Do Banks Report Check Deposits to the IRS?

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Staff Writer - Angela
October 24, 2018

If you want the quick and easy answer to if banks report check deposits to the IRS, then it largely depends on the amount of the deposit. The IRS certainly does not have time to monitor every single check from every high school part-timer in America. The IRS trusts all of those smaller transactions to be included in your yearly tax return if you make over $10,000. Speaking of $10,000, that’s the number that will cause the to start IRS keeping a closer eye on you. It’s the income at which you start filing tax returns, but it’s also the amount where the IRS begins questioning the legality of transactions.

The Big Number

If you make any business transaction where the amount surpasses $10,000, you’ll have to fill out Form 8300, which the bank will send to the IRS. The form will ask for the following information:

  • Personal information of the person that the money is coming from. This includes their name, address, date of birth, occupation, and taxpayer identification number.
  • Personal information of the person depositing the money into their account. This includes their name, address, date of birth, taxpayer identification number, employer identification number, occupation, and alien identification.
  • Details of the transaction. This includes the transaction date, amount of the deposit, whether there was more than one transaction, the amount received from each payment method, and the nature of the transaction as a whole.
  • Details of the business that received the money. This includes the name of the business, the address of the business, as well as the employer identification number and social security number.

Form 8300 is a measure put in place to prevent money laundering and other criminal activities related to the American banking system. The major exception to this is for monetary transactions taking place between close family members. If a family member gives a child a large check, it might go unnoticed, even if it is a transfer of over $10,000.

Staggered Deposits

If you’re looking at that $10,000 number and thinking to yourself that you can stay off of the IRS’s radar by depositing multiple smaller amounts, think again. Perhaps you are depositing multiple checks from one source that culminate to a value over $10,000. If these transactions all take place within a 12-month period, you’ll still be required to submit Form 8300. The requirement is the same if multiple transactions of a similar nature take place over a 24-hour period. The bank will report check deposits to the IRS.

Besides it likely not saving you any work, staggering out your deposits could even end up harming you. If there isn’t any good reason for why the payments are split up beside avoiding notice by the IRS, it could be classified as “Structuring.” This process is illegal and will get you in serious trouble regardless of whether the original transaction was wholesome or not.

Dubious Behavior

The IRS is quite used to catching suspicious financial activity after the many, many years of dealing with clever folks trying to get around the system. While the IRS typically doesn’t have the resources to care about private bank accounts, that doesn’t mean they can’t see them. The bank will report check deposits to the IRS. They have more than enough power to access details about your account and will undoubtedly assert that authority if they notice patterns in your transactions that don’t feel right.

The IRS has had multiple instances in the past where it noticed small businesses making numerous transactions under $10,000 and flagged them. In some of these cases, the IRS would even flush peoples’ bank accounts without filing criminal charges. In late 2017, the house of representatives cracked down on this practice, limiting their reach regarding civil forfeitures.

The IRS is only allowed to seize your bank funds if those funds came from illegal activity. Also, business owners that do have their money seized will be allowed to challenge the decision in a timely fashion. So the IRS is not going to forcefully empty your bank account anymore without some strong evidence of criminal activity. They are still able to get information about your account on demand though.

Overseas Funds

So we know that the IRS has the authority to monitor the activities of American bank accounts as they deem necessary. It is also worth noting that the IRS has enough global presence that they can see the details of offshore bank accounts in multiple countries as well. There are many legitimate reasons for why you may be getting income to a foreign bank account. You may have a spouse or business partner working in another part of the world.

Besides that, it should be no surprise that overseas sanctuaries exist for people to store their money and evade taxes. The IRS combats this with systems such as FBAR and OVDP. A good number of countries are cooperative with the IRS and will disclose banking details to them if requested. Although even with that said, it takes an incredible amount of resources for the IRS to track foreign income of all kinds.

Just Be Transparent

When banks report check deposits to the IRS, for the majority of the time, the IRS is going to prefer to ignore you and your bank activity. Even if you do make larger transactions that mean you need to submit information to them, they likely won’t make anything of it. Once in a blue moon, they might feel something is off and decide to audit you. Even in that case, so long as you can explain why any transactions happened the way that they did, then there shouldn’t be anything to worry about.

If there’s anything else about your taxes that you want to know, then we here at Solvable have articles to answer all of your debt relief questions. If you need help dealing with your tax debt and don’t know who to turn to, then we’ll guide you to the best company to help you. We do in-depth, comprehensive reviews of debt relief companies, so you know which companies you can trust.

 

 

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