Cash structuring is a practice of executing financial transactions of cash, money transfers, or wire transfers in a specific pattern to avoid or evade tax-reporting requirements. Federal law makes it a crime to “structure” cash transactions for the purpose of evading tax-reporting requirements. Structuring laws are designed to prevent illegal activities, such as illegal gambling and money laundering. Under federal laws, banks must report to the federal government certain kinds of financial transactions.
For example, banks are required to report cash transactions a person makes of $10,000 or more in a single day or single transactions. Banks are required to report these transactions by having the customer who is making the deposit fill out a simple form of where the cash is coming from. No such reporting exists if the transaction was less than $10,000. Federal structuring would arise if a person demonstrates a pattern of depositing series of transactions of less than $10,000 to avoid the reporting requirements.
How Is Cash Structuring Proved?
Depositing a series of transactions in a single day that is less than $10,000, but total to $10,000 is not illegal by itself. It is only illegal if the person doing it does it for the purpose of evading the reporting requirements under section 103.22. The element of state of mind is very important in these cases. The elements of the offense are as follows:
- A person acting alone or on behalf of others;
- Conducts or attempts to conduct;
- One or more transactions in cash or currency;
- In any amount;
- At one or more financial institutions;
- On one or more days; and
- knowingly for the purpose of evading the reporting requirements of Currency Transaction Reports.
What Are the Punishments for Cash Structuring?
The prohibited act of cash structuring is illegal and punishable as a felony. A person guilty of cash structuring would face a substantial fine and/or up to five years in prison. Since cash structuring is also a federal crime of avoiding tax, a person may also be charged with tax evasion on top of cash structuring.
How Do Customers Do Cash Structuring Transactions?
Customers try to avoid the federal reporting requirements and commit structuring when:
- They purposely lower the amount of the transactions to less than $10,000 (e.g. $9,999)
- Use multiple financial institutions to disburse a large transaction into smaller ones
- Deposit the cash on multiple days in amounts less than $10,000 for the purpose of evading the reporting requirements
- Use other people to deposit the cash into their own accounts and transferring it back
- Doing multiple transactions in one day throughout the day
When Must the IRS Charge You with Tax Evasion?
A person can also be guilty of tax evasion for making cash structures to avoid reporting requirements. Generally you have 6 years for the government to come after you for misstatements on your taxes. But there is no time limit on when the IRS can audit you. To be convicted of tax evasion, it must be proved:
- Unpaid tax liability exists.
- Prosecution must prove that the defendant did some kind of act to attempt to hide his/her taxable income and dodge paying some kind of taxes on their money.
- Prosecution must show that the defendant had specific intend to dodge paying taxes that he had a legal duty to pay.
- The jury must find the defendant guilty of each element beyond a reasonable doubt.
What Are the Punishments for Tax Evasion?
Tax evasion in the United States is a crime and an individual may be punished to substantial monetary penalties, imprisonment, or both. Punishments for tax evasion can be harsh, including:
- Fines as much as $250,000 for individuals and $500,000 for corporations
- A 75% civil penalty
- Criminal charges, including imprisonment up to 3 years
Do I Need an Attorney for Cash Structuring Charges?
Tax evasion and cash structuring violation and charges are a serious federal crime. If you have been red flagged for any suspicious activity or have been charged with cash structuring, getting assistance from a tax attorney or criminal defense attorney is highly recommended.