Making a huge cash deposit at a US bank may be necessary at times, but if the amount exceeds $5,000, additional procedures can come into play. Behind the scenes, banks may activate extra reporting and verification steps. Here’s what you need to know before making a deposit of that size.
What will happen if you deposit $5,000 in cash?
The deposit may not necessarily trigger a government report, however, your bank may pay closer attention to your account details. Reason being, the bank may put the transaction into a higher scrutiny bucket inside your bank, according to AOL.com
In case of a one-time deposit with a clear explanation, it may not raise many eyebrows. Repeated large cash deposits made without context, on the other hand, can apprise bank officials.
Banks are required to monitor activity that could signal money laundering or fraud.
You may face a few routine questions from your bank
A large cash deposit may trigger some amount of routine questioning from your bank. You may be asked to explain the source of the deposit. This is a normal part of internal record keeping, and not any sort of interrogation.
Simple, straightforward explanations such as receiving cash gifts, business receipts or selling of an asset like a car can help avoid unnecessary scrutiny, according to AOL.com
What happens if your cash transaction crosses $10,000?
According to the Bank Secrecy Act, once a single cash transaction exceeds $10,000, your bank must file a Currency Transaction Report.
This report goes to the Financial Crimes Enforcement Network (FinCEN), a bureau of the Treasury Department. It is not a tax form and it does not trigger an audit by itself.
The IRS is not automatically alerted
A common myth is that depositing more than $5,000 in cash automatically alerts the Internal Revenue Service (IRS), but that isn’t true.
Banks don’t notify the IRS just because you made a large cash deposit, they report certain large cash transactions to financial regulators to help combat money laundering and other criminal activity, according to the Bank Secrecy Act.
Tax issues only arise if the money represents taxable income you failed to report; the act of depositing cash itself is not taxable and won’t trigger a tax audit on its own if your income is reported correctly and the funds are legitimate.