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Structuring Deposits: The IRS Apologizes...Again

Posted by Alexander Novak | Feb 27, 2015 | 0 Comments

Last week, the United States IRS Commissioner John Koskinen made a startling apology in Congress. He apologized for the IRS seizing the bank accounts of businesses merely because they deposited a lot of cash. In most of these cases legitimate small business owners were depositing say $8000 cash every other day. Most of these stores were small grocery stores or candy stores which did a lot of cash business. Sometimes they were restaurants which did not take credit cards. The IRS used a well-known, but slightly obscure, rule that actually allows the IRS to seize assets from US citizens it believes – get it, that the IRS believes – violated Federal Cash Transaction Reporting requirements. You have seen those signs at banks: If you deposit more than $10,000 cash you must fill out a Currency Transaction Report (CTR). Who wants the hassle? So business owners would deposit less than $10,000 every other day. Banks must snitch on their customers who deposit so much cash. But if you deposit less than $10,000 where did go wrong? Ever heard of “structuring” deposits? That means you purposely divided your deposits below $10,000 to fly under the radar. The IRS was seizing bank accounts without ever bringing charges against the business owners. No due process. The IRS just shut them down based on suspicions and raked in millions. They cannot find the illegal immigrants, but they find your cash deposits. The IRS has been criticized by libertarians and lawmakers for using it to seize money from people and small businesses who repeatedly deposit lawfully obtained money in increments below $10,000. Amid that backlash, the IRS announced in October that it would no longer pursue cases involving legal sources of money unless there are "exceptional circumstances" and would focus on cash derived from illegal activity.

This isn't the first time the IRS erred and made an apology. IRS apologizes for targeting conservative groups. IRS Apologizes For Awful $60,000 ‘Star Trek' Parody Training Video. Talk is cheap. The law is still on the books. Just last week an Iowa widow pleaded guilty to illegally splitting up bank deposits of her late husband's legally earned cash, in a case that has drawn criticism as an overreach by the IRS and federal prosecutors. Janet Malone, 68, admitted she willfully violated a law that prohibits divvying up cash deposits into increments of less than $10,000 for the purpose of evading federal reporting requirements. She got probation. So you see despite that apology, the IRS and federal prosecutors continued to pursue civil and criminal cases against Malone, noting that her late husband Ronald had been warned by an IRS agent to stop structuring his cash deposits below $10,000 while he was dying of cancer in 2011. Janet Malone was present for part of that meeting. There is nothing illegal about depositing cash. Just fill out a CTR. This will not trigger an audit. Just report the money. But despite the recent apology the IRS and the Feds have the right to grab your money without due process. So much for the US Constitution.

Alexander Novak, ESQ.Partner, Novak Juhase & Stern

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About the Author

Alexander Novak

Partner | Alexander Novak  has represented professionals in high profile white collar crime matters including obtaining complete immunity for a co-conspirator in the largest inside  trading case in US history, US v. Martoma, and recently obtained acquittals of two doctors in a medical insurance fraud case....


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