Posted by John Merchant on September 06, 2010 at 12:06:13:
Banks watch for such systematic deposit patterns so this really isn’t an effective strategy.
Much better to just talk to an officer at the bank and explain what’s going on, the source of the cash, etc. so IRS won’t be scrutinizing you.
But I’d be concerned that if it did turn out the B stole the money the IRS might demand YOU turn that cash over to them so I’d recommend you talk to a local lawyer now to make sure the $$$ once paid you can be kept by you.
So I’ve been renting a low-end property now for the last 8 months or so. The tenant periodically has asked me if I would sell the house to him. I have always said yes, and we agreed on a potential price.
Yesterday he showed up with $5000 cash…in $100 bills. I wasn’t especially surprised because he always pays his rent in cash as well, as do many of my other tenants. His intent was to pay the remainder of the purchase price, in cash, at several different points in August.
So I took the $5K down to the bank to deposit. They asked for my ID, because of the “size” of the cash deposit. Now I’m wondering whether selling for actual cash is a problem. I know the banks used to report cash deposits of $10K or more. But in this case the initial deposit was half of that, and they were already asking for ID. And there will be more during August…approximately $40K.
I understand your thinking about ‘big brother’ as he has his hands in everything it seems. Your not breaking the law and I am sure you report what ever is required to the KGB…I mean IRS, so there is no issue.
When depositing cash there are 2 things that are used by banking institutions to watch cash deposits and withdrawals. They look at patterns of deposits and amounts over 5k. It used to be 10k I was told by a friend that is a commercial banker but was reduced to 5k after 9/11. The patterns I speak of might be as follows deposits of 3k a week for several months straight would be an example of something to go reported. My thought is this some cash deals would be better off to stay out of the bank anyways and you could use that cash to pay bills or fund large purchases moving forward. It is too bad they track money so closely it creates problems for people that want privacy. More and more it looks like privacy is no longer respected in our culture. As long as you have paid your taxes you have nothing to fear.
With the rash of banks going under the last few years just make sure you don’t have over 250k in any one banking institution. If you have that problems your probably don’t need much in the aspect of money advise. I used to carry a lot of cash on me when I was making deposits off my buildings before I outsourced my management activities and never had a problem with deposits of cash exceeding 10k in one day at least once a month.