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Why You Need to Be Careful With Large Cash Bank Deposits

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Why You Need to Be Careful With Large Cash Bank Deposits

The IRS made headlines last year when word got out that they had seized $43 million from more than 600 people for violating structuring laws, despite the fact that there was nothing that suggested criminal wrongdoing.

If you’re like most people, you have no clue about structuring laws. To keep it simple, federal law states that if an individual conducts a cash transaction of more than $10,000, the bank is required to file a currency transaction report to the U.S. Treasury Department. You can’t get around this rule by breaking up or “structuring” cash deposits in amounts below $10,000 to avoid having to report your doings to the government.

Prior to 2014 the IRS routinely seized bank accounts where individuals had structured their deposits to avoid the reporting laws even though there was no suggestion that the individual had done anything illegal other than violating the structuring laws, says Dennis Brager, a certified tax specialist and founder of the Brager Tax Law Group.

"Sadly, life can be very difficult when dealing with the IRS,” says Robert Kiggins, a partner with the law firm Culhane Meadows.

Prior to 2014 the IRS routinely seized bank accounts where individuals had structured their deposits to avoid the reporting laws even though there was no suggestion that the individual had done anything illegal other than violating the structuring laws.

The Institute for Justice litigated a number of cases challenging the constitutionality of what the IRS was doing. When called on the carpet, “Basically, the IRS said oops, even when they had been holding someone’s money for more than two years. Or weeks before we got involved in a case the IRS had given someone a settlement offer where the IRS would keep 50% of the money,” says Robert Everett Johnson, an attorney with the Institute of Justice.

The Institute of Justice kept the cases coming. With such pressure, in mid-2014, the IRS changed its prior policy and stated that it would no longer seize funds associated with so-called "legal source" income cases unless there are "exceptional circumstances", and there was high level IRS approval, says Brager.

In May of 2016, there was a Congressional inquiry, and the IRS agreed to notify property owners who had their property seized prior to the change in the policy that they could apply for the return of the property.  “The IRS gave back millions, but the Department of Justice, which also has a role in this, is still sitting on petitions, and people haven’t had their money returned,” says Johnson.

While the Institute of Justice isn’t seeing any new cases, people shouldn’t get comfortable. “The IRS change in policy is voluntary, they could go back to what they were doing at any time. What’s needed is for Congress to change the law,” says Johnson. “If there’s no change in the law you really have no security that this won’t happen again.”

The period to request the return of property closed in February of this year, and the IRS is no longer accepting applications for the return of seized funds.  “Little is known about how many individuals were successful in having their funds returned,” says Brager.

“It is unknown if the IRS has been following its own policies. Nor has the IRS released any statistics that would help us in deciding if legal source income seizures are still taking place.   It will probably be necessary to file a Freedom of Information Act Request in order to obtain at least some of the data to determine if the practice of seizing assets even though there is no violation of other laws has truly ceased,” says Brager.

How best to protect yourself? The first step is being aware. “Know the basics of how the rules work,” says Jeffrey Schneider, a director with the National Association of Enrolled Agents. Ignorance may or may not be much of a defense. Says Smalley, “If someone honestly didn’t know any better, an IRS agent would be able to see that.  I would hope that they wouldn’t get the book thrown at them.  IRS agents are trained, for the most part, to know when someone is being honest with them.  Just be honest.  I am sure there will be some penalty, but I don’t see the Service going full force on someone that just made an honest mistake.”

But just in case you can’t depend on the generosity of Uncle Sam, if you’re uncertain about what you can and can’t do, talk to your financial advisor.

Comments
jennifer
jennifer   |     |   Comment #1
This article says "cash". So I assume that doesn't include checks?

