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I understand that making a large cash deposit can trigger an IRS audit. I have about $75K to deposit. It's a mix of a loan I made to a friend by check that he paid back in cash, and a cash gift from my parents (under the tax-free gift limit).

I want to deposit the cash for safety and so that I can use it easily. Although I'm not involved in anything illegal, I'm worried about two things:

  1. The hassle of going through an IRS audit, and
  2. The risk that if I get audited, so will my friend and parents.

Am I right to worry about both of these?

Chris W. Rea
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Square Pants
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4 Answers4

17

Am I right to worry about both of these?

Of course. Who carries $75K in cash for no good reason? Your friend got the cash from somewhere, didn't he? If its legit - there's paper trail to show. Same for your parents.

If you/they can show the legit paper trail - there's nothing to worry about, the hassle, at worse, is a couple of letters to the IRS. If the money is not legit (your friend is selling crack to the kids in the hood and your parents robbed a 7/11 to give you the money, for example) - there may be problems.

littleadv
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12

Yes you should worry and take care not to violate the law or provide any appearance of impropriety.

Every bank in the USA is required under the Bank Secrecy Act to report cash transactions over $10,000 the same day to the IRS -- and here's the fun secret part -- without notification to the depositor.

But splitting the deposits up into smaller amounts is also a crime, called "structuring".

On occasion there is a news story where a retail business that naturally must deposit cash from customers will be (falsely?) accused of structuring, e.g.:

Feds seize grocery store's entire bank account -- Institute for Justice defends grocer

Under the legal doctrine of civil asset forfeiture, your money can be accused of a crime, seized, and tried separately from its owner. The actual cases indicate the money as defendant, i.e. "US v $124,700"

In this somewhat bizarre system of "justice", the owner need not be charged with a crime, and is not in immediate peril of going to prison (about the only upside in this, but might be temporary because the authorities haven't charged the owner yet). When only the money is charged with a crime, there is no requirement for the government to supply a public defender for the owners who can not afford a lawyer.... can not afford a lawyer, because the government took all their money....

Paul
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Why would you even accept 75K in cash? If anything is going to trigger an audit, this will be it. 75K in cash deposited will look like money laundring, so you better have a paper trail ready to prove this is legal or this won't end well.

Duci
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In the event of an audit, you AND your friends need to have already reported the cash the same way in previous tax filings. Even differences between legitimate sources can result in civil and criminal sanctions from the IRS, let alone questionable, dubious and illegal sources.

CQM
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