The IRS requires any trade or business to file Form 8300 if they’ve received any cash payments over $10,000. Financial institutions such as a bank must also report all transactions by, through, or to the institution by filing a Currency Transaction Report for cash transactions that exceed $10,000. These filings can help reduce crime, but this can also be intimidating when you have a legitimate source of funds. So, what happens when you personally deposit more than $10,000? Do you need to be worried? If you’re not doing anything illegal, it’s unlikely that there will be negative consequences.
Why Does the IRS Track Large Deposits?
The IRS and other organizations monitor activity that may be related to financial crime. Cash payments are difficult to track, making cash a useful tool for illegal activity. The funds can potentially be laundered—or integrated into the financial system in ways that hide evidence of their questionable origin, according to the U.S. Department of the Treasury. Plus, it can be easier to evade taxes for cash income you receive when there’s no paper trail. Because of this, federal law requires banks and credit unions to create a paper trail of potentially suspicious transactions. The Bank Secrecy Act, in particular, requires financial institutions to keep records of certain activities, including cash deposits exceeding $10,000.
How Much Cash Can You Deposit Without Flagging the IRS?
The Bank Secrecy Act specifies transactions of more than $10,000. However, it’s possible to raise red flags if you deposit less than that, especially if it appears that you’re intentionally trying to stay below the $10,000 limit. Banks and regulators keep an eye out for so-called “structuring”—the act of splitting up transactions to prevent filings that could create an unwanted paper trail. For example, if you have $12,000 in cash, you might be tempted to make two separate deposits of $6,000. In some cases, your bank may file a report after you make the deposits, even if you spread the deposits out over several days or weeks.
What Happens When Suspicious Deposits Are Reported?
Reports of large transactions create a paper trail that regulators and law enforcement agencies can use for future investigations.
Customer Identification
When filing a Currency Transaction Report, banks must verify your identification and include that information with your report. For example, the bank will provide your Social Security number, name, address, account numbers, and other details to the Financial Crimes Enforcement Network (FinCEN).
Combination of Transactions
Banks review all transactions through various banking channels on the day in question. Any cash transactions are combined and treated as a single transaction, and those transactions count toward the $10,000 limit. For example, if you deposit $9,500 of cash with a teller and deposit an additional $600 of cash at an ATM, those deposits result in a total that exceeds $10,000.
Search for Structuring
Banks must identify if you are structuring deposits to avoid potential filings. If they determine that you are, the bank must file a Suspicious Activity Report, which may result in additional scrutiny of your account activity.
Filing and Recordkeeping
All required information goes into a Currency Transaction Report that must be filed with FinCEN within 15 days of the transaction in question. Banks must also retain records for five years after the date of the report.
