In the United States, banks and other financial institutions are required to report transactions that involve $10,000 or more. You probably know about this, because it comes up in cop shows and spy shows fairly frequently. It’s basically set up to prevent tax evasion and money laundering by the Bank Secrecy Act of 1970.
In those various shows, the bad guys usually are structuring payments into installments just under $10,000 to avoid the reporting. This is, unsurprisingly, called structuring, and it’s a crime too. The IRS can actually seize the money that people try to slip by them through structuring.
So, don’t structure.
If you’re one of our clients you shouldn’t ever need to structure anyway. The rule doesn’t stop these transactions, it just means that they get reported to the IRS, and we’re going to save you money no matter how much your business makes.
Just a couple of notes on not structuring, to prevent it from looking like you’re structuring to the IRS when you’re not.
Know thy Banker
If you know your banker, and your banker knows your business, they can be an ally for you if something regarding the structuring rules ever happens. If you need to move money around above $10,000 they can also help you with the relatively simple paperwork that is required.
Drop Consistently
This point can be a bit confusing, but don’t let money build up until you have seven thousand dollars and then drop that. Instead, pick a day and drop weekly, biweekly, or monthly. That way you aren’t depositing similar amounts of money at random times, which is something the IRS would find suspicious.
Pay Attention.
The rules regarding structuring change sometimes, and just be aware that’s the case. Recently the news has been good for honest taxpayers: the IRS has said that they’re trying to focus more on tying structuring to criminal activity.
Don’t be a Criminal.
Some people do end up structuring their transactions: money launderers for terrorism, drugs, human trafficking and other crime. We certainly aren’t going to work with you if we think that you’re doing something bad, but maybe you just shouldn’t be a bad person? Have you ever thought about just not being a criminal anymore, because that might save you from decades in prison?