Georgia residents may be aware that banks file what are known as Currency Transaction Reports with the Financial Crimes Enforcement Network when they receive deposits of more than $10,000. This requirement was put into place by the 1970 Currency and Foreign Transactions Reporting Act, which is also known as the Bank Secrecy Act, but a report from the Treasury Inspector General for Tax Administration suggests that the Internal Revenue Service is not making much use of CTRs in their efforts to identify taxpayers who are hiding or underreporting their income.
The TIGTA report, which was published on Sept. 21, criticizes the IRS’s Criminal Investigation Division for not making better use of CTRs in its civil and criminal enforcement efforts. CTRs can be crucial pieces of evidence in an audit or provide evidence that a crime has been committed. According to TIGTA, the IRS could collect as much as $1.3 billion in unpaid taxes if CTRs were used more aggressively.
The IRS is urged in the report to formalize the procedures in place for processing information received from financial institutions pursuant to the provisions of the Bank Secrecy Act and monitor the time that it takes for this information to reach examiners. The agency is also encouraged to review the procedures designed to help examiners evaluate and use this data. The IRS has responded to the report by vowing to consider these recommendations and spend more time scrutinizing CTRs.
Attorneys familiar with the nation’s tax laws and the penalties in place for violating them may recommend against trying to circumvent the Bank Secrecy Act by splitting up large deposits to avoid triggering a CTR. This is known as structuring, and it can lead to penalties including fines, imprisonment and asset seizures.