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#1489839 - 01/05/11 04:43 PM Is this "SAR Worthy"?
Cbecotte Offline
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Joined: Jun 2009
Posts: 72
Massachusetts
Bank customer has a business account for landscaping. Account uses an EIN for reporting purposes. Customer makes regular deposits to this account that are usually checks made payable to the business. I have just found out that tellers have been giving the customer "cash back" on these deposits (that's another problem!) Customer also has personal accounts with the bank. Upon review of deposits in customer's personal checking account, it is discovered that nearly $2,000 per week is deposited to the personal account. These deposits are made up of personal checks payable to the customer (not the business) that reference work for landscaping.

My question is, is this worthy of a SAR? If so, is "possible tax evasion" an acceptable reason?

Any input would be appreciated!

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#1489855 - 01/05/11 04:56 PM Re: Is this "SAR Worthy"? Cbecotte
nemsi Offline
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Joined: Nov 2005
Posts: 383
CherylB what type of entity is it? Is it a sole proprietorship,single member LLC?

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#1489858 - 01/05/11 05:00 PM Re: Is this "SAR Worthy"? Cbecotte
John Burnett Offline
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I don't think you have enough information here. If this customer is a sole proprietor (SP), he could still have an EIN for his landscaping business, since he probably has employees. As an SP, his taking cash back from deposited checks and depositing checks payable to him personally into a personal account may be sloppy, but the cash-back reflects on your bank's policies or practices as much as on your customer.

If he's an SP, the only way you'd have justification for a SAR, IMO, would be if you dug around and saw that no federal tax deposit payments were being made or could see a copy of his 1040 and discovered that his income was being under-reported (or if he admitted doing it).

If the business isn't a sole proprietorship, however, there could be something to your suspicions.
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#1489869 - 01/05/11 05:10 PM Re: Is this "SAR Worthy"? nemsi
Cbecotte Offline
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Joined: Jun 2009
Posts: 72
Massachusetts
nemsi, yes, it is a sole proprietorship.

John, thank you for your input. It is very helpful, as usual.

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#1490047 - 01/05/11 07:26 PM Re: Is this "SAR Worthy"? John Burnett
Cbecotte Offline
Member
Joined: Jun 2009
Posts: 72
Massachusetts
Would this information change your mind?:

The only withdrawals that ever come out of the business account are transfers to the personal account via online banking. Customer has never written a check out of the business account. Checked the personal account. Customer has never written a check out of that account either. Pay EVERYTHING with Bill Pay. 95% of what is paid through Bill Pay is payment to credit cards. No evidence of any payroll for any employees nor federal tax being paid on the business account or personal account.

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#1490084 - 01/05/11 07:56 PM Re: Is this "SAR Worthy"? Cbecotte
Georgia Plum
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It would at least make me want to talk to the customer and find out what is going on. I'd be wary of filing a SAR based just on what you see and making assumptions that the's not paying any taxes. He could have accounts at other banks in his business name for general operating expenses and payroll. He may just have a very strange way of bookkeeping and he takes a portion of his business checks as his salary (bad accounting practice in my opinion, but...). As a SP, he is responsible individually and everything rolls up to him, ultimately.

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#1490086 - 01/05/11 07:56 PM Re: Is this "SAR Worthy"? Cbecotte
edAudit Offline
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edAudit
Joined: Jul 2008
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I still think that additional info is needed. Did anyone talk to the customer? Does he have a Payroll and/or tax account at another bank? Does he use a third party Accountant for tax/payroll? Are business expenses paid with Credit Cards (Gas, supplies, ...)
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#1490209 - 01/05/11 09:20 PM Re: Is this "SAR Worthy"? edAudit
HMS Pippii Offline
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If a sole proprietor has employees, IRS requires a separate EIN, but the sole proprietor still has all tax liability as an individual. I think he can have an EIN without employees if he chooses to do it that way in order to have a checking account in the name of the business. If he's using credit cards for virtually everything, he may be using his rewards points for cash rebates and using the credit card statements to help in his recordkeeping. I had a situation a year or so ago with a customer depositing wrapped gold dollars in $2-3k increments every few days. Turns out, after the detective did some investigating and finally sat her down (SARs filed from every bank in town per the mouthy detective) that she was using an AmEx Black Diamond card (I think Black Diamond? Definitely AmEx) to purchase the coin at face value from the US Mint with no shipping/handling costs and racking up enough rewards points to pull in about $30,000 a year from AmEx. It some 'get rich thing' she found on some website, it was perfectly legal, the US Mint wasn't happy about all the people that were doing it, but she was doing it purely for the cash rebate from AmEx for using their card. Your guy may have figured out that using his credit cards is good for cash rewards.

On your landscaper, I'd find out if he's got any employees or if he's a one man operation. Since you're not seeing any evidence of employees and it doesn't sound like he's pulling enough cash to make a cash payroll, I don't think you've got enough info to file on him. Yet. I think you've got questions to answer first.
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#1490546 - 01/06/11 03:00 PM Re: Is this "SAR Worthy"? HMS Pippii
BrendaC Offline
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Joined: Sep 2001
Posts: 6,029
Sweet Home AL
I would also consider changing the EIN on his business account to his personal SSN (as preferred by the IRS) if your internal tracking system aggregates by TIN. This will help to alert you of aggregate activity in his accounts that may need to be reported or reviewed.
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#1490905 - 01/06/11 06:40 PM Re: Is this "SAR Worthy"? BrendaC
OldTeller Offline
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Joined: Sep 2010
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If you think there is an adequate justification for suspiciousness, then it makes sense to file a SAR.

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#1491071 - 01/06/11 09:08 PM Re: Is this "SAR Worthy"? OldTeller
Cbecotte Offline
Member
Joined: Jun 2009
Posts: 72
Massachusetts
Thanks for your input everyone. I appreciate it.

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#1491184 - 01/07/11 12:40 AM Re: Is this "SAR Worthy"? Cbecotte
rlcarey Online
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rlcarey
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Galveston, TX
The instructions for the W-9 indicate that a sole proprietor should be providing thier SSN and not an EIN for information reporting purposes.
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