So this guy makes a very good living selling whaddayacallits. He pays all his income taxes and such on his paycheck, but he doesn’t put any of his take home pay in a retirement plan or a bank because he doesn’t trust them. Instead he puts cash in a suitcase in the attic.
He doesn’t have to spend much of his take home pay because his wife earns a good living and they live on her wages.
Now after putting his take home pay in the attic for 30 years he has a million in cash and finally decides he wants to invest it or put it in the bank.
Is he going to have a problem with this? When he walks into the local savings and loan to buy CD’s will he have to explain to the IRS where he got the million? Is the burden of proof on him that he paid income taxes on it all these years, or is the burden on the IRS that he didn’t? Will anyone care that this guy walks into a bank with a million dollars in cash?
Definitely. Financial institutions are required by law to determine the source of large deposits, I think large is anything over $5000, he’s going to have to prove that he came by the money legitimately. If he tries to get round this by making lots of small deposits, he could be prosecuted for money laundering.
As long as he has receipts to back it up he’ll have no issues whatsoever. Oh yeah it’ll trigger alarm bells and the IRS and other appropriate agencies will investigate and he’ll produce the receipts and that’ll be that.
A lot of people still don’t trust banks. It wouldn’t be unheard of for a person to have a large sum of money.
Banks have to report large sums of money, traditionally it’s $10,000 but they are also required to report odd amounts of deposits. For instance, depositing $9,999 isn’t going to get around that. Banks need to report the deposits, not determain if the money is legit. That is the Feds job to investigate.
Money laundering is illegal, putting a lot of legal money in accounts a small amount at a time isn’t laundering as long as the money is legit to begin with.
Also remember it’s up to the IRS to prove your money is illegal not the other way around.
In the OP argument he says taxes were paid. You don’t have to file a return if the IRS owes you money. You’re stupid not to do so, but as long as the IRS owes you a refund and not the other way around you’re covered. So there would be a huge history as well of taxes being paid on the money.
That’s called structuring, and if the bank notices a cluster of cash deposits above a certain amount in a certain span of time, they will file something called a Suspicious Activity Report. They will not, and can not, tell you if they do so, under requirements of the “Patriot Act.”
No, they aren’t, and no he won’t. Financial institutions are required to file a Currency Transaction Report for any cash transactions above $10,000. It’s not the bank’s responsibility to investigate the source of the funds; the government may certainly do so after receiving the report. The bank can mark a CTR as appearing “suspicious” when they file it, if they choose.
If the government does investigate then you may need to show where it came from.
“Structuring” deposits to get around CTRs is indeed illegal, but that’s not the same as money laundering.
The safest option is to start using the cash. Buy money orders to pay your mortgage and other bills. Buy a fairly new “used” car from an individual. Live on a cash basis only. Eventually, the money will run out.
Generally, three years. If there’s a lot of unreported income, then six. There’s no statute of limitations for fraudulent or false tax returns.
If the hypothetical man gets audited by the IRS, the examiner will probably do a financial status analysis. It’s an estimate of how much cash the man had coming in (e.g. earned, received as a gift, etc) and how much he spent during the year(s) under audit. Estimating a change in the man’s savings (cash hoard) is a component of this analysis.
