In today’s digital age, having a bank account has become a central part of our everyday lives. However, with the possibility of a U.S. default looming, the safety and stability of traditional banking systems have been called into question.
The latest news about regulators’ seizure of First Republic Bank only adds to many people’s skepticism about conventional banking systems. As a result, many people in the United States are looking for alternatives to store their hard-earned money.
One of the solutions gaining popularity is living without a bank account and relying solely on cash. If you’re thinking about exploring a bank-free lifestyle, it’s important to understand the tax and other associated obligations. Here’s what you need to know.
Living without a bank account doesn’t mean you can’t earn money or pay your bills. However, it does mean that you must be extra diligent in keeping track of your income. If you receive payment in cash, keeping excellent records is important, as you may be subject to a higher level of scrutiny. While there’s nothing illegal about getting paid in cash, it’s important to be aware of tax and reporting requirements.
In order to maintain proper records of your sales, it is essential to accurately track all cash payments received for the goods or services you sell. These records should include detailed information such as dates and amounts.
However, it should be noted that if you receive a total of $10,000 or more in cash through a single transaction or multiple related transactions, you are required to submit Form 8300 to the IRS.
In addition, it is worth mentioning that even if these transactions take place over a period longer than 24 hours, they are considered related if you are aware of or have reason to believe that there is a connection between each transaction.
When it comes to expenses, legitimate expenses are still legitimate expenses, regardless of how you pay. However, it’s essential to keep detailed records, especially if you pay for expenses using cash. Keep your receipts for at least as long as the statute of limitations runs, and make notations on receipts if costs are higher than usual.
If you make cash payments to employees, ensure you account for payroll deductions and provide them with a payroll stub showing the amount paid, hours worked, and any benefits included. It’s important to be aware of tax and labor laws in your state and have the required information on the payroll stubs.
If you’re a business owner, it’s common practice to keep separate bank accounts for your expenses and income. Even if you choose not to use credit cards or bank accounts, it’s crucial to keep your personal and business items separate. Maintaining excellent records and documenting any unusual transactions is essential.
The Internal Revenue Service (IRS) offers several ways to pay federal taxes with cash. The agency recommends considering alternative methods, such as using a money order or prepaid debit card. However, if you prefer to pay with cash, it can be done through one of the IRS retail partners, subject to transaction fees.
If you need to pay more than $1,000 in cash or are more comfortable paying the IRS directly, you can visit an IRS Taxpayer Assistance Center (TAC), but you must make an appointment 30 to 60 days in advance.
Mailing cash is not a secure way to send money, and the U.S. Postal Service advises using a money order instead. Nevertheless, it is not illegal to mail cash, and you can send as much money as you want into or out of the country.
However, if it is more than $10,000, then you should report it to U.S. customs authorities using a Currency Reporting Form (FinCen 105). Failure to comply with this requirement can result in severe penalties.
Travelling with cash in the United States requires caution. It’s vital to secure your money while travelling and not make it obvious to others that you have cash.
While travelling in the United States, including by air, there are no restrictions on how much cash you can carry. Be mindful that law enforcement officials may inquire about your cash, and it is advisable to be prepared to answer their questions.
If authorities suspect that your cash might be associated with criminal activity, they have the authority to seize it. Thus, it is crucial to understand your rights, such as the right to decline a search of your vehicle and to keep a record of any encounters with law enforcement.
In summary, living without a bank account amid a possible U.S. default is a feasible option for those who are prepared to manage their finances diligently.
Maintaining detailed records of income and expenses is essential to avoid tax and reporting requirements. It’s also crucial to separate business and personal expenses to avoid any confusion.
The IRS offers various methods to pay federal taxes with cash, but mailing cash is not a secure option. Travelling with cash requires caution as the authorities may inquire about it. By understanding these aspects, individuals can confidently explore the alternative route of living without a bank account.