Some people sometimes get apprehensive whenever they cash cheques, worrying over the paper trails they have left behind. This worry can stem from so many reasons especially people that carry one or more debts. While the IRS can be thorough when it comes to tracing funds, but it should be realized that the IRS doesn’t keep tabs of every taxpayer’s banking activity.
But that notwithstanding, the organisation has the ability to access your bank information whenever it desires. The IRS is usually interested in cash deposits that exceed $10,000, or those that are made in hefty foreign bank accounts. The IRS may access your banking information if they audit your tax return or enact a tax levy.
But even though the IRS does not keep tabs on your funds and transfers, the Bank Secrecy Act requires banks to report cash transactions over $10,000 to the IRS. Banks only are required to report transactions made in cash. That means that the bank isn’t going to alert the IRS if you transfer $11,000 from your checking to your savings or deposit a $11,000 check.
However, it will alert the IRS if you make that $11,000 deposit in cash. Banks may also report activity if you’re making multiple cash deposits just under $10,000. Along with other reasons, the IRS gets notified when you:
- Earn job income (Form W-2)
- Earn interest/dividend income, retirement income or sell securities. (Form 1099)
- Earn royalties
- Earn partnership income (Form K-1, K-2)
Banks are required to send a CTR for any transactions over $10,000. They also are obligated to file a SAR (Suspicious Activity Report) for transactions deemed “suspicious” by bank policy. These filings are primarily for law enforcement purposes. The IRS may or may not have access to this information.
Take Note of Audits
While the IRS won’t normally peruse your bank account information, it could do so during an audit. During an audit, an IRS agent will investigate your financial records and look for any unreported taxable income. The agent can access your bank account information him or herself or request that you provide all of your bank account records.
The IRS agent can review checks cashed and single out any transactions that seem suspicious. If they see a deposit or transfer from an account you haven’t already provided, you’ll be obligated to provide information on that bank account as well.
How to Cash a Check Without Leaving a Paper Trail
Like was said before, people for one reason or the other, prefer to carry out their transactions without leaving a paper trail. It should be noted that cashing a check without leaving a paper trail is easy, but often carries a significant expense when added up over time.
One of the ways too achieve this is to use cheque cashing services. Cheque cashing services usually charge between 3 to 5% for their services, and provide the cash immediately upon request. Some companies also provide cash advances on incoming paychecks in return for high fees and interest rates.
To cash your cheques without leaving a trail, you need to follow these steps.
1. Find a cheque cashing center
The first thing you need to do when you want to cash a cheque without leaving a trail is to find a cheque cashing center. Approach a check cashing center with a check from your employer or whoever. The cashier at the counter will then take your check, process it for identification and provide you with the cash while taking some money out for fees.
2. Use another person’s name
To ensure that the cheque cashed is not traced back to you, you may consider using another person’s name. Consider asking that checks be made out to someone else that you trust. Then, have that person deposit or cash the check. There will be no paper trail leading back to you.
3. Shop around for deals
If you want to get a good deal while still not wanting to leave a paper trail behind you after cashing a cheque, then you need to look around for the best deals. Compare and contrast the different check cashing services in your area. This business is highly competitive based on rates, so you may be able to find a better deal by shopping around.
4. Don’t break the laws
One way the IRS can easily start tracing your transactions is if you are suspected to be engaged in shady deals. So, if you want to avoid this, you should stay on the right side of the law. Avoid breaking laws against money laundering and tax evasion. Using a check cashing service is not illegal, but if it is used to launder money that has been involved in criminal transactions or to avoid taxes, using such a service to do so may result in legal penalties.
5. Always use the originator bank
If you want to ensure that cashing your cheques leave no paper trails, you should always make use of the originator banks. Cash the cheque at the bank from which it was drawn. So as long as you provide proper identification, you should be able to cash checks in most amounts at that bank without needing to go to a check cashing service or paying any additional fees.
The IRS isn’t all-seeing or all-knowing. But in the event of an audit, checques do provide a paper trail documenting the origins of your deposits.
So if you fail to report income from an “off the books” job, or do not fully report self-employment income, deposit records could be used against you. You are particularly vulnerable to this if you are in a profession where “off the books” transactions are routine — plumbers, auto repair, vending machines, etc.