Most bank transactions are unremarkable and can happen with ease. But if you deposit a substantial amount of cash at a bank or credit union, your bank may take notice and report your deposits to the federal government. Even large payments to vendors can trigger reporting, so it’s wise to know what to expect when you pay with cash.
The IRS requires any trade or business to file Form 8300 if they’ve received any cash payments over $10,000. Financial institutions such as a bank must also report all transactions by, through, or to the institution by filing a Currency Transaction Report for cash transactions that exceed $10,000. These filings can help reduce crime, but this can also be intimidating when you have a legitimate source of funds.
So, what happens when you personally deposit more than $10,000? Do you need to be worried? If you’re not doing anything illegal, it’s unlikely that there will be negative consequences.
Why Does the IRS Track Large Deposits?
The IRS and other organizations monitor activity that may be related to financial crime. Cash payments are difficult to track, making cash a useful tool for illegal activity. The funds can potentially be laundered—or integrated into the financial system in ways that hide evidence of their questionable origin, according to the U.S. Department of the Treasury. Plus, it can be easier to evade taxes for cash income you receive when there’s no paper trail.
Because of this, federal law requires banks and credit unions to create a paper trail of potentially suspicious transactions. The Bank Secrecy Act, in particular, requires financial institutions to keep records of certain activities, including cash deposits exceeding $10,000.
By tracking large deposits, regulators and law enforcement organizations can potentially reduce money laundering and tax evasion. With those efforts, officials hope to prevent terrorism, illegal drug trade, and other financial crimes.
How Much Cash Can You Deposit Without Flagging the IRS?
The Bank Secrecy Act specifies transactions of more than $10,000. However, it’s possible to raise red flags if you deposit less than that, especially if it appears that you’re intentionally trying to stay below the $10,000 limit. Banks and regulators keep an eye out for so-called “structuring”—the act of splitting up transactions to prevent filings that could create an unwanted paper trail.
A series of structured deposits that exceed $10,000 can lead to a filing.
For example, if you have $12,000 in cash, you might be tempted to make two separate deposits of $6,000. In some cases, your bank may file a report after you make the deposits, even if you spread the deposits out over several days or weeks.
What Happens When Suspicious Deposits Are Reported?
Reports of large transactions create a paper trail that regulators and law enforcement agencies can use for future investigations.
When filing a Currency Transaction Report, banks must verify your identification and include that information with your report. For example, the bank will provide your Social Security number, name, address, account numbers, and other details to the Financial Crimes Enforcement Network (FinCEN).
Combination of Transactions
Banks review all transactions through various banking channels on the day in question. Any cash transactions are combined and treated as a single transaction, and those transactions count toward the $10,000 limit. For example, if you deposit $9,500 of cash with a teller and deposit an additional $600 of cash at an ATM, those deposits result in a total that exceeds $10,000.
Search for Structuring
Banks must identify if you are structuring deposits to avoid potential filings. If they determine that you are, the bank must file a Suspicious Activity Report, which may result in additional scrutiny of your account activity.
Filing and Recordkeeping
All required information goes into a Currency Transaction Report that must be filed with FinCEN within 15 days of the transaction in question. Banks must also retain records for five years after the date of the report.
The details of the process may not be comforting to hear, but if you’re not doing anything illegal, you don’t necessarily need to worry about these filings. For some people and businesses, it’s normal to deposit large amounts of cash (sometimes in a series of transactions), and there are legitimate reasons for doing so. If you have any concerns, discuss your account activity with your bank.
Frequently Asked Questions (FAQs)
How much cash can you deposit?
You can deposit as much as you need to, but your financial institution may be required to report your deposit to the federal government. That doesn’t mean you’re doing anything wrong—it just creates a paper trail that investigators can use if they suspect you’re involved in any criminal activity.
What bank does the IRS use for direct deposit?
The IRS issues and accepts payments through the U.S. Treasury.
How do I deposit cash into an online bank?
Online banks typically do not accept cash deposits. In most cases, you fund online-only accounts from an external bank (which might be a brick-and-mortar bank that accepts cash deposits) or via mobile deposit. With some online banks, you can also purchase a money order with cash and mail it in for deposit. All that said, some banks allow you to deposit cash at an ATM, but be sure to verify that this feature is available with the institution before opening an account.