Banks do not report deposits made into a bank account to the Internal Revenue Service except under abnormal circumstances, and reporting does not depend upon the total amount of money in the account. The IRS primarily wants to discover suspicious transactions where deposited funds have been acquired through illicit means. For this reason, the IRS sets limits on the types of transactions that banks must report, requiring banks to report all cash deposits of $10,000 or more.
Benefits Of Reporting
Congress passed the Bank Secrecy Act of 1970 in order to locate instances of money laundering and tax evasion. IRS rules on bank reporting requirements primarily help law enforcement locate and prosecute individuals in the business of selling illegal drugs. In the wake of the 9/11 terrorist attacks on the World Trade Center, bank reporting laws under the Bank Secrecy Act also help shut down sources of terrorist financing within the United States.
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The IRS isn't the only agency to which banks might report unusual activity: In some cases, they're also required to report suspicious transactions to the Treasury Department's Financial Crimes Enforcement Network, known as FinCEN.
Types Of Reporting
The IRS requires banks to report, using Form 8300, any cash bank deposit of $10,000 or more in value. The IRS defines cash as currency or coins that are legal tender in the United States or another country. Banks do not report personal checks deposited into an account regardless of the amount, because such monies are traceable due to the funds being drawn on another customer's account. If a bank account owner deposits a cashier's check, bank draft, money order or traveler's check into their account of $10,000 or more, and the bank believes the money will be used for criminal activity, the bank must report this transaction using Form 8300.
The reporting requirements also aren't just related to banks. Other businesses that receive cash payments over $10,000 also are generally required to report those to the IRS.
Some money launderers, terrorists or tax dodgers will make smaller deposits to avoid reporting requirements. If a customer deposits more than $10,000 into his account in separate transactions over a 24-hour period, the bank must count all the deposits as one transaction for reporting requirements. If a bank suspects a depositor is placing money at regular intervals into an account to avoid reporting, the institution also must report these transactions to the IRS.
Filing By Banks
Banks will mail Form 8300 within 15 days after a reportable transaction takes place. This form requires the bank to list its business information and the personal information of the depositor. In addition, the bank must describe the amount of the transaction and how the bank received the funds.
Foreign Asset Reporting
U.S. taxpayers with money in foreign bank accounts are sometimes required to report those funds to the IRS and to FinCEN. Generally, for example, unmarried people with more than $50,000 in foreign accounts at the end of a tax year, or $75,000 at any point in the year, are required to report that to the IRS. Any U.S. citizen or resident with more than $10,000 in foreign accounts at any point in the year generally needs to report that to FinCEN, though the exact details vary based on the exact nature of the assets and other factors.
If for some reason you are under investigation by the IRS, such as for misrepresenting your income on a tax return, they have the authority to request documents from banks and other institutions. You might also be asked to share bank information during an IRS audit.
If you fail to pay the taxes you owe, the IRS can also seize funds from your bank accounts to cover the amount owed.
- U.S. Internal Revenue Service: Form 8300
- Office of the Comptroller of the Currency: Bank Secrecy Act
- FINCen: Suspicious Activity Report Statistics
- IRS: Form 8300 – Is Your Business Filing the Proper Cash Transaction Forms?
- IRS: Comparison of Form 8938 and FBAR Requirements
- IRS: Frequently Asked Questions (FAQs) Pertaining to Summonses
- IRS: The IRS Collection Process