A visit from an IRS special agent (criminal investigation)
Mar 2, 22, 6:31 pm
#46
Original Poster
Join Date: Apr 2013
Posts: 568
I'm surprised Alliant hasn't shutdown your account as of yet, several acounts were shutdown for MO deposits a couple of years ago.
https://www.doctorofcredit.com/allia...s-mo-deposits/
https://www.doctorofcredit.com/allia...s-mo-deposits/
Mar 2, 22, 7:23 pm
#48
Join Date: Jun 2012
Posts: 103
The Contract that wins today is usually the one that is a cash transaction - sellers dont want to see "subject to finance" in this market.
Last edited by bailey911; Mar 2, 22 at 7:28 pm
Mar 2, 22, 7:38 pm
#49
Join Date: Oct 2019
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Mar 2, 22, 9:04 pm
#50
Original Member
Join Date: May 1998
Posts: 1,135
Oh Wise and Concerned Flyertalkers,
Special Thanks to the OP for sharing this story. It brings back memories for me.
I am both a CPA and CFE with 40 years experience. I worked as a Special Agent with the Internal Revenue Service, Criminal Investigation Division for 10 years. If the OP was under suspicion for either Tax Evasion/Crimes (26 USC 7201, 7206(1)) or Money Laundering (18 USC 1956/1957) then the behavior of the Agents (i.e. visiting unannounced) is totally Standard Operating Procedure. I am still unclear about the whole "Manufactured Spending" (MS). I thought MS is when you use a Credit Card (Like Amex Plat) and buy an item that is very liquid (i.e. Gold/Silver Coins, Gift Cards, etc.) and you immediately monetize those items at the same cost or very slightly less. The end benefit to the MS process is that the Cardholder than derives Points, Cash Back or some other monetary benefit, that when compared to the spend and any reduced monetization, is profitable. Do I have the MS basics ?
There is ample case law to support that Frequent Flyer Benefits and other Loyalty Awards are not taxable. However, be aware that FINCEN is aggressively monitoring all kinds of Financial Transactions. The OP likely got flagged when his total Credit Card spend exceeded his reported income. Couple this with ownership of a Coinbase Account and any of a multitude of other factors which I no longer follow and SURPRISE, you have 2 IRS Special Agents at your doorstep. Pre-Paying Credit Cards used to be the Classic Money Laundering scheme. However, almost every Bank prevents you from having a negative balance today and will promptly refund any overpayments or credit balances. Lastly, if the government felt that one was deriving substantial income or MS was the principle source of income, they might try to make a case of unreported income. The bigger concern for the government in the OPs case is the source of the money.
OP (ZEPP) feel free to contact me on PM if you ever have any concerns about this issue.
Special Thanks to the OP for sharing this story. It brings back memories for me.
I am both a CPA and CFE with 40 years experience. I worked as a Special Agent with the Internal Revenue Service, Criminal Investigation Division for 10 years. If the OP was under suspicion for either Tax Evasion/Crimes (26 USC 7201, 7206(1)) or Money Laundering (18 USC 1956/1957) then the behavior of the Agents (i.e. visiting unannounced) is totally Standard Operating Procedure. I am still unclear about the whole "Manufactured Spending" (MS). I thought MS is when you use a Credit Card (Like Amex Plat) and buy an item that is very liquid (i.e. Gold/Silver Coins, Gift Cards, etc.) and you immediately monetize those items at the same cost or very slightly less. The end benefit to the MS process is that the Cardholder than derives Points, Cash Back or some other monetary benefit, that when compared to the spend and any reduced monetization, is profitable. Do I have the MS basics ?
There is ample case law to support that Frequent Flyer Benefits and other Loyalty Awards are not taxable. However, be aware that FINCEN is aggressively monitoring all kinds of Financial Transactions. The OP likely got flagged when his total Credit Card spend exceeded his reported income. Couple this with ownership of a Coinbase Account and any of a multitude of other factors which I no longer follow and SURPRISE, you have 2 IRS Special Agents at your doorstep. Pre-Paying Credit Cards used to be the Classic Money Laundering scheme. However, almost every Bank prevents you from having a negative balance today and will promptly refund any overpayments or credit balances. Lastly, if the government felt that one was deriving substantial income or MS was the principle source of income, they might try to make a case of unreported income. The bigger concern for the government in the OPs case is the source of the money.
OP (ZEPP) feel free to contact me on PM if you ever have any concerns about this issue.
A person buys $500 variable prepaid debit cards from a store such as Kroger, earning credit card reward points. A lot more worthwhile if the person is doing minimum spend to get a credit card welcome bonus, but there are a number of credit cards that give 2-6 times the regular loyalty points for grocery store spending.
The person takes those prepaid debit cards to WalMart and either does a BillPay transaction to repay the credit card balance, buys money orders to mail to the credit card companies, or buys money orders and deposits them into a banking account. Doing too many Billpays is a major source of credit card shutdowns. Some credit card companies will call if they get a continuous stream of money order payments, but some are okay with that technique.
But for whatever reason, most FT’ers seem to want to take the money orders and deposit them into bank accounts and use those bank account balances to make payments to satisfy the credit card debts. Making thousands, if not hundreds of thousands, of deposits into a bank account in the form of money orders made payable to ones self is likely generating SARs that are occasionally followed up on by IRS CID, which is not surprising. In a strange way, that is easier for the MSer than the classic civil audit technique of making the taxpayer prove that each deposit does not constitute income.
Personally, I think a person is better off taking each money order and mailing it as payment on the credit card debt.
