@SingerHiker wrote:
Thanks for your quick response. I really appreciate it.
It is my money, but the source is a bank. Won't that cause a red flag? The dividends/interest go back several years. I just received all the statements earlier this year. I am concerned about reporting the source and about the dividend/interest amount I'd report.
Is it worse to not report and re-file later, OR under-report and then re-file later?
Thank you very much for your thoughts.
There is no particular red flag when banks transfer money. There is an automatic report generated for transactions over $10,000, but even that does not create an automatic assumption that the money is "taxable income." Moving your own money is not income.
You need to declare the interest income as taxable income. Technically, if the money was in your account and spendable by you, then the interest was reported and taxable in the year it was paid, even if you forgot you had it. I think how serious this is depends on how much money. Suppose you received $5 of interest in 2020-2023--technically, that should be reported on your 2020-2023 tax returns, which would mean filing amended returns for all the prior years. I probably would not file amended returns for that small an amount, just include all the income with your 2023 tax return. (This is not a legal opinion, just what I would do.) If the interest payments are large, then it might be more important to amend your prior returns.
