Most people and small business owners do not realize that they have broken the law without meaning to, in the process of complying with the rules of the financial domain. One of them is the so-called structuring, a method to avoid the numbers of financial reporting, but not harmless at all. Structuring is perceived by the IRS and the federal agencies to be a very grave criminal offense with punishment that can cost a lot of fines and even imprisonment.
This blog addresses the issue of structuring deposits that may get one into legal trouble, what the law dictates, and how one can go around this trap.
What is Structuring? Understanding the Basics
It is called structuring or smurfing and involves dividing large structural financial deposits into less than ten thousand dollars to avoid reporting to the government under the Bank Secrecy Act. The Bank Secrecy Act (BSA) requires that any transaction involving cash above $10,000 be reported to the IRS using a Currency Transaction Report (CTR).
To circumvent this, people can conceivably make intentional deposits that add up to just below that limit, e.g. $9,900 or $9,500, in two consecutive days. Although an honest person finds it clever or harmless, the IRS sees it as a deliberate step aimed at concealing taxable income or illegal money. One can take the help of a tax audit attorney to check all the income files before filing.
Why the IRS Watches for Structured Transactions?
Structured transactions are continuously targeted by the IRS Criminal Investigation Division and the Financial Crimes Enforcement Network (FinCEN) since they are usually associated with money laundering or tax evasion, or with other unlawful business activities. The funds may be of legitimate origins; however, the approach of doing anything decent to conceal CTR reporting can result in a criminal case.
Notably, a desire is a factor. And, if you were aware of the existence of the $10,000 rule and attempted to circumvent it by making numerous minor deposits, you might again be punished under the federal structuring provisions–even without your having broken the law to receive the money.
Real-Life Cases: How Structuring Becomes a Federal Offense
The instances of how structuring can have criminal fallouts that were unintended have been discovered in several high-profile, as well as small, businesses:
- The owner of a chocolate bakery in Iowa lost money totalling 33,000, as the IRS confiscated that amount as he deposited just below 10,000 dollars on several occasions, even though he earned it legitimately.
- One of the doctors in New Jersey was prosecuted because he made deposits of $9,500 once a week for months.
- It seems that even purely legitimate businesses like convenience stores and car washes can be punished by poor structuring, based only on bad financial advice or the fear of being audited by the IRS.
These examples point out the fact that good intentions do not work as a defense, legally speaking, when it comes to the structuring of laws.
Suppose you avoid or doubt that your financial habits may draw the attention of the IRS. A professional criminal tax attorney would provide answers to your concerns prior to the IRS visit.