Dealing In Large Amount Of Cash? Learn What Is Being Reported To The IRS

Most people know that banks are required to report customers that engage in a currency transaction of $10,000 or more. Having that much cash is not illegal but know that the bank will alert Uncle Sam that you deposited that much money in cash. These reports, called Currency Transaction reports, must be filed by every financial institution when the transaction exceeds $10,000. In 2008, the IRS collected 15,449,549 such reports.

What most Americans do not know are the other 7 reports routinely filed. Gambling establishments, for example, are also required to report any customer with more than $10,000 in cash. In 2008, they filed 452,075 reports.

Individuals with foreign bank accounts must also report their accounts to the government if the account has exceeds $10,000 at any time during the year. These reports are called Reports of Foreign Bank and Financial Accounts or FBARs for short.

Businesses are required to file if a customer receives more than $10,000 in any one transaction or two or more related transactions within 12 months. That means if you try to buy that nice motorcycle and make three $5000 cash payments you can expect the dealer to tell Uncle Sam. In 2008 the IRS received 173,345 reports, a figure that is believed to be artificially low. Many businesses are unaware of their obligation to file these reports.

Suspicious activity reports are filed by banks when someone attempts to "structure" cash deposits to circumvent reporting requirements. Think you are smart by depositing $9,999 or two $5000 payments at two different branches of the same bank? Expect Uncle Sam to be notified and be very suspicious. In 2008 733,543 such reports were filed. Gaming establishments have similar requirements.

Think you can avoid reporting requirements by purchasing money orders or traveler's checks? Perhaps by dealing with a money transmitters like Western Union? Think again. The government requires these so called money services businesses to file Suspicious Activity Report by Money Services Businesses (SARM) for suspicious transactions involving as little as $2000. Stock brokers have similar requirements.

Where do these reports wind up? They often in the hands of IRS criminal division special agents or IRS auditors. While there is nothing illegal in holding cash, suspicious transactions are red flagged and often result in heightened scrutiny. Note that within the realm of reportable transactions, some generate more scrutiny than others. For example, it is less suspicious to deposit $10,000 than it is to make repeated deposits for $9,990 in multiple branches on the same day.

Intentionally structuring transactions to avoid reporting is actually a federal crime even though possession of the money is not. The filing of foreign bank account forms, structuring transactions or suspicious activity reports filed about you is a sure ticket to an audit.