IRS Rules for Reporting Personal Check Deposits
Generally, it is not expected that personal check deposits amounting to less than $10,000 will be reported to the IRS. However, banks must follow IRS rules for reporting personal check deposits or cash withdrawals in excess of $10,000. Following passage of the Bank Secrecy Act (BSA) of 1970, banks are required by law, to report transactions exceeding $10,000 to the IRS and sometimes other government agencies or law enforcement.
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Currency Transaction Report
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With the passage of the Bank Secrecy Act, came the Currency Transaction Report (CTR), used by banks for currency reporting to the Internal Revenue Service when transactions exceed $10,000. Currency reporting is done in an effort to curtail illegal activities, such as money laundering and drug trafficking. In 1986, the Money Laundering Control Act was passed, releasing financial institutions of any liability in giving law enforcement suspicious transaction information.
Suspicious Activity Report
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In April 1996, the federal government introduced the Suspicious Activity Report (SAR). Financial institutions were, and still are, required to file a SAR for each transaction or attempted transaction, involving at least $5,000, where the bank suspects, knows or has a reason to believe the money was obtained through illegal means. Financial and non-financial institutions report suspicious personal check deposits, cash deposits or withdrawals and checks that get cashed, to the IRS to help the federal government identify possible tax fraud and terrorist financing activities.
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Gift Money
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IRS rules for reporting personal check deposits for individuals depends on whether you are the giver or the receiver. Gift money can be subject to a gift tax, unless the amount is less than the allowable annual exclusion amount, which as of 2011 is $13,000 per person. If you receive a personal check as a gift from a parent, grandparent or spouse, typically you will not have to pay any gift tax.
Gift Tax
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If you give money to another individual, you must report the amount on your annual tax return if it exceeds the allowable annual exclusion amount. According to IRS Publication 950, the general rule is that any gift is a taxable gift; however, there are several exceptions to this rule. As previously stated, gifts amounting to less than the annual exclusion are not taxable, as well as gifts in the form of tuition or medical expenses paid directly to an institution for another person or gifts to your spouse, charities or political organizations. In some cases, even if you give a money gift that amounts to more than the annual exclusion amount, you may not have to pay the gift tax, but you will have to file a gift tax return with the IRS.
Gift Tax Return
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Usually you will need to file gift tax return Form 709, even if you do not end up owing any tax. If you have given a money gift to at least one person, in excess of the annual exclusion amount, you will need to file IRS Form 709 with your annual tax return.
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