If people manipulate cash transactions to avoid required bank reporting to the Treasury Department, they are using the technique of structuring their transactions.
In an effort to identify questionable illegal transactions, financial institutions are required to report any monetary amounts over $10,000 to the Treasury Department. If someone knowingly structures transactions to avoid this reporting, the Bank Secrecy Act allows the IRS to legally seize these assets.
The old rules provide fairly broad discretion in this area. Many innocent taxpayers not only had assets frozen, but found it virtually impossible to get their funds returned to them.
Here are the most important aspects about structuring that will help you stay out of trouble:
Be aware of the rule.
As more small businesses try to avoid the high charges associated with credit cards, they must also be aware of the Bank Secrecy Act rules. Establish a good relationship with your banker and have them understand your business to help create a potential ally if needed. Do not knowingly try to avoid the $10,000 reporting rule.
Be consistent with your numbers.
Create a regular routine of sales deposits. Do not save up deposits and then deposit similar amounts. This could raise red flags.
Understand the rules are changing.
In a recent change, the IRS will still pursue structuring violations, but will try to more closely align action taken with knowledge of criminal activity. The government must show that the taxpayer knows of the rules and knowingly structures his or her transactions to avoid the reporting.
Some people know structuring is illegal but do it anyway.
Money laundering is a big problem. Whether for drug money, terrorist fundraising, bootlegging or other illegal activity, excess cash deposits will raise suspicions. So while the IRS uses its tools to catch people acting illegally, it is making an attempt to keep innocent taxpayers out of its net.