Are we talking only "real" cash here?
cashmeanscash
cashmeanscash   |     |   Comment #23
If you don't understand the difference between 'cash' and other monetary instruments you are well advised to seek informed help for any financial matters.
A. JESUIT
A. JESUIT   |     |   Comment #42
I CANNOT BELIEVE THIS ARTICLE, BY THIS EXPERT HAS LEFT OUT OBAMA'S CALL TO REPORT SUSPICOUS ACCOUNT ACTIVITY FOR 5000 DOLLAR TRANSACTIONS,,,,,,THAT'S RIGHT BOYS AND GIRLS,,,,,,,IN MARCH OF 2015,,,,,HE ANNOUNCED IT,,,,DIDN'T GET MUCH FANFARE OR ALARM,,,,,,,think i'm kidding,,,,,,GOOGLE IT UP,,,,,,,DO YOUR RESEARCH I'M NOT GONNA REPEAT WHAT YOU CAN FIND ON YOUR OWN LIKE SO MANY PLEONASTS ON THIS DOMAIN. IF YOU CHALLENGE ME ON THIS,,,,,,,you better have your facts in order. I wish it were not so.
a. jesuit
a. jesuit   |     |   Comment #44
p.s. it gets worse,,,,,beyond filing sars,,,,,THE TELLERS ARE SUPPOSED TO CALL LOCAL LAW ENFORCEMENT,,,,,on suspicious customers and their cash transactions. Sheila Bair had some alarming views on the fragility of the fdic,,,,you can research that also,
pencil neck poindexter
pencil neck poindexter   |     |   Comment #45
If you will, one should be aware that banks allegedly have a "mandated" monthly quota of SARS. It would be nice if a expert were to write the definitive article on this entire subject, It is not likely to happen on this domain. It would be unpleasant news for the banking and credit union industry, and that Just Won't Do!
Nothing
Nothing   |     |   Comment #46
And, if a bank has too many it is "forced" to go to non-cash transactions, e.g. Chase.
#47 - This comment has been removed for violating our comment policy.
jennifer
jennifer   |     |   Comment #2
OK. I googled it. This only applies to cash not checks. Therefore it is not an issue from my standpoint.
!!!
!!!   |     |   Comment #3
Legalized thievery by the IRS. What happened to "innocent until proven guilty"? The IRS is out of control. Be honest with the IRS, sure. However individuals in the IRS are not always honest with us.

And the financial institutions are complicit with the IRS. One transaction or multiple cash transactions, as long as they were all under 10K, there is no reason to report the transactions to the IRS. The law states more than 10K.

I have also read of local police confiscating large quantities of cash from individuals without due process. Are we now living in a police state? People who prefer to deal in cash are not all criminals. I guess they just consider some of us "easy pickings".
Rosedala
Rosedala   |     |   Comment #21
EXCELLENTLY SAID, !!! The IRS has a nasty and arrogant attitude since decades! As I already mentioned, our President Trump can straighten this out too....provided the liberals won't disrupt his work.
midas89
midas89   |     |   Comment #4
One of the problems with the "structuring" statute is there is no clear guideline given to financial institutions when depositing different amounts of cash under $10K at different times classifies as structuring, where they should file a Suspicious Activity Report (SAR).

For example: Say you deposit $7,000 in cash on Monday. But then by Friday you've earned $8,000 cash from a legit endeavor...so you deposit that on Friday. Someone at the bank could easily file a SAR. (Keep in mind that banks and their employees are absolutely protected by law from any liability in filing these SAR cash reports.) And then for the IRS or any government agency to be able to just freeze these assets no questions asked is completely unfair.

They would probably argue that if they investigate first and ask the depositor, it would allow the depositor time to take the money out of the bank. So, the IRS took the money first. The extra sad part of that is that they have no easy way in place for the depositor to be able to defend themselves and quickly get the money back within just a few business days. (And often the depositor would have to pay a lawyer for help.)
Bozo
Bozo   |     |   Comment #6
Wikipedia has an informative article on the Bank Secrecy Act of 1970. It would appear, at first blush, that cash depositors who routinely have legitimate "large" cash deposits can have their bank file appropriate paperwork. This article is informative:

