After making a significant cash deposit or receiving a large check, many individuals may question whether their bank will inform the IRS about the transaction. While some assume that banks maintain the privacy of their customers' transactions, there are mandatory reporting regulations in place that could lead to scrutiny from the IRS regarding your financial activities.

Understanding when and why banks report deposits is essential to avoid unnecessary complications or potential examination by the IRS. Banks are obligated to disclose certain transactions to the IRS, and this practice can have implications for your financial situation.

Typically, banks do not report all deposits to the IRS, except for those exceeding $10,000. This requirement falls under the Bank Secrecy Act (BSA). It is important to note that the $10,000 threshold applies to the total aggregate amount per day, meaning that if multiple transactions within a day amount to $10,000 or more, the bank is obligated to report it.

In cases where deposits surpass $10,000, banks are required to submit either IRS Form 8300 or use electronic filing methods for reporting such significant transactions. The submission of this form is due 15 days following the transaction. Additionally, banks must file a FinCEN Form 104, known as a Currency Transaction Report (CTR).

The $10,000 limit is crucial for detecting and preventing money laundering, and it is part of the efforts by the Department of the Treasury to combat illicit financial practices. Financial institutions are also mandated to report any suspicious activities that could be indicative of illegal actions, tax fraud, or other criminal behaviors. Therefore, the BSA is sometimes referred to as an "anti-money laundering law."

While transactions below the $10,000 threshold may not be reported, each financial institution operates differently. Therefore, the most reliable way to confirm reporting practices is by directly consulting your bank and referencing the FinCEN Form 104 and/or IRS Form 8300.

The IRS utilizes Currency Transaction Reports to support examiners in various ways, such as determining the need for additional auditing procedures, investigating non-withheld income sources, and identifying potential cases of unreported income, money laundering activities, and tax evasion strategies. These reports are not solely focused on detecting money laundering but also play a role in uncovering potential tax evasion schemes.

The IRS may request access to bank records when scrutinizing specific transactions or income sources during audits or in cases where tax liabilities are owed. If there are unexplained cash deposits, especially unrelated to reported income sources, the IRS may require documentation to explain these transactions. While the IRS cannot directly access your bank accounts, it has the authority to request records from financial institutions, which can be used in their investigations.