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What Your Bank REALLY Tells the IRS
We receive a lot of questions in our Ask a Banker in-box about banks' reporting of transactions to the IRS, so many questions, in fact, that it is clear that there is a lot of misinformation about the subject on the Internet and circulating by word of mouth. This article is an attempt to debunk the myths, scotch the rumors and dispel the misinformation that surround this question. |
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Cash Transactions
Federal law requires that banks, credit unions and other financial institutions file a Currency Transaction Report (CTR) with the IRS whenever one or more transactions in currency conducted on the same business day by or on behalf of the same person result in the bank's receipt or paying out of more than $10,000 in cash. The requirement applies whether the cash transactions are deposits or withdrawals, currency exchanges (including exchanges of foreign currency), check cashing, loan payments or disbursements, purchases of bank checks or any other transactions completed in cash. If the bank receives more than $10,000 in cash or pays out more than $10,000 in cash from the transactions, reporting is required.
The reporting requirement does not cover transactions completed by check, draft or any other non-cash method. It does require the bank to combine a business days' cash transactions that it is aware are conducted by or on behalf of the same person to determine whether the $10,000.01 reporting threshold is reached.
The filing of CTRs says nothing about the source of reported cash. CTRs only report the fact of transactions, not the reasons behind them. Law-abiding businesses and individuals should not be concerned when a CTR is filed.
Attempts to Avoid CTRs
Some individuals attempt to avoid the filing of CTRs by breaking up their transactions in currency -- deposits or withdrawals -- into smaller transactions. Under federal law, that's called "structuring," and it's illegal, whether the transactions are made on the same day, stretched out over two or more days, made at different tellers or different branches, or even at separate financial institutions. If a bank suspects that transactions have been structured, it could be required to disclose its suspicions to the government. Convictions for structuring can result in jail time and stiff fines.
The U. S. Treasury Department's Financial Crimes Enforcement Center (FinCEN) has a brochure available that describes CTR filing and structuring in more detail. If you can read documents in Portable Document Format (PDF), you can read the FinCEN brochure at http://www.fincen.gov/whatsnew/pdf/CTRPamphletBW.pdf. You may also be able to obtain a copy at your bank.
Published on BankingQuestions.com 4/10/2009
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