https://www.forbes.com/sites/stephendunn/2013/02/18/asset-forfeiture-is-anything-but-civil/#67fcd353...
deplorable 1
deplorable 1   |     |   Comment #27
Interesting read Bozo the guy eventually got his money back after paying attorney and court fees and he is sill fighting to get those fees returned. I think he should be compensated for the hassle on top of that as he did nothing wrong.
Bogey
Bogey   |     |   Comment #28
Any innocent person put in the same position as that guy should certainly be WELL COMPENSATED for the time spent fighting to get back their own money, legal fees, the aggravation, and anxiety of not knowing whether or not you would ever get your money returned to you. However, I doubt that would ever happen. This money confiscation policy is definitely WRONG when innocent people can be hurt so badly!
Bozo
Bozo   |     |   Comment #7
Midas89, any bank or credit union worth its salt will (or should) work with small business owners who run "cash" businesses by filing FinCEN Form 110.
anonymous
anonymous   |     |   Comment #5
The IRS are pigs who don't follow due process. These laws are not to protect us from terrorism, they are to steal from the working middle class.
!!!
!!!   |     |   Comment #8
I find it very disturbing that a person cannot even make a cash withdrawal of 10K or more of their own money without the bank having to report it to the IRS.

A bank teller cautioned me of that very thing when I wanted to withdraw 12K in cash from my MM account to distribute among my grand children at Christmas time a year ago. I don't see why I should be compelled by the IRS to write checks to each one of them to avoid such reporting.

I wanted to see the smile on their faces while I'm still alive, rather than have them smiling after I'm gone.
LuvCD
LuvCD   |     |   Comment #9
Wait for $100 bills to be taken out of circulation or no longer printed...soon. $50 bill will be largest in circulation
Bozo
Bozo   |     |   Comment #11
LuvCD, the elimination of $100 bills would come as no surprise, as "the Benjamin" is the favored bill for money launderers and drug dealers the world over. I mean, seriously, when was the last time you walked into a 7-11 and tried to use a Benjamin? When you use an ATM machine, what do you get? Twenties. They spend. For ordinary folks, Washingtons ($1), Lincolns ($5), Hamiltons ($10), and Jacksons ($20), are about all that is needed. While I have a soft spot in my heart for the $50 Bill (U.S. Grant), it's just because our family mythology credits him as being a great-great-great grandfather. Yes, my mother's maiden name was Grant.
LuvCD
LuvCD   |     |   Comment #13
Bad guys don't use banks nor foreign currency...cash and carry in greenbacks. Gov't needs to focus on those bad guys...e.g. here in Mexico bad guys do not use pesos. We need to have a "holiday" every x years and people can turn in greenbacks for bluebacks. Only those with traceability on source of funds will turn them in...that coupled with allowing people to file amended tax returns and pay back taxes...no penalties assessed....Taxes collected will cover administrative costs AND the budget would be balanced. May be fewer $ in circulation with a down tick in economy...less prisons, less police ("why steal if $s are soon to be valueless in next cycle)...thus one can imagine police won't like the idea...follow the $s!
Bozo
Bozo   |     |   Comment #10
Ironically, the law was initially signed by Richard Nixon and then renewed and amended (several times) under bipartisan support. Wrap your arms around FinCEN Form 110, if concerned.
!!!
!!!   |     |   Comment #12
So instead concentrating on real criminals, the IRS would rather go after the average law abiding citizen who worked hard, earned their money and managed to build a little nest egg. Easy pickin's and less work for the IRS. The IRS is out of control, thanks to all our politicians who enabled it.
hank
hank   |     |   Comment #19
I don't believe taking out 10,000 is reported to the irs. It is only if you deposit it.
LuvCD
LuvCD   |     |   Comment #20
Try it and report back
midas89
midas89   |     |   Comment #22
Hank, withdrawals of cash over $10,000 are also required to be reported. "A currency transaction report (CTR) is a report that U.S. financial institutions are required to file with FinCEN for each deposit, withdrawal, exchange of currency, or other payment or transfer, by, through, or to the financial institution which involves a transaction in currency of more than $10,000."
klink
klink   |     |   Comment #14
Well I guess I'm guilty. The banks involved had me sign paperwork before they dispensed/accepted the cash amount which was 10K for a CD. I had even thought about breaking it up and am glad I did not. Next time I'll do a cashiers check, or go a dollar less.
Amber Noele
Amber Noele   |     |   Comment #39
The SAR could still be filed if you went a dollar less.. it's much easier on everyone if you go ahead and get over $10k and let the bank file a CTR on you.. the CTRs literally sit in a database and no one looks at them unless you are being investigated for something else and then they may query the database to see what else you've done. If a SAR gets filed on you, it's basically a big flashing neon sign over you that says "come check me out"
decades
decades   |     |   Comment #15
I never had trouble with the IRS till I joined the TEA party ...seem to get examined a lot since then ..maybe just a coincidence ...tempted to change my screen name to... Captain Bee Fart ...MAGA!
???
???   |     |   Comment #16
Has anyone heard of such seizures if "checks" in excess of $10,000 were used?
???
???   |     |   Comment #18
Not to be confused with me.^
me1004
me1004   |     |   Comment #17
This article is talking of seizure, but that is not all it is. This is done as forfeiture, under 18 USC § 5317(c)(2). And it is not unique to these money transactions; since Reagan became president, this has been done in all kinds of circumstances involving suspicion of criminal activity. We're just talking of suspicion, not conviction.

