Cash Deposits Just Under $10,000 and an Offer to Settle in Cash
You are reviewing Vinny's convenience store account. He owes $52,300 for 2022. Bank records obtained by summons show six cash deposits between $9,200 and $9,700 over ten weeks, totaling $56,400. The 2022 return reports gross receipts of $118,000, but total business deposits are $291,000. Vinny offers to bring $35,000 in cash today to settle and asks you not to contact his bank or make it a big thing. He says he can pay the rest in installments. He has a prior 2018 accuracy-related penalty but no fraud penalty. His prior installment agreement defaulted in 2021. You have not yet told him about the deposit analysis.
1. Identify the indicators and explain the initial actions you should take before discussing the deposits with Vinny.
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The indicators include repeated cash deposits just below $10,000, a large gap between reported gross receipts and total deposits, an offer of cash to settle, a request not to contact the bank, and a prior installment agreement default. The deposit pattern is consistent with structuring, and the deposit gap suggests unreported income. The cash offer and secrecy request are also potential concealment indicators.
Before confronting Vinny, preserve the bank records and the return. Do not accept cash. Do not tell him you have analyzed the deposits. Consult your manager and follow referral procedures. Determine whether the case should be referred to Criminal Investigation before any interview that could alert him. Continue normal account processing only as directed. Document the indicators, the date of the offer, and your decision not to accept cash. If he sends cash anyway, follow cash-handling procedures and do not commingle it with case files. Do not process an installment agreement based on financial information that may be false.
2. Should you make a referral, and how should you document and handle it?
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Yes, the combination of structured deposits, unreported income, a cash settlement offer, and a request for secrecy supports a fraud or CI referral. Follow the referral procedures in the IRM and use the appropriate referral form. Document the specific facts, not conclusions: the six deposit amounts and dates, the reported gross receipts, the deposit total, Vinny's statements, and the prior default. Do not disclose the referral to Vinny. Do not tell him the bank contacted you or that you have a deposit analysis. Keep the referral separate from documents he can request.
Before referring, consider whether collection should continue, be suspended, or be coordinated with CI. Do not close the collection case solely because of the referral. Do not accept the $35,000 cash or negotiate a settlement. If an installment agreement is otherwise appropriate, it must be based on verified income and assets. Document the manager consultation and the date the referral was made.
3. What should you avoid doing when Vinny offers cash and asks you not to contact the bank?
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Do not accept cash, do not agree to keep the bank contact secret, and do not promise that the case will not become a criminal matter. Do not confront him with the full deposit analysis before consulting your manager. Do not tell him that the deposits are 'structured' as a legal conclusion. Do not negotiate a cash settlement or suggest that paying $35,000 will make the balance disappear. Do not process an installment agreement based on his oral offer. Do not disclose the referral or the bank records to him. Do not treat the 2018 accuracy penalty as proof of fraud, but do document it as part of the pattern. Keep your tone neutral, document the exact words he used, and route the case through the required approval channels.