Here's How Making a Lot of Small Deposits Could Cause You Trouble

Most folks wouldn't think it a financial crime to deposit money into their savings accounts. After all, it's your money, right? What kind of world is it in which FBI agents rappel from the roof and burst through your windows just because you made a series of small deposits?

To be sure, depositing money into your checking or savings account isn't a financial crime, nor does it lead to criminal investigations. However, if you frequently make small deposits into your bank account, especially when they total $10,000 or more, you could find yourself under investigation. Here's what you should know.

The Bank Secrecy Act

Banks have to report any transactions above $10,000 to the IRS on a form known as the Currency Transaction Report. Yes -- even if it's only a penny above $10,000.

This requirement falls in line with the Bank Secrecy Act of 1970, which helps the federal government track and prevent financial crimes. When banks fail to report large cash transactions, it's easier for criminal activity to fly under the radar. Reporting large cash deposits helps the government keep the banking system clean.

The government isn't going to hound you because you deposited $10,000. So long as you're not doing anything illegal, the federal government likely won't care. Problems arise, however, when you try to cover up that you're depositing a large sum, often by breaking it into smaller deposits over a short period. Yes, this is illegal even if you're only doing it to protect your privacy.

Banks might get suspicious when you make several deposits over a short period

The technique of breaking deposits into smaller chunks is known as "structuring." If you deposit $2,500 today, $2,500 tomorrow, $2,500 the next day, and $2,500 the day after, your bank would have to report the entire series, even if no individual deposit is over $10,000.

Depositing money in this way isn't always structuring. For instance, contractors sometimes get paid on different days from different clients. Instead of depositing all that income at once, a contractor could very well deposit it in a series that surpasses $10,000. They might do this every month, too, such that it could trigger some suspicion, even though it's not unlawful.

But if a bank thinks you're structuring on purpose, your deposits might be reported as suspicious activity. Once flagged, you might end up in an investigation. At that point, if you're caught intentionally evading a bank's reporting requirements -- even if you just value your privacy -- you could face criminal or financial charges.

Try not to obsess over the Bank Secrecy Act

Again, if you're not intentionally structuring (as in the contractor example), you have nothing to worry about. After all, you shouldn't be afraid to deposit money into your checking account, especially if you're doing it lawfully.

Just be aware that large deposits -- or even a series of small ones -- might draw attention from your bank. As long as you provide necessary information that your activities are legitimate, you should have no issues.