When filing your tax return for the Internal Revenue Service (IRS), there is a level of trust involved in the process. The IRS doesn't usually require you to prove via bank statements that every one of the figures you're entering on your tax return are accurate. There are some situations, however, when your bank will report certain transactions to the IRS, which is why it's always worth being careful when filling out that tax return.
Here, we outline the various situations when your bank is required to report your transactions to the IRS. In each of these situations, your bank should inform you of this so that it doesn't later come as a surprise.
The four situations when your bank reports transactions to the IRS
- When you're being audited: If you are chosen for an IRS audit, then your bank will have to share information on all relevant transactions with the IRS.
- When making a deposit of 10,000 dollars: If you make a deposit of 10,000 dollars or more, the bank is obliged to report this transaction to the IRS.
- When receiving multiple transfers of 10,000 dollars: If a third party transfers an amount of 10,000 dollars or more into your account on more than one occasion in the space 12 months, the bank should report this too.
- When your banking activity is suspicious: Apart from the circ*mstances mentioned above, your bank is also expected to report other suspicious movements or patterns to the IRS.
All of this is done using the IRS Form 8300, which is used for both individuals and businesses. These reports from banks to the IRS are required as part of the Currency and Foreign Transactions Reporting Act, also known as the Bank Secrecy Act. This was originally implemented to help prevent tax evasion, but it is also now in place as an anti-terrorism measure.
