- November 8, 2023
- Posted by: legaleseblogger
- Category: Related News
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Handling Repayment from a Friend without Attracting IRS Attention
Over the course of the past few years, I have generously loaned my friend small amounts of money, totaling a significant sum. Now, with his improved financial situation, he wishes to repay me around $4,000. However, I am concerned about the potential tax implications and the scrutiny of the IRS in handling this transaction. We had not formalized the loans with any written agreements, as I had initially provided the funds without the expectation of repayment.
The prospect of receiving this repayment is incredibly important to me, and therefore, I am seeking guidance on the proper way to navigate this situation without inviting unwanted attention from the IRS.
This is where the AI Legalese Decoder can be of great assistance. The AI Legalese Decoder is designed to interpret complex legal language and provide clear and concise explanations of legal terms and concepts. In this case, the tool can help me understand the potential tax implications of receiving the repayment from my friend, as well as provide guidance on the appropriate steps to take to ensure compliance with tax laws and regulations. With the help of the AI Legalese Decoder, I can confidently navigate this transaction and avoid any complications with the IRS.
Thank you in advance for your assistance and advice.
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****** just grabbed a
Just have him give you cash or a check. There are no tax consequences
Nothing. It’s a reimbursement, which does not count as income. Neither you or your friend have any tax issues to worry about. He can just cut you a check.
You’re a good friend for helping out and not expecting anything back.
He’s a good friend for paying it back when he was able.
Lots of loans and money situations don’t work as well between friends.
If neither of you are drug dealers, engage in child slavery or other nefarious activities, he could Zelle it to you, write a check, give you cash, buy you a pound of weed.
So many of you have a movie like impression of the power of the IRS. They don’t have agents inside your bank accounts. If you aren’t up to no good, just have him pay you.
If he’s actually repaying you it’s not income or a gift
4000$ personal check with ÔÇ£ReimbursementÔÇØ in the memo
Cash and a thank you note
Even if it was just a gift, you can give $17k a year away and not have to pay any taxes on it
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A lot of folks here saying it’s a reimbursement but that doesn’t even matter.
Gift tax limits are something like 10k per person per year before you have to *report* it. Meaning two couples could transfer 40k per year before the IRS even cares that it happened.
Then it’s not even taxed until the amount that you report reaches something crazy like 11 million over your lifetime.
It’s a tax for the wealthy to stop them from end-running around estate tax when they die. It’s not for normal people.
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Thanks folks. I understand that itÔÇÖs totally ok to Zelle the money and have asked my friend to go ahead. Appreciate all your inputs.
This isn’t income. This is a loan repayment or reimbursement. There are no tax implications here.
Comments talking about “repayment” are actually giving you bad advice (though practically, it probably doesn’t matter).
With respect to the IRS, you should consider the original “loans” to be gifts to your friend and the “repayment” as a gift from your friend. You’re well below the threshold for reporting the gifts, not to mention the threshold for actually paying any taxes.
If these transactions were to be considered loans (by the IRS), then you’d have charged below market interest rates (0%), which does have tax implications (imputed interest).
He writes a check, you take the check, you deposit the check.
That is it. That’s the end. No one else cares about it at that amount.
The only way to mess this up is by trying to do something tricky for no reason.
Its not income, he is repaying a loan. if there is interest it is income. if not you’re all good just take a check and cash it.
Lots of financial advice already, so here’s some life advice. Unless there’s some really terrible thing you’d rather not bring up, you’ve got a good friend there, especially if he volunteered to pay you back without you asking for it or bringing it up. That’s someone to keep in your life going forward.
And kudos to you for paying for stuff without expecting anything back either. That is the proper way to do gifts. Expecting something in return means it’s not a gift, it’s a transaction.
Personal Check?
You don’t raise any red flags at a bank unless the amount is $10k or over. And I’d just make sure the memo says something like “repayment of loans.”
Paypal “send to a friend or family” or whatever it is. Yeah its on record but you can add a note specifying its to pay back a loan, then is the IRS for some reason wanted to audit, you have it on record. Or you can go cash, but if you deposit it, its on record and you have no backup for it. Your choice. You can use cash for a lot of things.
You’ve already paid tax on it when you earned it.
In this sense, you took money out of the bank and put it in your pocket for a while, and now you’re putting it back in the bank.
Just deposit it, I say.
(meanwhile, I sit here dreaming of the day that someone who borrowed money from me would say “here’s everything I owe you.”)
Side question. Would there be tax implications if the friend paid back the amount, but also with interest? Not that I’d report it but just curious. Thanks!
just hand over 4k cash
Congrats! I’ve never had people pay me back when we agreed that they would. I’m at about $16k over the years and I really wish I would see any of it, ever. Especially with the hurt experienced by 2 of them, one saying I didn’t deserve it, and the other disappearing, never acknowledging that he couldn’t afford it or making excuses. Just ghosting.
ItÔÇÖs 4K youÔÇÖre not exchanging millions 🙂
he gives you the money. No tax implications
Its a small amount I wouldn’t worry.
If youÔÇÖre worried about it, ask for cash. Then use it for gas, groceries and other necessities over the next few months. You will be able to save your regular income in the bank this way
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You can gift up to $17k in a year to someone before it gets taxed, $34k if theyÔÇÖre married. So itÔÇÖs fine to transact all at once.
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