How Much Money Can You Deposit Before it is Reported?

If you’re a small business owner who accepts cash, you might make your own deposits into your bank account. Everything’s going great. Your business is making money, you’re depositing a large amount of cash, and everybody’s happy.

That is until you get a notice in the mail that you’ve been reported to the Internal Revenue Service (IRS) or Financial Crimes Enforcement Network (FinCEN). Don’t panic, though. It doesn’t mean you’ve done anything wrong. Financial institutions are required to report large deposits of over $10,000. However, if the bank reports your cash deposits before you do, you may end up with a fine or, worse yet, have your account frozen.

There are also a few other situations that can put you on the IRS’s radar. Knowing what your reporting requirements are to the IRS and how to file them will not only help you see what’s coming, but it will also help you avoid penalties and headaches. To avoid the IRS’s scrutiny, all your deposits will need to be as transparent as possible. This guide will teach you when you’re required to file bank deposits with the IRS and how to do it.

Are Banks Required to Report Large Cash Deposits?

The Bank Secrecy Act, which was passed in 1970, outlines what deposits need to be reported to the IRS. Banks are required to report cash into deposit accounts equal to or in excess of $10,000 within 15 days of acquiring it. The IRS requires banks to do this to prevent illegal activity, like money laundering, and to curtail funds from supporting things like terrorism and drug trafficking.

Failing to report a $10,000 deposit within the time limit can result in a $100 fine from the IRS. Intentionally neglecting to report a $10,000 deposit can incur a fine of $25,000 to $100,000. By keeping a close eye on large deposits, the IRS and FinCEN can analyze suspicious or fraudulent activity.

Another name for the Bank Secrecy Act (BSA) is the Currency and Foreign Transactions Reporting Act. When the law was updated in 2002, as part of the Patriot Act, one of its goals was to monitor the use of foreign currency in the United States. In addition to cash deposits, the law applies to companies that sell cashier’s checks, money orders, and traveler’s checks.

However, in this case, it’s up to the company that issues monetary instruments for currency to report them to the IRS. This means that if you get paid with a money order worth $10,500, you won’t have to report it, as its issuing company likely already has.

It’s not just lump sum cash deposits that can raise flags. Several related deposits that equal more than $10,000 or several deposits over $9,800 can also trigger a bank’s suspicion, causing it to report the activity to FinCEN.

When you make these types of deposits, it can appear that you’re trying to avoid BSA reporting laws. This is called "structuring," and it is always illegal, no matter what the deposits are used for. If you try to structure your deposits to avoid attention, you’ll get the opposite effect.

Are Business Owners Required to Report Large Transactions?

If a business owner deals in cash, they will be required to report received cash payments of $10,000 or more to the IRS. In addition, they’ll have to report related payments from a client that equal $10,000 or greater. For example, if you teach a monthly class and deposit cash payments from one student of $1,500 a month for your services, you’ll need to report these payments on the seventh month when they surpass $10,000.

Remember that repeated transactions close to $10,000 can look like structuring to the IRS. It never benefits you to lower transactions to under $10,000. Doing so can land your business in deep trouble.

Filing Form 8300

The way to report cash transactions of $10,000 or more is through the use of IRS Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business. The form helps the IRS and FinCEN notice money laundering and fraud. Basically, it helps law enforcement keep track of suspicious activity.

Using the form, you’ll have to identify everyone involved in the transaction or transactions and explain why they are paying you. To get started, you’ll need to know information like your client’s name, address, ID number, and tax identification number (TIN). Form 8300 must be filled out and submitted to the IRS within 15 business days when you receive the cash. You can file Form 8300 online using the BSA E-Filing System website or by mail to the following address:

Detroit Federal Building

P.O. Box 32621

Detroit, Michigan 48232

Some common business situations in which this form might need to be used include escrow arrangements, large purchases like vehicles, property sales, and loan repayments. For example, if you’re a freelance artist and paid $12,000 in cash for a painting, you’ll have to file Form 8300 when you deposit the money into your account.

Form 8300 must also be filled out for several deposits that add up to $10,000. If the buyer from the above example takes out a loan to purchase your painting and makes cash payments over $10,000 during the course of the year, the lender will have to file Form 8300 with the IRS.

The form is only used for cash and check payments. It doesn’t apply to credit cards or wire transfers. If the buyer paid $5,000 in cash for the painting but used a credit card to pay for the remaining $6,000, you would not have to file Form 8300. You also wouldn’t have to file Form 8300 if the buyer paid with a money order or traveler’s check. Although money orders and traveler’s checks are considered the same as cash, it’s up to the bank or institution that issues them to file Form 8300.

When you file Form 8300, you’ll be required to send a written notice to everyone mentioned in it. The statement has to have the name and address of the seller, a phone number and name of a contact person, the complete amount of money received in the year, and a statement that the business is reporting information to the IRS. The format of the statement isn’t regulated. What’s important is that the statement has all the required information.

How Much Cash Can You Deposit Before It Is Reported to the IRS?

When it comes to cash deposits being reported to the IRS, $10,000 is the magic number. Whenever you deposit cash payments from a customer totaling $10,000, the bank will report them to the IRS. This can be in the form of a single transaction or multiple related payments over the year that add up to $10,000. However, it’s not quite that cut and dry.

Depending on the situation, deposits smaller than $10,000 can also get the attention of the IRS. For example, if you usually have less than $1,000 in a checking account or savings account, and all of a sudden, you make bank deposits worth $5,000, the bank will likely file a suspicious activity report on your deposit.

If you plan to make any deposits out of the ordinary, you should discuss them with your bank teller. If you explain anything suspicious about your deposit account, the bank will be less likely to report them, making it less likely that you’ll be monitored by the IRS.

Manage Your Tax Forms and Accounting With Skynova

Keeping track of your own business accounting can be time-consuming, tedious, and even risky. If you fail to report your deposits correctly, you might face financial penalties from the IRS or, worse, end up getting audited by the federal government. Seeking the advice of a qualified professional or resource is always a smart choice.

Unless you love administration, you’d probably rather spend your time managing your business than working managing your accounts. Skynova’s software can aid you in your accounting, making it easier and faster. Our cloud-based, document-sharing options are quick, simple, and can be sent and received from anywhere, making them the perfect tool for businesses operating during the COVID-19 pandemic.

We also have free templates for all your business needs, including quotes, estimates, and even bids. Our documents are professional, clear, and look great. If you’ve been making your own business documents, you’ll be amazed at the time you save with Skynova. Take a peek at our invoice template today to see how we can help you. Let us take the stress away from the administration so that you can focus on your business.