I understand that cash gifts to my wife are not taxable; however, if I gift my wife $100,000 with cash from under my mattress, do I have to report it to the IRS?

[dhuber24]

I don't have this money in a bank account, it is pure cash in a safe. Are there rules against gifting "actual cash"?

[DoninGA]

Cash gifts to a spouse are not reported on a tax return or on a Form 709 as long as your spouse is a US citizen.

[dhuber24]

So I take my wife to the bank with $100k in cash, deposit it, and the bank won't send anything to the IRS simply because I told them it's from me?

[rjs]

The bank has to report any cash transaction over $10,000, no matter who it's from. But that doesn't make the gift taxable, and it doesn't mean you have to report it on your tax return.

[DoninGA]

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@dhuber24 wrote:

So I take my wife to the bank with $100k in cash, deposit it, and the bank won't send anything to the IRS simply because I told them it's from me?

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The bank is required, by law, to report all cash deposits of over $10,000 to the IRS using Form 8300.  This law was put in place to assist in combating money laundering.

You still do not report the gift to your spouse on a tax return or on a Form 709. 

[rjs]

If the IRS looks into it at all, they might want to know how you came to have $100,000 in cash. If it was taxable cash income that you did not report on your tax return, they will charge you the back taxes plus interest and penalties. Depending on the circumstances, they might also dig deeper to see if you had any other income that you did not report. You might need a lawyer. If you might be on the hook for a large amount of tax, you might want to hold onto some of the money so you can use it to pay the tax, instead of giving it all away.

If you and your wife filed a joint tax return for a year that you had income that you didn't report, she is equally responsible for the back tax, interest, and penalties.

If you live in a community property state, any income that you received while you were married is probably community income, which means that your wife is responsible for reporting her share of it, even if she filed separately. If the cash that you give your wife is from community income (whether or not the income was reported), then only half of it is a gift. The other half belonged to your wife all along.

In spite of all this, though, giving the money to your wife is a nontaxable gift and you do not report it.