You’ve just deposited a large sum of cash or received an unusually hefty check, and now you’re wondering: Will your bank notify the IRS? Many people assume banks keep their transactions private, but financial institutions often have mandatory reporting requirements that might put your finances under the IRS microscope.
Knowing when and why banks report deposits can help you avoid unnecessary headaches — or worse, IRS scrutiny. Here’s a closer look at why banks have to disclose certain transactions to the IRS and what it means for your finances.
Do banks report deposits to the IRS?
In many cases, bank deposits aren’t reported to the IRS. However, banks do report deposits over $10,000. This is required as part of the Bank Secrecy Act (BSA). Note that this amount is the daily aggregate amount, meaning if you have multiple transactions in a day that add up to $10,000 or more, the financial institution must report it.
In this case, banks must either file IRS Form 8300 or use electronic filing to report large transactions. The form is due 15 days after the transaction, but financial institutions can e-file for free. In addition, banks must file FinCEN Form 104, Currency Transaction Report (CTR).
The $10,000 threshold helps detect and prevent money laundering. The Department of the Treasury imposes reporting requirements on financial institutions to combat illegal practices. For instance, financial institutions also must report suspicious activity that could indicate illegal activity, tax evasion, or other criminal activities. This is why the BSA is sometimes called an “anti-money laundering law.”
Are other transactions reported?
Your bank may report transactions that don’t exceed the $10,000 threshold. However, reporting your transactions is generally not a requirement in this instance.
Each financial institution is different, so the best way to confirm is by asking the bank directly. You can mention FinCEN Form 104 and/or IRS Form 8300.
What does the IRS do with bank deposit information?
The IRS doesn’t outline its specific process for handling Currency Transaction Reports, but it does mention they may help examiners with the following:
- Making decisions on the need to complete additional auditing techniques
- Questioning sources of income not subject to withholding tax
- Generating leads for potential unreported income, money laundering transactions, and other tax avoidance schemes
The IRS says it may use the CTR to decide whether to conduct further audits of a person. It also uses them to identify unreported income and analyze sources of income that aren’t subject to withholding tax. In other words, it uses them for more than just identifying money laundering — it also looks for potential tax evasion.
Can the IRS look at your bank accounts?
The IRS’s primary duty is collecting taxes, and it sometimes goes to great lengths to ensure it receives as much tax revenue as possible. This may cause it to scrutinize certain transactions or income sources and inquire about them, which can happen if you’re facing an audit or owe back taxes.
Alternatively, you might have cash deposits without a reasonable explanation. For instance, they may not come from your reported profession. If this happens, the IRS may ask you for records to back up those transactions.
If you refuse to provide the requested records or fail to do so by the deadline, the IRS may then ask your bank for access to your bank records. So, while the IRS can’t access your bank accounts directly, it can request records for your accounts, which it may use in its investigations.
Bank deposits and the IRS FAQs
What happens if I deposit a $20,000 check?
If you deposit a $20,000 check, your bank must file IRS Form 8300 within 15 days of the transaction. In addition, it should file FinCEN Form 104, Currency Transaction Report (CTR).
Is depositing $2,000 in cash suspicious?
Depositing $2,000 in cash is generally not suspicious, as it doesn’t reach the $10,000 threshold. However, it could still raise red flags with the IRS, especially if you have a series of somewhat large deposits like this without explanation.
How much money can you receive without reporting to the IRS?
The amount you can receive without reporting to the IRS depends on the situation. For instance, you can receive up to $400 of self-employment income without reporting it. As mentioned, any cash deposits of over $10,000 must also be reported.
