You’ve likely heard the stories about the IRS being notified when you deposit a large amount of cash. But what happens when you deposit over $10,000?
Who is responsible for reporting large deposits? And what will the IRS do if you deposit large amounts of cash?
We answer these questions and more in this article.
Table of Contents
- How Much Cash Can You Deposit Without Being Reported to the IRS?
- Do Banks Report Smaller Cash Deposits?
- Who Has to Report Large Cash Deposits?
- Why Does the IRS Require Reporting of Large Cash Deposits?
- What Is the Penalty for Not Reporting Large Cash Deposits?
- What Is the Penalty for Splitting Up Large Cash Deposits?
- Final Thoughts
How Much Cash Can You Deposit Without Being Reported to the IRS?
The answer to that question is a tricky one. The Internal Revenue Service (IRS) requires that financial institutions report all individual or business deposits over $10,000.
That means you can deposit up to $10,000 without your bank reporting it. However, if you deposit $10,000.01, the financial institution you deposit with must report it.
A bank or financial institution must fill out a CTR (Currency Transaction Reporting) Form 112 for deposits that meet this requirement.
The same rule applies to purchases made with cash over $10,000. So if you buy a car or other item with over $10,000 in cash, the dealer or private party must fill out IRS Form 8300.
However, no one needs to file a report if you buy a car with a $5,000 wire transfer and $5,000 cash. The same goes if you make a bank deposit of $5,000 in cash and have a wire transfer of $5,000 in cash on the same day.
That being said, in addition to actual coins and bills, the IRS considers the following monetary instruments as cash for reporting purposes:
- Money orders
- Traveler’s checks
- Cashier’s checks
- Bank drafts
Reporting entities like banks are also required to report smaller amounts if they suspect other monetary instruments are being used to avoid being reported on a CTR.
Do Banks Report Smaller Cash Deposits?
Banks may need to report your transactions to the IRS even if you make smaller cash deposits.
Individuals and entities such as banks or other businesses must fill out a Currency Transaction Report or Form 8300 if they make multiple cash deposits totaling over $10,000 in 24 hours.
For example, if you go to the bank and make a $4,000 cash deposit on Thursday at noon and another $7,000 cash deposit the next day at 11 a.m., the bank must submit a CTR form to the IRS.
However, banks, individuals, and businesses can also voluntarily fill out the form if they suspect you are “structuring” deposits.
To “structure” deposits means you purposely split up cash deposits to avoid your bank reporting those deposits to the IRS.
Let’s say, for example, that you make a $5,000 cash deposit on a Monday. Then you make another $6,000 cash deposit on the following Friday. Or you make a $3,000 cash deposit on Friday and another $3,000 the next Tuesday.
Even though the $11,000 you deposited didn’t fall within 24 hours, the bank can choose to file a CTR Form 112. They can do so on suspicion of structuring.
Bank personnel and other entities have the right and the responsibility to determine whether the form is necessary and whether or not they suspect that a customer is structuring.
This is true no matter what type of bank you bank at.
Who Has to Report Large Cash Deposits?
IRS rules state that any person in a trade or business that receives more than $10,000 in cash in a single transaction must file Form 8300.
Note that this includes multiple related transactions in which the individual cash amounts might be $10,000 or less but that, together, total over $10,000.
A trade or a business can include:
- Real estate brokers
- Insurance companies
The individual or organization must submit the report within 15 days of receiving the cash deposit. Banks and financial institutions have to file a Currency Transaction Report Form 112.
In addition, the form must include the Taxpayer Identification Number of the person who deposited the cash.
If the person depositing the cash refuses to provide their tax ID number, the organization must submit the form explaining why they didn’t include the cash depositor’s tax ID number.
Why Does the IRS Require Reporting of Large Cash Deposits?
The IRS requires the reporting of large cash deposits to help track down and discourage illegal activities, including unreported income, illegal drug trading, money laundering, and more.
By working to keep track of large cash deposits, the government can help keep a lid on such activities.
If you legally make a large cash deposit, you don’t need to worry when your financial institution completes Form 8300 or a Currency Transaction Report.
What Is the Penalty for Not Reporting Large Cash Deposits?
The IRS can penalize banks and other entities that fail to report large cash deposits or purchases. As of the 2021 filing year, the penalties for non-reporting include the following:
- $280 for negligent non-filing per incidence
- The greater of $28,260 or the amount received in the transaction, up to $113,000 for intentional neglect to file
Other fees may apply as well, depending on the situation. So, as you can see, it is a smart business for banks and other entities to fill out the CTR Form 112 or Form 8300 when applicable. And it’s the law.
What Is the Penalty for Splitting Up Large Cash Deposits?
The IRS may penalize you for intentionally splitting up large cash deposits to avoid bank filing of Form CTR 112. The government determines the penalty amount depending on the situation.
If you have acquired the money legally, it’s best to deposit it as a whole amount if you want it all in the bank.
The reporting entity or person must file the report within 15 calendar days of the transaction. In addition, they must inform you of the filing. However, the deadline for informing is January 31 of the year following the filing.
That means you may not find out that a CTR Form 8300 was filed on you until several weeks or months after the form was filed. However, some individuals or entities might inform you immediately if the form was filed.
Form 8300 or CTR Form 112 is sent to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of Treasury.
FinCEN will investigate where your cash came from to ensure it didn’t come from any illegal activities.
If they determine you aren’t involved in any illegal activities, you have nothing to worry about. However, you may be asked to explain where the cash originated from.
For instance, some businesses deal largely in cash. For example, if you sell crafts at craft fairs, you may primarily take cash in as a form of payment for the goods you sell.
Because of your business, you routinely make large cash deposits in your business bank account.
In this case, it’s completely understandable that you may have cash of over $10,000 to deposit in the bank.
If FinCEN determines that your actions in obtaining the cash were illegal, you will be penalized according to federal law.
Withdrawals of over $10,000 in cash or suspected structuring of multiple withdrawals of cash that add up to over $10,000 must be reported to the IRS.
The law states that any cash transaction of over $10,000, whether it’s a withdrawal, a deposit, or a purchase, must be reported.
The government makes it very easy to file Form 8300 or CTR. You can file online at the Bank Secrecy Act e-filing system.
The form can also be mailed to:
The Detroit Federal Building
P.O. Box 32621
Detroit, MI 48232
It’s important to know what happens when you deposit more than $10,000 to a bank or make a purchase that includes a payment of over $10,000 in cash.
Remember that cash and equivalents deposited or used in a purchase can trigger an IRS investigation. However, as long as your actions and cash acquisition are legal, you have nothing to worry about.