Currency Transaction Records (CTR) and Suspicious Activity Reports (SAR) are financial reporting forms that track activity in the financial system for the purposes of criminal investigation and enforcement. The Internal Revenue Service (IRS) has access to such resources for Title 26 civil income tax purposes. Fink, Faris R., Memorandum for Services and Enforcement Compliance Operating Division Commissioners and SB/SE Directors, Internal Revenue Service, available at https://www.irs.gov/pub/foia/ig/sbse/sbse-04-0312-028.pdf.
Information included on a CTR includes the size of a transaction, the occupation, profession or business of the transacting party, and the sending and receiving parties’ zip codes and dates of birth. Size of the transaction is a crucial component; CTR transactions are usually no less than $10,000, or a series of cash transactions that aggregate to over $10,000 in one business day by a given customer. CTR transactions have included transactions as high as $750,000. Furthermore, identification information including address will be cross-referenced with the zip code of where the transaction occurred to gain additional useful information. In short, CTRs note suspicious activity, which can lead to the creation of an SAR.
SARs are filed also in relation to suspicious activity, but may not necessarily come about as a result of a CTR. For example, an SAR may be filed for a suspicious transaction that is cancelled at the last minute, even though no CTR would be filed for a cancelled transaction. SARs exist for a variety of different financial institutions, including depository institutions, securities and futures industry participants, card clubs and casinos, and money service businesses. The IRS can utilize SARs to see whether a tax debtor’s alibi to the IRS is consistent with SAR records, where a CTR is reflected, where routine means of locating banking information has been otherwise exhausted, where potential fraud indicators are present, or generally speaking, to determine whether an enforcement action is necessary. SARs can also be used where it appears that a taxpayer is operating on a cash basis simply to avoid IRS reporting requirements and/or to evade tax obligations.
In short, the IRS’ access to SARs and CTRs allows them to follow large financial flows, and utilize that information pursuant to an investigation and/or enforcement action against tax debtors. This should be kept in mind when considering what will and will not be scrutinized by the IRS.