Depositing large amounts of money into a bank account isn't automatically subject to scrutiny from the IRS. However, the Bank Secrecy Act (BSA) of 1970 requires financial institutions to report deposits of more than £6,500 to the IRS, other government agencies and law enforcement to curtail money laundering and drug trafficking. Other deposits of any amount can be reported to the IRS if financial institutions believe they are suspicious.
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Reporting large cash deposits to the IRS isn't an option for banks and financial institutions; it is required by law.
Banks must file a Suspicious Activity Report (SAR) for every transaction or attempted transaction over £3,250 if the bank suspects, knows or believes the deposit has been obtained illegally. Financial institutions and nonfinancial institutions are required to report check deposits, cash deposits, withdrawals and cashed checks to the IRS to help identify possible tax fraud and terrorist financing activities. It is important to remember that an SAR can be filed for a deposit of any amount.
Whether or not you must report gifts to the IRS depends upon if you are the giver or the receiver. Generally, money or property given as a gift is subject to a gift tax. Under IRS rules in 2011, a person can give a gift of up to £8,450 to another person and it will not be subject to a gift tax.
Any gift amount over £8,450 must generally be reported and is subject to tax; it's best to check with a tax professional for exact requirements, since the maximum gift tax exclusions vary according to the giver's tax filing status.
Currency Transaction Report
Another tool that banks have for reporting deposits is the Currency Transaction Report (CTR). Banks submit a CTR to the IRS if they receive a large cash deposit of any amount, even if it is under £6,500. Banks are also required to report multiple transactions in a single business day.
Seek Professional Help
The IRS and banks have a number of automatic reporting requirements in place that are designed to catch people who may be depositing cash illegally or hiding it as unreported income. Though some people try to take advantage of the system, banking rules make it harder to make deposits without having it reported to the IRS or other government agency.
If you make large deposits, it is best to get professional advice. An accountant is qualified to help advise clients with deposits over £6,500, if you run a business with frequent cash deposits or if you get gifts. When it comes to the IRS, it is best to have a qualified tax professional tell you upfront what the reporting requirements are and to obey the tax laws.
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