Mar 2, 22, 9:36 pm
#51
Join Date: Aug 2012
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Plenty of normal folks sitting on an already paid off house/high amounts of home equity who can make a jump to an equal or cheaper property as a cash buyer once their old house gets sold off. We bought cheap enough to get a 15 year mortgage in 2001, and could sell high enough now to be cash buyers now in a number of places we'd be okay with living in while only throwing a little bit of cash on top of the proceeds from the house sale.
Mar 3, 22, 6:57 am
#53
Join Date: May 2008
Posts: 166
Mar 4, 22, 8:06 am
#54
Join Date: Apr 2015
Location: Hopkinton, MA
Posts: 230
Sorry. This is wrong. I've used pre-payment for at least 35 years. First did it when our honeymoon was coming and we were going to be in Hawaii for 2 weeks. As new college grads with short credit histories, both the wife and I had limited credit card limits. But if you send in $5000 for a $500 credit limit card, you do absolutely have the ability in Hawaii to spend $5500.
This past week, I paid all my high spend credit cards because my credit union is changing systems and sent messages that their bill pay system won't work. Not wanting a problem, I just went in and paid everything off in full. Well, my Wells Fargo credit card with auto pay happened to be on payment the next day and guess what? The full balance BEFORE my payment was taken out, so today i have minus $700 some odd to spend. Yes, I agree that SOME credit cards won't allow you to pay more than you owe. I have some. And if you do a manual pay, it adjusts your auto pay so you never pay more than what's owed. But that for me is a minority. Out of 24 active cards I have, I'd say 4 don't allow overpayment.
Mar 4, 22, 11:32 am
#55
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The IRS often sends out agents to houses without prior announcement of the visits. Sometimes the IRS even sends its agents out to a last/older address on the individuals' tax files -- assuming it's a domestic US address -- when the IRS can't figure out the location of a target of an investigation or of a collection effort or can't get a response for whatever reason.
Last edited by GUWonder; Mar 4, 22 at 11:38 am
Mar 4, 22, 8:18 pm
#56
Join Date: Dec 2008
Location: SRQ
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Sorry. This is wrong. I've used pre-payment for at least 35 years. First did it when our honeymoon was coming and we were going to be in Hawaii for 2 weeks. As new college grads with short credit histories, both the wife and I had limited credit card limits. But if you send in $5000 for a $500 credit limit card, you do absolutely have the ability in Hawaii to spend $5500.
This past week, I paid all my high spend credit cards because my credit union is changing systems and sent messages that their bill pay system won't work. Not wanting a problem, I just went in and paid everything off in full. Well, my Wells Fargo credit card with auto pay happened to be on payment the next day and guess what? The full balance BEFORE my payment was taken out, so today i have minus $700 some odd to spend. Yes, I agree that SOME credit cards won't allow you to pay more than you owe. I have some. And if you do a manual pay, it adjusts your auto pay so you never pay more than what's owed. But that for me is a minority. Out of 24 active cards I have, I'd say 4 don't allow overpayment.
This past week, I paid all my high spend credit cards because my credit union is changing systems and sent messages that their bill pay system won't work. Not wanting a problem, I just went in and paid everything off in full. Well, my Wells Fargo credit card with auto pay happened to be on payment the next day and guess what? The full balance BEFORE my payment was taken out, so today i have minus $700 some odd to spend. Yes, I agree that SOME credit cards won't allow you to pay more than you owe. I have some. And if you do a manual pay, it adjusts your auto pay so you never pay more than what's owed. But that for me is a minority. Out of 24 active cards I have, I'd say 4 don't allow overpayment.
In the day Money Launders would prepay Credit Cards to the tune of hundreds of thousands of dollars. I know this as I investigated a Political Corruption matter where the wife of an elected official prepaid 18 separate credit card accounts. When her family would buy assets or pay for extravagant travel, they used the Credit Cards, giving the illusion that they were simply going into debt, but in reality, they were harvesting the ill gotten gains.
You provide an instance where you paid the balance of your credit card in full and for some reason the same bank processed an Auto Payment that caused your card to have a negative, or prepaid balance. Be assured that if your card had a negative balance (i.e. they owed you) for more than 30 days the Bank would have promptly sent you a check for the negative amount. No USA bank is going to allow you to maintain a negative or prepaid balance on a Credit Card for more than 30 days. Now I understand that for new credit applicants there is a product called "Pre-Paid" Credit Card. These products are not traditional Credit Cards, but rather a hybrid between a Pre-Paid Gift Card and a credit line that can grow based on the use and continued replenishment of the card. Also these products might allow the user to establish a small credit line (usually not above $5,000). Hardly an attraction to a hardened Money Launder.
Mar 5, 22, 8:41 am
#58
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Mar 7, 22, 12:38 pm
#60
Join Date: Aug 2014
Posts: 1,183
Banks don't like multiple forms of payment. I can't imagine the automatic red flag it must be to a banking institution to have thousands of dollars in money orders snail mailed regularly. What legitimate purpose could that possibly serve from the bank's perspective? On top of that, if the mail loses the MO, I can only imagine the disaster it would be to track it down or having to go through WU or MG. I tried the "check free pay" years ago at Walmart and that was sketchy enough with the payment going through and then not posting for 2-3 days with my credit card. Finding the right institution that allows MO's to be deposited is always the way to go, then paying from that checking account. I'm not putting scores of MO in the mail, honestly, do people on here do that?
ETA- Yea it's a PITA too! ^
ETA- Yea it's a PITA too! ^
Last edited by DeltaNeutral28; Mar 7, 22 at 12:43 pm Reason: .
