[NYCONRAD]

I'm having a discussion with a neighbor and think that his information is off base.
He says that he has been told:

- You do not have to claim a 401K on forms requesting information about your assets since the IRS does not know that it exists since it is only reported to them when you make a withdrawal. Until then it is invisible to them.

- If you have a bank account in a bank that is in a town that does not directly border your town that the IRS will not find it if you are audited.

- If you have a non-interest bearing account the IRS will not know that you have this account if transactions are kept below $10,000 each.

Is any of this accurate?

[NYCONRAD]

On the above #1, no new contributions are being made so it is not on the W-2.

[ebaines]

I don't get what the point of all this is.

1. What forms are you talking about? Your 401(K) can not be garnished - is that what you're getting at?

2. If you're being audited by the IRS it's presumably because there is some question about your income taxes - such as failure to report income. All banks report interest they pay out ito individuals in excess of $10 - it doesn't matter whether the bank is in a town that borders yours or not. There is no automatic reporting of bank balances to the IRS, so again I don't understand what the point is here.

3. If you have a non-interest bearing account then you have no income from the account, which means that of course there is nothing to report to the IRS. Seems obvious to me. All cash transactions in excess of $10K are reported to the IRS- doesn't matter whether it's an interest bearing account or not. Conversely, cash transaction less than $10K are typically not reported to the IRS.

[NYCONRAD]

I don't get what the point of all this is.

1. What forms are you talking about? Your 401(K) can not be garnished - is that what you're getting at?

2. If you're being audited by the IRS it's presumably because there is some question about your income taxes - such as failure to report income. All banks report interest they pay out ito individuals in excess of $10 - it doesn't matter whether the bank is in a town that borders yours or not. There is no automatic reporting of bank balances to the IRS, so again I don't understand what the point is here.

3. If you have a non-interest bearing account then you have no income from the account, which means that of course there is nothing to report to the IRS. Seems obvious to me. All cash transactions in excess of $10K are reported to the IRS- doesn't matter whether it's an interest bearing account or not. Conversely, cash transaction less than $10K are typically not reported to the IRS.

#1: The question is: When applying for something like student loans, when asked about assets, you do not have to list something like a 401K as an asset since they have no way of knowing that it even exists - the IRS will have no record of it until you make withdrawals.

#2: You make deposits of 9K a month into a non-interest bearing account. If audited he claims that they will only look for accounts in your name in your home town and bordering towns only. (You can have an account in a town 10 miles away and the IRS will not find it)

#3: If one (A potential terrorist, criminal, or anyone etc) puts $9,000 into a non-interest account every month for a year (total of $108K for the year). Since no interest is reported to the IRS or other government departments, they are unaware that this account exists.

[ebaines]

My points are that:

#1. The IRS has nothing to do with student loans. And most (all?) institutions don't make you disclose your 401(k) assets when applying for a loan because you don't have access to them anyway.

#2. The IRS doesn't care if you have a million dollars in a bank account - they only care that you pay income tax on the interest the account generates. Audits aren't about your assets, they're about your income and taxes paid on that income. Or are you talking about what happens if you owe a lot of money to the IRS and how to hie assets from garnishment?

#3. The IRS cares about large cash transactions as they are indicative of significant financial activity - legal or otherwise. If you claim low income on your income taxes but are washing $10K through the bank every couple of days they will question what's going on. And yes, if you deposit only $9K no record of that transaction is sent to the IRS. Are you suggesting the threshold for reporting should be a smaller amount? By the way, this has nothing to do with whether the account is interest bearing or not. And if the government is investigating you for criminal activity they can always sunpoena your bank records anyway, and those records would include ALL transactions.