The forfeitures were most touted at first for suspicion of illegal drugs no matter how little or what drug (there were cases of the government using the forfeiture law to seize entire ocean-going cargo ships if a single marijuana joint was found in a crewman's personal belongings!), and clearly no matter whether the forfeiture fits that crime. And it has spread to all kinds of things, and is also being used by local police departments (for instance, since the late 1980s, Los Angeles has seized the cars of anyone it suspects of soliciting a prostitute -- which will tend to be a police decoy -- and you cannot get your car back simply because you are found innocent at trial, it is gone! I note, only last year did Los Angeles change its approach to provide for the possible return of the car if you were found not guilty).

I blame such forfeiture laws on the loads of people in this country who favor all power to the police, they will do no wrong. That only makes for a police state and laws like this. I blame it on our courts too, as they upheld these forfeitures without convictions.
MR.LABORECON
MR.LABORECON   |     |   Comment #24
JUST FOR FUN READ UP ON DENNIS HASTERT THE POSTER CHILD FOR LARGE AND MANY CASH WITHDRAWALS AND ASK YOURSELF....WHAT'S WRONG WITH THIS PICTURE?
deplorable 1
deplorable 1   |     |   Comment #25
This is scary as I do large transactions all the time although usually by electronic check and not cash. I have done multiple 0% no fee balance transfers to a bank account in amounts ranging from $10,000 to $100,000. I have had funds tied up for weeks due to some of these laws. The problem is that cashiers checks are not treated as cash by banks anymore so if you need your money quickly you must deposit cash to avoid long hold times.
Bozo
Bozo   |     |   Comment #29
Funny story. Sold a car some years back. Got a cashier's check. Took it to the bank. The bank had to call the bank issuing the cashier's check to make sure it wasn't a phony (it wasn't). Lesson learned: in these days of phony this, and phony that, wait until the check clears before you surrender title.
paoli2
paoli2   |     |   Comment #30
I get Cashier's checks all the time when our CDs mature and used to deposit them into our local checking account until I decided where to buy another CD. When I found out the bank would put a "hold" on it until they knew it was good, I usually take them now directly to whatever bank or credit union I am going to buy a new CD from. They will take the Cashier's Check and if they have to "clear" it, I can still have gotten the CD quicker. I am very disturbed at what is happening in our financial system and how the control is being taken away from customers.
Nothing
Nothing   |     |   Comment #31
Little known secret...stop payment order can be done for/to cashier's check. Wire transfer is "usually" effective upon receipt...and I have it go into an account that is not very active, i.e. low balance, move the funds asap
paoli2
paoli2   |     |   Comment #32
Thanks for the info on "stop payment order". Did not know that.
I have been reading up on FinCEN and trying to understand it but I cannot find any article which explains "Structuring Law" that Ken seems to be referring to. Does anyone have a link?

