question about reporting bank accounts on tax return

[dimi1119]

Dear Turbo Tax Support,

Single, filing individually.  In the tax year 2022, I had a relative who passed away.  I was a beneficiary on some of the decedent's bank accounts.  The sums on those were transferred to me.  I opened a bank account in my name and make check deposits of those sums into my account.  Do I need to pay taxes on those check deposits? Do those check deposits count as income?  And if the bank account accumulates interest, do I have to separately report that interest and pay taxes on it as well?  Thank you so much for your help!

[DoninGA]

A cash inheritance is not reported on a federal tax return.  Any interest earned on all funds deposited in your bank account is reported on a tax return.

[dimi1119]

Thank you so much. Will I automatically receive a tax form at the end of the year for the interest.  Or do I need to contact the bank in order for them to send me one?

[DoninGA]

---

@dimi1119 wrote:

Thank you so much. Will I automatically receive a tax form at the end of the year for the interest.  Or do I need to contact the bank in order for them to send me one?

---

If the interest earned for the year is more than $10 the bank will send you a Form 1099-INT for the interest earned.  Otherwise you will need to contact your bank in January of 2023.

[al_phillips]

Sorry about your mom.  Maintain the final statement(s) for the funds while in her name.  If there was interest it will need to be filed with her last and final return.  If the sum(s) was  below $10,000 there is no tax due on the inherited proceeds.  If (I believe this is still true) the sum(s) was over $10,000 a gift form needs to be filed by the executor/administrator of her estate, however, still no inheritance tax.  

[dimi1119]

Thank you so much for the useful information and for replying so quickly.  Really appreciate all of your help.  Also just another question, if I make a check deposit into my bank account which is more $10,000 dollars, do I need to report it to the IRS myself, or does the bank report it? And does it count as income.  How exactly does that process work?

Let's say, for example.  I receive a check from a living family member which is $25,000.  And I go to my local bank and deposit that check.  How does this reflect my taxes at the end of the year? Do I have to add this $25,000 to my total income?

Thank you so much!

[NCperson]

@dimi1119 @al_phillips = let's go back a little bit

1) as long as the estate was below $12 million, there is no inheritance tax. 

2) there are gift tax reporting requirements (inheritance is not a gift) if the gift exceeds $15,000, but that filing requirement is on the gifter not on the recipient. 

If you receive $25,000 as a gift from a living family member, you have no reporting requirment to the IRS.  IT is not income to you.  The family member would be required to fill out a gift reporting form but that is their responsibility - not yours

do not confuse money received as an inheritance vs. money received as a gift from a living indiviudal - rules are totally different. 

[DoninGA]

@dimi1119 Funds deposited into your personal bank account are not reported on your tax return regardless of the amount deposited.  The Bank will report to the IRS any cash deposits of $10,000 or more but that does not have any affect on your tax return.

Some other information on funds you may receive - 

Gifts you received from an individual are not reported on a tax return, regardless of the amount of the gift.

However, if a gift received from a foreign individual is more than $100,000 then you have to report the gift received using IRS Form 3520.

[dimi1119]

Thank so, so much, truly amazing advice.  

So, if a living family member makes a gift to me.  A check, let's say $25,000, I can go to my bank and deposit this check.  Not worry about having to report it on my tax return.  In addition my bank will let the IRS know that I made a deposit of said amount.  What does the IRS do with that information if it doesn't get taxed then? Does it just keep that information for record keeping purposes?

Also, the living family member that gifts me the check for $25,000.  They, themselves, actually do need to report that to the IRS?  That they are making a gift to a family member in the amount of $25,000.  Is there a form that is provided for them to fill out? Or does their bank create this form? Or is it on the IRS website?

Thank you so much!

[DoninGA]

---

@dimi1119 wrote:

Thank so, so much, truly amazing advice.  

So, if a living family member makes a gift to me.  A check, let's say $25,000, I can go to my bank and deposit this check.  Not worry about having to report it on my tax return.  In addition my bank will let the IRS know that I made a deposit of said amount.  What does the IRS do with that information if it doesn't get taxed then? Does it just keep that information for record keeping purposes?

Also, the living family member that gifts me the check for $25,000.  They, themselves, actually do need to report that to the IRS?  That they are making a gift to a family member in the amount of $25,000.  Is there a form that is provided for them to fill out? Or does their bank create this form? Or is it on the IRS website?

Thank you so much!

---

The Treasury department is notified of large cash deposits for determining bank fraud or other illegal activity.

The giver of a gift to an individual of over $15,000 in 2021 or over $16,000 in 2022 has to report the gift given to the IRS using Form 709.  This form is available through the IRS and has to reported in the tax year of when the gift was given.  However, there are no taxes owed on the gift given if the total of all gifts ever given is less than $11.7 Million in 2021.

[dimi1119]

Thank you so much, you make everything very clear and lucid to understand.

So this form 709, which needs to be filled out by the giver of the gift.  Is the giver then able use the gift amount as a deduction when filing their taxes?

[NCperson]

 Is the giver then able use the gift amount as a deduction when filing their taxes?

No; only gifts to non-profit organizations are eligible for deductions on a tax return. 

[dimi1119]

I'm just curious.  Since the giver of the gift has hypothetically already paid taxes on the gift that he is giving when he/she initially earned that money.  Why does he then have to pay taxes A SECOND time on that money that he is gifting.

Thank you!

[NCperson]

he is NOT paying taxes a 2nd time

That form 709 is just to report the gift; there is no current tax payment associated with it.

too complicated for this forum, but it would come into play later in his estate if he had more than $11.7 million in his estate less the sum of all the gifts reported on Form 709 over his life.   An unlikely event for most people.

[dimi1119]

OHhhhhhh, okay okay okay, i understand now. thank you

So basically the form 709 is for a cumulative total life record keeping of all the gifts ever given? to see if it ever goes above that 11 million dollar max.

But then what happens if someone exceed the yearly tax limit for a gift.  Let's say someone makes a single year gift above the tax limit.  Let's say a $30,000 gift in a year when the limit is $16,000?