her mortgage company, which is a bank, but it would not be deposited into a checking/savings account.

Oh wow I didn't realize that she wanted the entire amount to be sent to her mortgage company. Derp.

[sleepyheads]

I can ask H to ask her, but I'm not sure if she would give a straight answer anyways. She does what she wants to work the system as best she can. She even claimed disability when she left her old job to start up this business and got 50% pay plus health insurance...so I don't really trust anything she would tell us.

[explorer2001]

Jan 29, 2016 18:04:36 GMT -5 @foodielicious said:

I don't know about whether this is legal or not, but it just sounds all around hinky.

How big is her mortgage payment? I doubt that's just one payment but if you send that in, it's not like she's not going to have to pay next month.....they'll just apply any extra to principal.

This request seems to have come in a vacuum, is she not open to questions? Or have you just not had the time to ask?

One thing is if you do this, is it going to look like you gifted *her* 7K? And what does that do to your taxes?

It does nothing unless they exceed the annual exclusion which is $14K from each person, to wach person.

[sleepyheads]

Jan 29, 2016 18:04:36 GMT -5 @foodielicious said:

I don't know about whether this is legal or not, but it just sounds all around hinky.

How big is her mortgage payment? I doubt that's just one payment but if you send that in, it's not like she's not going to have to pay next month.....they'll just apply any extra to principal.

This request seems to have come in a vacuum, is she not open to questions? Or have you just not had the time to ask?

One thing is if you do this, is it going to look like you gifted *her* 7K? And what does that do to your taxes?

Her payment would not be even close to that a month, but my understanding is that it's not a traditional loan. She built her house and I believe H told me years ago she somehow did it as a line of credit. So it may just being going towards the line of credit she used to build the house. And I didn't think of it possibly coming back as us gifting her the money. I'll bring that up to H.

[madringal]

Jan 29, 2016 17:31:05 GMT -5 explorer2001 said:

Jan 29, 2016 17:20:31 GMT -5 @rennido said:

I'm guessing she needs to pay something, but she over drew her bank account and they will take the money. I don't think this is a tax issue.

I'm like 80% positive that she really doesn't have to report anything she makes under 10k right? I know a guy (construction) that bids jobs that are just under 10k so he doesn't have to report them. Sneaky as fuck.

Wrong and illegal!

Under $10,000 the bank doesn't have to report the transaction to the Treasury so it won't be tracked. That doesn't make the income non-taxable. It makes the guy you know a tax evading cheat!

A CTR is used to report cash transactions greater then 10k. A MIPL is used to report the cash purchase of a money order or cashiers check from 3-10k. They both fall under the Bank Secrecy Act and are equally important. The MIPL is just lesser known.

[dexteroni]

I have no idea what kind of shady business she has planned, but do NOT get involved in it. You already know she ranges from suspicious to outright illegal (hi, disability fraud). You know you need to stay far away from this and any of her other schemes.

[dr.girlfriend]

I can't think of any non-shady reason she would have for doing this. Stay FAR away.

[spunkarella]

Ditto explorer2001 all the way. OP, do not do this. Pay back the loan and get out from under that kind of pressure.

[AAM2012]

No no no!

[kwynn]

I have no idea what she's trying to do - but it sounds and feels wrong, so don't do it.

If you really want to put effort into it, ask your own accountant or attorney to explain it. I'd personally rather GIVE my own mom 7k if she was having a tough time (put it on her mortgage for her) than her using me to do something that seems wrong and will get us all in trouble.

Can you just hurry and repay the loan to her and move on? I'd try to get a bank loan and repay her and get away money-wise from her!

[sfy]

Jan 29, 2016 18:11:31 GMT -5 @chloe77 said:

Can you ask her why she wants you to do this?

Okay, so it's not just me. Why doesn't your husband just ask his own mother instead of you asking strangers on the Internet? Maybe she's honest, maybe not, but that seems like the obvious place to start, at least.

[atarianna]

Jan 29, 2016 17:31:05 GMT -5 explorer2001 said:

Jan 29, 2016 17:20:31 GMT -5 @rennido said:

I'm guessing she needs to pay something, but she over drew her bank account and they will take the money. I don't think this is a tax issue.

I'm like 80% positive that she really doesn't have to report anything she makes under 10k right? I know a guy (construction) that bids jobs that are just under 10k so he doesn't have to report them. Sneaky as fuck.

Wrong and illegal!

Under $10,000 the bank doesn't have to report the transaction to the Treasury so it won't be tracked. That doesn't make the income non-taxable. It makes the guy you know a tax evading cheat!

I just want to add too that banks track below $10k as well, especially when it appears people are structuring it to remain under the $10k threshold.

[moolarkey]

Does she owe the IRS or state or local taxes and they will seize her checking account so she doesn't want mortgage money in there to be seized? Has she had a legal judgement against her where they can seize her money? Possibly her bank account is frozen for these or other reasons so any money that goes in, she can't access.

[moolarkey]

Could it be that this large amount could be questioned as to the origin of the money and possibly cost her the disability income she's getting?

[LoveTrains]

Jan 30, 2016 8:10:44 GMT -5 atarianna said:

Jan 29, 2016 17:31:05 GMT -5 explorer2001 said:

Wrong and illegal!

Under $10,000 the bank doesn't have to report the transaction to the Treasury so it won't be tracked. That doesn't make the income non-taxable. It makes the guy you know a tax evading cheat!

I just want to add too that banks track below $10k as well, especially when it appears people are structuring it to remain under the $10k threshold.

and to reiterate - all income is taxable to the IRS!!!!

[sleepyheads]

Thanks for all the replys. H asked her today (she had the cash and wanted him to take care of it today) and she said so she doesn't have to pay taxes on it. At least she was honest, so we are not getting involved.