For example, this week I had to withdraw some cash (over $2,000 ) since I may be having medical surgery and wanted to leave extra cash at home for bills etc. I decided last night I had forgotten other items I need more cash for so if I return to the same bank (the only one we use now) and withdraw more cash even if they both are under $10,000, do I risk them closing our checking or savings account?? I am very concerned about whether to do the second withdrawal this soon. Can anyone give opinion or link to info that can help me? Thanks so much!
DCGuy
DCGuy   |     |   Comment #37
Here is the IRS statute regarding structuring.

https://www.irs.gov/irm/part4/irm_04-026-013.html

If you need to deposit big amounts of money by currency very often, you probably need to make provisions with your financial institution to avoid getting problems later when it appears that you are drug dealer or mobster/money launderer).

With the big improvement with laser printers, currency, cashier's checks, and other financial instruments can be forged. There is a big push to use electronic money by the government. That will make life harder for those that deal almost exclusively in paper money. That includes the drug dealers, street walkers, mobsters/gang members/felons. As long as you make it harder on the "bad guys", then if any "good guy" gets impacted, it is acceptable "collateral damage".
Bogie
Bogie   |     |   Comment #38
"As long as you make it harder on the "bad guys", then if any "good guy" gets impacted, it is acceptable "collateral damage"."

Easy to say if you are not one of the innocent "good guys" that fall victim to the IRS or some police force looking for a big payday.

There have been some real life horror stories in the news of what several innocent people had to go through to have the legally gotten cash returned to them. Some still fighting to get it back. Time, expense and no guaranties of ever recovering what was rightfully theirs.
DCGuy
DCGuy   |     |   Comment #43
Best thing would be to eliminate all ill gotten currency from the criminals, but very hard to achieve that. I think the US Treasury should issue the $10K bill, so that the reporting requirement would affect fewer people.
paoli2
paoli2   |     |   Comment #33
Soooo does all this mean someone can't pay cash for a home because it would be over $10,000.00? I was just reading the China Lite case and it is frightening to read what seems to have happened to our country!! It looks like people who have a business or have saved all their lives can't do what they want anymore with those savings?? They have us coming and going. This is worse than Bernie Sander's Socialism. He only wanted to go after the top 1%. THIS can impact even middle class savers like ourselves. What a mess!
Nothing
Nothing   |     |   Comment #34
Look at comment 13 above and merely withdrawing a large amount should not tigger any concerns. Deposit could be an issue
Dubg58
Dubg58   |     |   Comment #35
My 70 yr old aunt is on ssi and recieving a settlement from a accident she was in...She already signed off on the case but won't go get the check because her ssi will stop..Some idiot said to havr the check put into someone else's name??? I feel bad because I wish she didn't sign off and just let them keep the money andjust pay her medical bills..
bob
bob   |     |   Comment #36
once a person reaches full retirement age they can make unlimited amount of income
no penalties
Amber Noele
Amber Noele   |     |   Comment #40
A CTR is filled out for anything $10,000.01 and greater in currency, whether it is deposited or withdrawn...
Bogie
Bogie   |     |   Comment #41
Right Amber. And some financial institutions will fill out the form for even less than $10,000.00 cash transactions.
Jake at State Farm
Jake at State Farm   |     |   Comment #54
Also if you purchase a cashiers check.
#48 - This comment has been removed for violating our comment policy.
#49 - This comment has been removed for violating our comment policy.
Siren
Siren   |     |   Comment #50
Just another reason to consider investing in Bitcoin, it eliminates third party banking. Banks charge you to use YOUR money. Then gleefully hand over YOUR money when the feds think you are up to no good whether you are or not. $10,000 or $2500.00 big brother is always watching.
Rosedala
Rosedala   |     |   Comment #51
Hello Siren, I'm wondering what security is there for Bitcoins? I know, for instance, if an American bank or Credit Union lose your money, they have to replace it by law. But the Bitcoin newcomer (to me anyway), does it have this protection? Thanx.
???
???   |     |   Comment #52
I only know that its like pulling the lever at the casino. If you like that type of gambling with your money RESEARCH. My take on it is BeWare
!!!
!!!   |     |   Comment #53
I agree with comment #52.

In theory dealing with the Bitcoins would be the way to go. But in actual practice, it potentially could be a mind field. From what I know about Bitcoins, there is no protection. Plus what determines the value of Bitcoins?