Can the IRS Track Checks Cashed at Banks?

The IRS doesn't keep tabs of every taxpayer's banking activity. However, it does have the ability to access your bank information. It is especially interested in cash deposits that exceed $10,000, and in hefty foreign bank accounts. The IRS may access your banking information if they audit your tax return or enact a tax levy.

Can the IRS Track Checks Cashed at Banks
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Deposits Over $10,000

The Bank Secrecy Act requires banks to report cash transactions over $10,000 to the IRS. Banks only are required to report transactions made in cash. That means that the bank isn't going to alert the IRS if you transfer $11,000 from your checking to your savings or deposit a $11,000 check. However, it will alert the IRS if you make that $11,000 deposit in cash. Banks may also report activity if you're making multiple cash deposits just under $10,000.

Foreign Bank Accounts

In an effort to curb tax evasion, the IRS requires taxpayers to report on any sizeable foreign bank accounts. Taxpayers are required to fill out a report of foreign bank and financial accounts — known as an FBAR — if the aggregate value of the accounts ever exceed $10,000 during the year. If it is suspicious of the activity in your foreign bank account, it usually has the resources to access your bank information. Thousands of banks in almost 70 countries share account information with the IRS.

Audit Investigations

While the IRS won't normally peruse your bank account information, it could do so during an audit. During an audit, an IRS agent will investigate your financial records and look for any unreported taxable income. The agent can access your bank account information him or herself or request that you provide all of your bank account records. The IRS agent can review checks cashed and single out any transactions that seem suspicious. If they see a deposit or transfer from an account you haven't already provided, you'll be obligated to provide information on that bank account as well.

Tax Levies

In addition to checking your banking activity, the IRS can access your bank account funds in certain situations. If you fail to pay your taxes and don't obtain an extension or installment plan, the IRS could levy the account, which allows the IRS ro withdraw a predetermined amount. If you don't have enough funds to cover the entire bill, the IRS can levy your account multiple times. The IRS will send you a notice and give you the opportunity to have a hearing before enacting a tax levy.

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